Cam 205. Project Management Final

CAM 205: PROJECT MANAGEMENT

CAM 205: PROJECT MANGEMENT


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About this STUDY MANUAL

CAM 205, PROJECT MANGEMENT, has been produced by KCA

University. All Modules produced by are structured in the same

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comprises:


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An introduction to the CHAPTER content.

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Course Code: CAM 205

Course Title: PROJECT MANAGEMENT

Course Purpose

The course introduces the concept of project management, project support, leadership,

Monitoring and control and risk identification

Expected Learning Outcomes

At the end of the course, students should be able to:

1. Prepare a detailed plan of Scheduling, execution, monitoring, risk identification and

control.

2. Identify and explain project success factors.

3. Provide sound advice on project management.

Course Contents

Introduction to Project Management: Definitions of a project, examples of typical projects,

project management, brief history of project management as a discipline, project manager,

qualities and responsibilities of a project manager and project team;

Project Life Cycle: General description of the project life cycle phases;

Initiation Phase: Project ideas and idea screening, project feasibility study, project proposal

format, project standards and procedures, capital project evaluation techniques (cost/benefit

analysis, accounting rate of return, payback period, net present value method, profitability index

and internal rate of return);

Planning and Organizing Phase: Detailed planning of the project, project scheduling and

sequencing, work breakdown structure, network diagrams, critical path method, program

evaluation and review technique, least cost scheduling(crashing), floats, Gantt charts, project

organization structures, organizing for resources and recruitment of project team;

Project Execution and Control Phase: Actual work on various tasks, reporting quality, cost,

schedule, technical and financial status of a project, comparing actual performance with planned

performance, investigation of variances, and Earned value performance measurements.


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Project Closure Phase: Tasks undertaken, lessons learnt;

Project Stages Exit Criteria: Exit information, exit signatures;

Risk Management: Risk and opportunity, examples of project risks, risk identification (brain

storming, Delphi technique, lessons learn from previous projects), risk quantification, risk

response strategies, risk monitoring and control;

Project Success Criteria and Success Factors: Project manager, project team, organizing,

external environment, configuration management, force field analysis;

Teaching Methodology:

Lectures, tutorials and discussion

Instructional Materials/Equipment

Class with visual aids

Course Assessment/Student Performance

Continuous Assessment: 30%

Examination: 70%

(Grading as detailed under examination regulations)

Recommended Readings

1. Chandra, P (1995). Projects: Planning, Analysis, Selection, Implementation and

Review. (4th.ed.). New Delhi: Tata McGraw Hill.

2. Gardiner, P (2004). Project Management. London: Palgrave Macmillan

3. Meredith, J. R & Mantel, S. J (2002). Project management; A Managerial Approach

(4th.ed.). New York: John Wiley & Sons.

4. Nagarajan, K (2001). Project Management. New Delhi: New Age International.

Yeates, D & Cadles, J (1996). Project Management for Information Systems (2nd.ed.)

London: Pitman.


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Table of Contents About this STUDY MANUAL ......................................................................................... 2 How this STUDY MANUAL is structured ....................................................................... 2 Course Contents................................................................................................................. 4

Instructional Materials/Equipment 5

Course Assessment/Student Performance 5

LECTURE ONE: INTRODUCTION TO PROJECT MANAGEMENT: ........................ 7 LECTURE TWO: PROJECT LIFE CYCLE ............................................................... 13

PROJECT PROPOSAL FORMAT 17

LECTURE THREE: CAPITAL PROJECT EVALUATION TECHNIQUES: .............. 20

LECTURE FOUR: PROJECT PLANNING ............................................................... 27 Scheduling Tools ............................................................................................................. 30 LECTURE FIVE: PLANNING AND ORGANIZING PHASE (Continued) ............. 40

Organising projects within the Functional Organization Structure ....................... 49 LECTURE SIX: PROJECT EXECUTION AND CONTROL PHASE ...................... 51

Tools and Techniques ............................................................................................ 55 LECTURE SEVEN: PROJECT PERFORMANCE MEASUREMENT: ....................... 56

Over/Under or Favorable/Unfavorable? ................................................................ 58

How are Variance Reports used? ........................................................................... 58

When should a variance be investigated - factors to consider ............................... 58 LECTURE EIGHT: PROJECT RISK MANAGEMENT ............................................... 65

1. Brainstorming..................................................................................................... 66

2. Nominal Grouping Technique ........................................................................... 66 3. Mind Mapping.................................................................................................... 67

4. Delphi Technique ............................................................................................... 67 5. Lessons Learned from Similar Projects ............................................................. 68 Tools Available for Risk Control ........................................................................... 71

LECTURE NINE: PROJECT CLOSURE PHASE:........................................................ 73

PROJECT PHASE EXIT PLAN 75

Phase exit information ........................................................................................... 75

LECTURE TEN: PROJECT SUCCESS CRITERIA AND SUCCESS FACTORS: .. 78 i) Describe the project Success Criteria ................................................................. 78


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LECTURE ONE: INTRODUCTION TO PROJECT MANAGEMENT:

1.1 Introduction

Welcome to the first lecture in Project Management. We shall start our lesson by introducing

several concepts related to project management. Project management processes describes how

various elements of project management interrelate.

1.2 Specific objectives:

By the end of this lesson you should be able to:

i) Define the term project and give typical examples of projects

ii) Define Project Management

iii) Write a brief history of project management as a discipline

iv) Explain the qualities and responsibilities of a project Manager

v) Briefly explain the composition of a project team

1.3 Lecture Outline

1.3.1 Projects.

1.3.2 Project Management

1.3.3 History of project Management

1.3.4 Project Manager

1.3.5 Project Team

1.3.1 Projects.

a) Definitions of a project

• A project is a series of related activities which must be implemented in a logical

sequence from a given start time to a given end time.

• A project may be defined as a means of moving from a problem to a solution via

a series of planned activities. It is a set of interrelated activities that has a definite

starting and ending point and results in the accomplishment of a unique often

major outcome; or an identifiable goal and an integrated system of complex but

interdependent relationships.


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A project is an investment of money or otherwise in a time-bound intervention to

create productive deliverables/outcomes.

b) Types of projects

Projects are usually categorized into one of three types below:

Change driven: The need to change operations to match the environment.

Market driven: Producing a new product in response to market needs

Crisis driven: Usually in response to an urgent situation eg. Introducing a

replacement of a defective product

c) Examples of typical projects:

Personal projects:

Obtain a Bachelors degree, write a report, plan a wedding, build a house,

Grow horticultural products, run a campaign for a political office, etc

Industrial projects:

Construct a processing plant, provide a gas supply to an industrial estate,

design a new product, etc

Business projects:

Develop a new course, develop a new computer system, introduce a new product,

prepare an annual report, set up a new office, Implement a new business

procedure, etc

1.3.2 Project Management

a) Definitions of project Management:

Project management is the application of knowledge, Skills, tools and techniques

to project activities in order to meet or exceed stakeholder needs and expectations

from a project.

Project management is the discipline of planning, organizing, securing and

managing resources to bring about the successful completion of specific project

goals.

http://en.wikipedia.org/wiki/List_of_academic_disciplines

http://en.wikipedia.org/wiki/Planning

http://en.wikipedia.org/wiki/Organizing

http://en.wikipedia.org/wiki/Managing

http://en.wikipedia.org/wiki/Resources


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Project management is an Approach to management of work within the constraints

of time, cost, and performance requirements.

b) Project Management Knowledge areas:

i) Project Integration Management

Describes the processes required to ensure that the various elements of the project

are properly coordinated. It consists of project plan development, project plan

execution and overall change control

ii) Project scope Management

Describes the processes required to ensure that the project includes all the work

required and only authorized work is executed. It consist of initiation, scope planning,

scope definition, scope verification and scope change control

iii) Project time Management

Describes the processes required to ensure timely completion of the project. It

consists of activity definition, activity sequencing, activity duration estimation,

schedule development and schedule control.

iv) Project cost Management

Describes the processes required to ensure that the project is completed within the

approved budget. It consists of resource planning, cost estimation, cost budgeting and

cost control.

v) Project Quality Management

Describes the processes required to ensure that the project will satisfy the needs for

which it was undertaken. It consists of quality planning, quality assurance and quality

control.

vi) Project human resource Management

Describes the processes required to make the most effective use of people involved

with the project. It consists of organizational planning, staff acquisition and team

development.

vii) Project communications Management

Describes the processes required to ensure timely and appropriate generation,

collection, dissemination, storage and disposition of project information. It consists of

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http://www.businessdictionary.com/definition/cost.html

http://www.businessdictionary.com/definition/performance.html

http://www.businessdictionary.com/definition/requirements.html


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communication planning, information distribution, performance reporting and

administrative closure.

viii) Project Risk Management

Describes the processes concerned with the identifying, analyzing and responding to

project risk. It consists of risk identification, risk quantification, risk response and risk

response control.

ix) Project procurement Management

Describes the processes required to procurement planning, solicitation planning,

solicitation, source selection, contract administration and contract close out.

1.3.3 History of project Management

Different scientists have used several measures to categorize the historical periods of Project

Management evolution. In this module, we are going to use the classification proposed by

Carayannis (2005), where the historical evolution is divided in four major phases: the craft

system, prior to 1958, application of management science from 1958 to 1979, projects as

production centres (1980-1994) and creating new environments 1995 to present.

The craft system, prior to 1958:

The ancient civilizations learned how to manage processes using the simplest tools. It was not

until middle 1900s and 1950s, when the industrial engineers began to investigate how the

processes were undertaken in practices, in order to develop an organizational theory that

advocates the procedure of project realization. In the early 1900s, Henry Fayol and Henry Gantt

became the forefathers of the twentieth century project management. Henry Fayol’s major

Achievement was the delineation of five primary management functions, among which are

planning organizing, commanding, and controlling. This theory effectively put contemporary

project management on more specific footing. Gantt created a project management tool called

the Gantt chart. According to Betchel, the first use of the term Project Management in the

international work is traced to the 1950’s. At that time, the PM techniques were developed in

U.S. Navy forces. They were concerned with the control of contracts for its Polaris Missile

projects. These contracts consisted of research, development work and were unique, never been

previously undertaken.


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Application of management science from 1958 to 1979

Critical Path Method (CPM) and PERT were developed at the Integrated Engineering Control in

1959. CPM is based on duration of the process, while PERT takes into consideration four major

Variables’: optimistic, pessimistic, and most probable times. Pert method is planned to be used in

highly uncertain environments, where the necessity to measure different risk can arise. In

contrast, environment with low level of uncertainty can be evaluated with CPM, based on

previous experience duration of similar processes.

Popularity of PERT and CPM increased within the private and public sector. Defense

Departments of several countries, NASA and large engineering and construction companies

worldwide applied project management principles and tools to manage large- budget and

schedule projects. In 1970’s, the Material Requirements Planning (MPR) was introduced.

Projects as production centres (1980-1994)

During the 1980s and early 1990s, the revolution of IT/IS sector shifted people from using a

mainframe computer to a multitasking personal computer, which demonstrated high efficiency in

managing and controlling complex projects schedules. In the mid-1980s, the internet served

researches, developers, local area networks and Ethernet technology started to dominate network

technology. During this period low cost project management software became available, that

made projects management technique more accessible. As a result, Internet permited

organizations to be more productive, more efficient and more customers oriented

Modern stages and trends of Project Management (1995 to present)

This period is characterized by high speed of innovation in the theory and perspective on the

project management. Topics that cover alternative spheres of the study include: examination of

the concept of learning curve, project complexity, and project management in product

development sphere, variability of project performance and managing business by project

concept. In the later 2000’s, scientist started to discuss the factors of project failures and success,

role of the culture and communication because of the growing amount of cross national projects.

Besides, researches came back to the origins of PM methodology with an aim to change static,

well-established set of recommendation to the dynamic project environment rectory set of

techniques and references. Relationship problems, studies on stakeholders’, management and

studies on governance issues in project are an evidence of raising popularity and wide spread


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interest in the field. The basics of PM models were slowly introduced to smaller organizations

and governmental institutions with an aim to improve the work efficiency and reduce time and

cost of project realization

1.3.4 Project Manager- A project manager is a professional in the field of project management.

Project managers have the responsibility of the planning, execution, and completion of any

project with Limited time and other resources.

A project manager should possess solid technical knowledge (to be able to take usage of

models and instruments for planning, scheduling and control), experience in human

resources sphere (to be able to manage persons form different field) and professional

background in situation of stress, limited time and resources

1.3.5 Project Team- Project team refer to a number of people who work closel together to

achieve shared common goals. It is vital to identify all the team members and clearly

define their roles and responsibilities. Team members can have various roles such as

engineers, technicians, planners, software specialists, etc. Projects pose particular

problems of building and managing project teams. Project managers should have good

team management skills

1.4 Activities

1.4.1 Differentiate between a process and a project

1.4.2 Explain the qualities and responsibilities of a project Manager

1.4.3 Explain why a project team may fail

1.5 Summary

A project is made up of a defined beginning, multiple activities which are performed to a plan

and a Defined end.

All projects must be planned out in advance if they are to be successfully executed. The

execution of the project must be controlled to ensure that the desired results are achieved.

1.6 Self-assessment

You have been appointed the project manager of Gate pump water project. Describe the skills

required for such an appointment.

http://en.wikipedia.org/wiki/Project_management

http://en.wikipedia.org/wiki/Project


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LECTURE TWO: PROJECT LIFE CYCLE:

2. Introduction

Welcome to the Second lecture in Project Management. Organisations performing projects will

usually divide each project into several project phases to provide better management control and

appropriate links to the on-going operations of the performing organisation. Collectively, the

project phases are known as the project life cycle.

2.1. Specific objectives:


i) Describe in general the project life cycle phases

ii) Describe how project ideas are screened

iii) Write a project feasibility study report

iv) Prepare a project proposal

v) Discuss project standards and procedures

2.2. Lecture Outline

2.2.1. Project life cycle phases

2.2.2. Project Ideas

2.2.3. Feasibility study

2.2.4. Project proposal

2.2.5. Project standards and procedures

2.3. Project life cycle phases

The Project Life Cycle is a framework for dividing a project into manageable phases.

Regardless of scope or complexity, any project goes through a series of stages during its

life. Most projects can be subdivided into four generic phases: Concept and Initiation phase,

Design or Planning phase, Implementation or execution phase and Closure or Exit phase.

1) Initiation Phase

In this first stage, the scope of the project is defined along with the approach to be taken to

deliver the desired outputs. The need, goals/objectives and the viability of the project are


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established. The project manager is appointed and in turn, he selects the team members

based on their skills and experience.

2) Planning Phase

The second phase should include a detailed identification and assignment of each task until

the end of the project. Project schedules, resource requirements, cost budget , policies and

procedures are developed. It should also include a risk analysis and a definition of a criteria

for the successful completion of each deliverable. The governance process is defined, stake

holders identified and reporting frequency and channels agreed.

3) Execution Phase

the most important issue in this phase is to ensure project activities are properly executed

and controlled. Project manager coordinates his team to ensure that the project is executed

according to its scope, quality, time and cost. The planned solution is implemented to solve

the problem specified in the project's requirements.

4) Closure

In this last stage, the project manager must ensure that the project is brought to its proper

completion. The closure phase is characterized by a written formal project review report

containing the following components: a formal acceptance of the final product by the client,

Weighted Critical Measurements (matching the initial requirements specified by the client

with the final delivered product), rewarding the team, a list of lessons learned, releasing

project resources, and a formal project closure notification to higher management.

2.4. Project Ideas

Project idea screening is a process used to evaluate innovative product ideas, strategies and

marketing trends. New product ideas are seldom revolutionary, they are mostly evolutionary.

Many develop from the products of the past, making improvements in quality; convenience, cost

or variety .Idea screening criteria are used to determine compatibility with overall business

objectives and whether the idea would offer a viable return on investment. Whatever does not

meet these criteria is typically discarded. Idea screening helps to reduce the amount of ideas into

a manageable number.

http://www.businessdictionary.com/definition/process.html

http://www.businessdictionary.com/definition/innovative.html

http://www.businessdictionary.com/definition/product.html

http://www.businessdictionary.com/definition/idea.html

http://www.businessdictionary.com/definition/strategy.html

http://www.businessdictionary.com/definition/marketer.html

http://www.businessdictionary.com/definition/trend.html

http://www.businessdictionary.com/definition/criteria.html

http://www.businessdictionary.com/definition/compatibility.html

http://www.businessdictionary.com/definition/objective.html

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http://www.businessdictionary.com/definition/viable.html

http://www.businessdictionary.com/definition/return-on-investment-ROI.html


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Screening criteria:

a) Qualitative criteria:

All ideas are presented on the wall/board

Each person in the idea generation group receives a highlighter and chooses all

the ideas he/she believes have a potential based on consumer needs and potential

solutions

Give a red sticker to each participant and make them put it on the idea their heart/

gut feeling would like to realize

Ask them to put a yellow sticker on the idea they think will be the most successful

if realized

To put a green sticker on the idea they believe in the most

And finally put a blue sticker on the idea that is of greatest importance to the

company

Put specific names on the idea(s) you personally would like to take responsibility

for, and on the ideas you would like to support. Ideas without a person responsible

for them should be rejected. The coloured stickers should then decide which and

how many ideas to take further and which one to reject, and could also decide

which one to start with. Ideas with many hearts are more likely to succeed,

because someone in the company wants to take them further these ideas should be

chosen first.

b) Quantitative criteria

Important attributes for evaluating the ideas are defined

Option 1:

Give the attributes an importance- score from 1- 10 (10= most important)

Rate each idea for each attribute

The ideas with the highest scores are chosen

Option 2:

Define outcomes and rate them for probability and importance

Give each idea a score on probability for the outcome and the importance if it

happens


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The ideas with the highest scores are chosen

2.5. Feasibility study

A feasibility study is an analysis of the ability to complete a project successfully, taking into

account legal, economic, technological, scheduling and other factors. It allows project managers

to investigate the possible negative and positive outcomes of a project before investing too much

time and money.

The study is based on extensive investigation and research to support the process of decision

making. Feasibility studies aim to objectively and rationally uncover the strengths and

weaknesses of an existing business or proposed venture, opportunities and threats present in the

environment, the resources required to carry through, and ultimately the prospects for success. In

its simplest terms, the two criteria to judge feasibility are cost required and value to be attained.

A well-designed feasibility study should provide a historical background of the business or

project, a description of the product or service, accounting statements, details of the operations

and management, marketing research and policies, financial data, legal requirements and tax

obligations. Generally, feasibility studies precede technical development and project

implementation.

A feasibility study evaluates the project's potential for success; therefore, perceived objectivity is

an important factor in the credibility of the study for potential investors and lending institutions.

It must therefore be conducted with an objective, unbiased approach to provide information upon

which decisions can be based.

Feasibility Study Report

Typical contents of a feasibility study report include:

• Project definition covering goals and objectives

• General background and introduction with an outline description of the options

• A clear definition of success criteria

• Findings of the feasibility study

• Financial appraisal

• Preliminary compliance

• Organizational suitability

http://en.wikipedia.org/wiki/Natural_environment

http://en.wikipedia.org/wiki/Resources

http://en.wikipedia.org/wiki/Cost

http://en.wikipedia.org/wiki/Value_%28economics%29

http://en.wikipedia.org/wiki/Product_%28business%29

http://en.wikipedia.org/wiki/Service_%28economics%29

http://en.wikipedia.org/wiki/Business_operations

http://en.wikipedia.org/wiki/Management

http://en.wikipedia.org/wiki/Marketing_research



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• Plan for implementation and management of the project

2.5.1. Project proposal

A project proposal is a detailed account of a succession of activities meant to solve a certain

problem. In order to be successful, the document should: give a logical arrangement of a research

idea, demonstrate the importance of the idea, explain the idea's connection to past actions, and

express the activities for the intended project.

The proposal is written with a specific purpose in mind: to convince someone that the project can

and should be undertaken. Although there isn't a universal format for project proposals, many

elements in proposals are important, and often, mandatory. Above all else, you must remember

that a project proposal is an argument. If you don't present a viable and logical argument, your

proposal will likely be rejected. Foundations give specific proposal guidelines:

PROJECT PROPOSAL FORMAT

SAFARICOM FOUNDATION PROJECT PROPOSAL FORMAT

GENERAL INFORMATION

1. Name of Organisation

2. Project Title

3. Project Location

4. Contact Person

5. Contact Information: Physical Address, Postal Address, Phone Number and Email

Address

6. Project Timeline

7. Amount Requested

EXECUTIVE SUMMARY:

Provide a brief overview and summary of the project. It should provide a credible statement that

describes your organisation and establish the significance of the project


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PROBLEM STATEMENT:

State the challenges identified, the rationale/need to address these challenges and the conditions

to be changed by the project

PROJECT OBJECTIVES:

The objectives should describe the intended outcome of the project and should be SMART

(Specific, Measurable, Accurate, Realistic and Time Bound) .

Indicate how the objectives will contribute to the achievement of the project, what difference the

project will make and the time frame during which this will happen.

PROJECT IMPLEMENTATION AND MANAGEMENT PLAN:

Describe the project activities indicating how the objectives will be accomplished, what will be

done, who will do it, who are the implementers, partners and beneficiaries and when it will be

done. Describe how the project will be sustainable after the funding period.

PROJECT MONITORING AND EVALUATION:

Describe how you are going to monitor and evaluate the project so as to assess progress during

implementation and improve the project efficiency as the project moves along.

DOCUMENTATION AND SHARING RESULTS:

Describe how you are going to document the progress of your project during and after

implementation. State how you will document and share your results and let others know of

your purpose, methods and achievements.

PROJECT BUDGET:

Indicate the total cost of the project and also provide a detailed budget for these costs.

2.5.2. Project standards and procedures

The project standards and procedures are typically documented in a Project Standards and

Procedures Manual. This manual consists of an introductory section followed by separate

sections for each aspect of the project activities, such as:


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Standards and Procedures for Team Performance, including such general project

practices as the code of conduct and standard project terminology, meetings, change control

procedures (including the use of Change Requests and Decision Requests), and risk

management.

Standards and Procedures for Cost/Schedule Management, including organizing the

work, project monitoring, project accounting, and cost/schedule analysis.

Standards and Procedures for Data Management, including the project library,

document identification, document structure and style, and document preparation.

Standards and Procedures for Configuration Management, including identifying,

controlling , maintaining, and reporting on configuration items.

Standards and Procedures for Quality Management, including such things as: walk-

throughs, reviews, audits and inspections, handling and storing, packaging and shipping,

and procedures for eliminating the cause of problems.

2.6 Activities

Describe the following feasibility areas:

i) Technology and system feasibility

ii) Legal feasibility

iii) Operational feasibility

iv) Economic feasibility

v) Schedule feasibility

2.7 Summary

Every unique project has unique activities in each project life cycle phase

2.8 Self-assessment

Write a project proposal for a project of your choice


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LECTURE THREE: CAPITAL PROJECT EVALUATION TECHNIQUES:

3. Introduction

Welcome to the third lecture in project management. A capital project is a long-term investment

which requires the use of huge amounts of capital, both financial and labour , to undertake and

complete. E.g. a new building , acquisition of land or property, lease of property, the

refurbishment of an existing building , purchase of an equipment, etc The commitment of funds

to capital projects gives rise to a management decision problem, the solution of which, if

incorrectly arrived at, may seriously impair company profitability and growth. The proper use of

evaluation techniques and criteria should enable management to make more effective decisions

which result in future success. The purpose of investment appraisal is to evaluate whether or not

the current sacrifice is worthwhile.

3.1. Specific objectives:


i) Discuss the cost/benefit analysis evaluation Technique

ii) Describe the accounting rate of return

iii) Discuss the payback period method

iv) Explain the net present value method

vi) Describe the profitability index method

vii) Discuss the internal rate of return method

3.2. Lecture Outline

3.2.1. Cost/benefit analysis

3.2.2. Accounting rate of return method

3.2.3. Payback period method

3.2.4. Net present value method

3.2.5. Profitability index method

3.2.6. Internal rate of return method


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3.3. Cost/benefit analysis

Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic

process for calculating and comparing benefits and costs of a project. It has two purposes:

1. To determine if it is a sound investment project

2. To provide a basis for comparing projects.

It involves comparing the total expected cost of each option against the total expected benefits, to

see whether the benefits outweigh the costs, and by how much.

The following is a list of steps that comprise a generic cost–benefit analysis.

1. List alternative projects.

2. List the stakeholders.

3. Select measurement(s) and measure all cost/benefit elements.

4. Predict outcome of cost and benefits over relevant time period.

5. Convert all costs and benefits into a common currency.

6. Apply discount rate.

7. Calculate net present value of project options.

8. Perform sensitivity analysis.

9. Adopt recommended choice.

3.3.1. Accounting rates of return (ARR)

- This technique uses accounting information as revealed by the financial statements to

measure the profitability of the investment.

-

.100

cos Re

2

Average income after tax and deprARR x

Average investment

Initial investment t sidual valueAverage investment

Acceptance criterion

- Management should establish the minimum ARR for its projects

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http://en.wikipedia.org/wiki/Annual_effective_discount_rate

http://en.wikipedia.org/wiki/Net_present_value

http://en.wikipedia.org/wiki/Sensitivity_analysis


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- A project whose ARR is higher than the management’s ARR should be accepted and vice

versa.

- If the projects are mutually exclusive, chose the one with the highest ARR

-

Strengths of ARR

Simple to understand and use.

Calculate from accounting data which is readily available from financial

statements of a business organization.

Uses returns from entire life of the project to determine project profitability.

- Weaknesses of ARR

Ignores time value of money.

Uses accounting profits and not cash flows in appraising. Projects. Accounting

profits include non-cash items.

There is no universally acceptable way of computing ARR and this means

different parties can come up with different rates depending on the formula used.

3.3.2. Payback Period Method

Payback refers to the duration required for the project to recoup or recover the initial

investment cost. Initial investment cost is recovered from the future cash inflows expected

from the project. If the project generates a constant annual cash inflows, its payback period

is computed by dividing the initial investment cost by the annual constant cash inflows.

cos

tan inf

Initial investment tPBP

Cons t annual cash lows

If the project undertaken is to yield un equal cash inflows, its PBP can be determined by

adding up the cash inflows until the total cash inflows are equal to the initial investment

cost. It is assumed that the cash inflows are evenly generated and that cash inflows for a

fraction of a year can be calculated proportionately.

Acceptance criteria

- The management should fix the maximum acceptable PBP for its future projects


23

- A project whose PBP is less than the managements PBP should be accepted and vice

versa.

If the projects are mutually exclusive, the one with the smallest PBP

Strengths of payback period method include the following:

Its simple to understand and easy to calculate

It chooses ventures with the shortest pay back period and this minimizes the risks

associated with returns which will be generated some time in future and which may

be uncertain.

Choosing of the ventures with the shortest payback period improves the liquidity

position of the company

Payback period is realistic for those companies that which to re-invest intermediary

returns.

Weaknesses of payback period method include the following:-

Ignores the time value of money.

Ignores cash flows after the payback period

There is no rational basis for setting a maximum payback period

It’s not consistent with the objectives of maximizing the market value of firms shares.

Shares values do not depend on payback period of investment projects.

When the project does not yield uniform returns payback period will not be accurate

as it will assume that cash flows occurs evenly throughout the year which is

unrealistic

3.3.3. Net Present Value (NPV)

This technique recognises the fact that cash flows arising at different time period differ in

value and are comparable only where their present values are determined. NPV is the

difference between the present value of cash inflows and the present value of cash outflows.

Decision criterion

- Undertake projects with positive NPV

- Reject projects with negative NPV


24

- If the projects are mutually exclusive, chose the one with the highest positive NPV

Strengths of NPV

It recognizes the time value of money.

It takes into account cash flows over the entire life of the project to determine the

project viability.

It ranks projects according to their true profitability

It uses cash flows and not profits and therefore gives a reasonable assessment of the

investment viability.

It is consistent with the value additively principle. The NPV’s of various projects

can be added together to determine the increase in the value of the firm.

Weaknesses of NPV

It is more difficult to use compared to the traditional methods.

It use the firms cost of capital to discount the cash flows. It thus assumes that the

firms cost of capital is always available for use and is easy to calculate which is

not the case.

It is only ideal in ganging the profitability of investments similar in a number of

aspects such as similar economic life, similar initial cost, etc.

It ignores risks associated with an investment. All the firms future projects are

evaluated using the same discount rates irrespective of the differences in their

level of risk.

Use of the firms cost of capital as an investment discount rate to be applied to the

firms future project is based on the assumption that the firm’s future projects will

bear the same risks as the current projects which is unlikely.

It involves estimates of future cash flows which is a tedious task.

3.3.4. Profitability Index (PI) or benefit Cost Ratio (BCR)

Profitability index is the ratio of cash inflows to the initial cost of the project.

inf

cos

Pv of cash lowsPI of the above project

Initial t


25

Decision criterion

- Undertake projects whose PI>1

- Reject projects whose PI<1

- If the projects are mutually exclusive, chose the one with the highest PI

Strengths of PI

Recognizes time value of money

Takes into account cash flows over the entire life of the project

Uses cash flows and not profits and therefore gives a reasonable assessment of the

investment viability.

Weaknesses of PI

Difficult to use compared to the traditional methods

Assumes that the firm cost of capital is always available for use and easy to calculate

which not the case is.

Involves estimates of feature cash flows which is a tedious task

Ignores risks associated with an investment. All the firms’ future projects are evaluated

using the same discount rates irrespective of the difference in their level of risks.

3.3.5. Internal rate of return (IRR)

- IRR is the discount rate at which the NPV of a project is zero

Decision criterion

- Undertake projects whose IRR> cost of capital

- Reject projects whose IRR<Cost of capital

- If the projects are mutually exclusive, chose the one with the highest IRR

Strengths of IRR

Takes into account time value of money.

Considers cash flows occurring over the entire life of the project.

Ranks projects according to their true profitability giving the same result as NPV

method.

It is consistent with shareholders wealth maximization objectives.


26

Uses cash flows and not profits and therefore it gives a reasonable assessment of

the project profitability.

Weakness of IRR

May involve tedious calculations

May yield multiple and negative rates of return which may not have any meaning.

Not consistent with value addivity principle. IRR of various projects cannot be added

together to give the firms additional wealth from the projects.

Requires estimates of cash flows which is a difficult task.

.

3.4 Summary

Proper use of evaluation techniques and criteria should enable management to make

more effective decisions which result in future success

3.5 Self-assessment

The management of ABC Ltd anticipates purchasing one of the pump models

below. Each model has an initial cost outlay of Ksh 15,000 and a useful life of 5

years.

The corporation tax rate is 30% and the required rate of return is 10%. The

pumps are depreciated using straight line method. The before tax and

depreciation cash flows expected to be generated by the projects are as follows:

Year 1 2 3 4 5

Model I 8,000 8,000 6,000 5,000 4,000

Model II 6,000 6,000 6,000 6,000 6,000

Required:

a) Determine the cash flows after tax

b) Compute the AAR, PBP, NPV, PI and IRR for each project

c) Advice the management on the pump model to purchase


27

LECTURE FOUR: PROJECT PLANNING

4.0 Introduction

Project planning is part of project management, which relates to the use of schedules to plan and

subsequently report progress within the project environment. Planning process not only

establishes what is to be done, but also smoothens the way to make it happen. Many experts

believe that proper planning is essential for project success.



i) Outline the detailed planning of a project

ii) Prepare a schedule for the project activities

iii) Prepare a work breakdown structure

iv) Draw network diagrams, determine the project duration and the critical path

v) Apply program evaluation and review technique

4.2 Lecture Outline

4.2.1 Project planning

4.2.2 Work breakdown structure

4.2.3 Project scheduling

4.2.4 Network diagrams

4.2.5 Program evaluation and review technique

4.3 Project planning

Project planning is a discipline for stating how to complete a project within a certain timeframe,

usually with defined stages, and with designated resources.

Detailed planning involves:

• Clearly defining project objectives (definition agreed upon by customers, organizations

/contractors performing the project).

http://en.wikipedia.org/wiki/Project_management

http://en.wikipedia.org/wiki/Schedule_%28project_management%29


28

• Dividing and subdividing project scope into major ‘pieces’ or work packages shown by

work breakdown structure (WBS).

• Defining the specific activities that need to be performed for each work package in order

to accomplish the project objectives.

• Graphically portraying the activities inform of network diagrams, Gantt charts, etc .

• Making a time estimate for how long it will take to complete each activity.

• Making a cost estimate for each activity based on the quality and quantity of resources

for each activity.

• Developing a project schedule and budget to determine whether the project can be

accomplished within the required time.

• Documenting a project plan

4.3.1 Work breakdown structure

A complex project is made manageable by first breaking it down into individual

components in a hierarchical structure, known as the work breakdown structure (WBS). It

provides definition to the project scope by showing the hierarchical break down of activities

and end products that must be completed to finish the project. Such a structure defines tasks

that can be completed independently of other tasks, facilitating resource allocation,

assignment of responsibilities, and measurement and control of the project.

Example:

4.3.2 Project scheduling

HOUSE

CIVIL PLUMBING ELECTRICAL

Foundati

on

Walls/R

oof

Piping Sewerage Wiring Appliances


29

Example 1: Project Schedule

Project Management Improvement

Project – Phase 1

Effort

Estimate in

Days

Planned

Start

Date

Planned

End Date

Resource

1 Initiate Project

1.1 Develop Project Charter

1.1.1 Define Scope 4.00 06/01/05 06/08/05 Name1, Core Team

1.1.2 Define Requirements 3.00 06/09/05 06/15/05 Name1, Core Team

1.1.3 Identify High-Level Roles 0.25 06/16/05 06/17/05 Name1

1.1.4 Develop High-Level Budget 1.00 06/16/05 06/20/05 Name1

1.1.5 Identify High-Level Control Strategies 0.50 06/21/05 06/21/05 Name1

1.1.6 Finalize Charter and Gain Approvals 2.00 06/21/05 06/30/05 Name1

1.1.6.1 Consolidate and Publish Project Charter 1.00 06/21/05 06/23/05 Name1

1.1.6.2 Hold Review Meeting 0.50 06/24/05 06/24/05 Name1

1.1.6.3 Revise Project charter 0.50 06/27/05 06/28/05 Name1

1.1.6.4 Gain approvals 0.50 06/29/05 06/30/05 Name1

2 Plan Project

2.1 Develop Work Plan

2.1.1 Develop Work Breakdown Structure 2.00 07/01/05 07/06/05 Name1

2.1.2 Develop Project Staffing Plan 2.00 07/07/05 07/11/05 Name1

2.1.3 Develop Project Schedule 3.00 07/12/05 07/14/05 Name1

2.1.4 Develop Project Budget 3.00 07/15/05 07/20/05 Name1

2.2 Develop Project Control Plan

2.2.1 Develop Communication Plan 1.50 07/15/05 07/17/05 Name1

2.2.2 Develop Quality Management Plan 1.50 07/17/05 07/21/05 Name1

2.3 Finalize Project Plan and Gain

Approvals 5.00 07/22/05 07/29/05 Name1

3 Execute and Control Project

3.1 Design Framework

3.1.1 Define framework stages and activities 5.00 08/01/05 08/15/05 Name1, core team

3.1.2 Design framework content formats 1.00 08/16/05 08/18/05 Name3, Name2

3.1.3 Design web framework delivery tool 2.00 08/19/05 08/31/05 Name3


30

A schedule is a listing of a project's milestones, activities, and deliverables, usually with intended

start and finish dates. Those items are often estimated in terms of resource allocation, budget and

duration, linked by dependencies and scheduled events. Elements on a schedule may be closely

related to the Work Breakdown Structure (WBS) terminal elements.

A schedule tells you when each activity should be done, what has already been completed, and

the sequence in which activities need to be finished.

Scheduling Tools

Here are some tools and techniques for combining these inputs to develop the schedule:

Schedule Network Analysis – This is a graphic representation of the project's activities,

the time it takes to complete them, and the sequence in which they must be done. Project

3.2 Build the Framework

3.2.1 Write the framework content 65.00 09/01/05 10/31/05 Name2

3.2.2 Review framework content for quality

12.00 09/15/05 10/21/05

Name1, core team,

review team

3.2.3 Build web tool prototype

20.00 08/19/05 08/31/05

Name3, web

developer

3.3 Test the Framework

3.3.1 Test usability of web tool

4.00 09/19/05 11/25/05

core team, review

team

3.3.2 Test usability of content

4.00 10/19/05 11/25/05

core team, review

team

3.3.3 Adjust framework based on user feedback 5.00 11/18/05 11/30/05 Name2, Name3

3.4 Implement Framework

3.4.1 Move framework to production

environment 5.00 12/01/05 12/16/05 Name1

3.4.2 Announce availability of framework 0.50 12/19/05 12/30/05 Name1

4 Close the Project

4.1 Conduct Post-Project Review

5.00 01/03/06 01/10/06

Name1, core team,

review team

4.2 Celebrate

0.50 01/13/05 01/13/05

Name1, core team,

review team


http://en.wikipedia.org/wiki/Milestone_%28project_management%29

http://en.wikipedia.org/wiki/Task_%28project_management%29

http://en.wikipedia.org/wiki/Deliverable

http://en.wikipedia.org/wiki/Estimation_%28project_management%29

http://en.wikipedia.org/wiki/Resource_allocation

http://en.wikipedia.org/wiki/Budget

http://en.wikipedia.org/wiki/Duration_%28project_management%29

http://en.wikipedia.org/wiki/Dependency_%28project_management%29

http://en.wikipedia.org/wiki/Work_Breakdown_Structure

http://en.wikipedia.org/wiki/Work_breakdown_structure#Terminal_element


31

management software is typically used to create these analyses – Gantt charts and PERT

Charts are common formats.

Critical Path Analysis – This is the process of looking at all of the activities that must be

completed, and calculating the 'best line' – or critical path.

Schedule Compression – This tool helps shorten the total duration of a project by

decreasing the time allotted for certain activities. It's done so that you can meet time

constraints, and still keep the original scope of the project. You can use two methods

here:

Crashing – This is where you assign more resources to an activity, thus

decreasing the time it takes to complete it. This is based on the assumption that

the time you save will offset the added resource costs.

Fast-Tracking – This involves rearranging activities to allow more parallel work.

This means that things you would normally do one after another are now done at

the same time

Example 2: Project Schedule

Activity Predecessors Duration Weeks Crew Size Workers

A

B

C

D

E

F

G

H

-

-

A

A

B

B

D, E

F, G

4

7

3

3

2

2

2

3

4

2

2

4

6

3

3

4

4.3.3 Network diagrams

A network shows the various activities and their duration. It shows the sequence in which the

activities are to be carried out.

A project network diagram has the following features:

http://www.mindtools.com/pages/article/newPPM_03.htm

http://www.mindtools.com/critpath.html

http://www.mindtools.com/critpath.html


32

(a) Arrows – which denote activities.

An activity is an action which is time and resource consuming

Each activity will be necessary to complete a particular part of the overall project.

Activities are usually denoted by capital letters (A, B, C, …)

(b) Circles – Which denote events

An event is an instance in time denoting either the start or finish of an activity or a

group of activities.

(c) Activity duration

This is the time an activity is estimated to take to complete. It is indicated on the

activity arrow.

Rules of drawing a network

1. A complete network has only one start event point and one finishing event point.

2. Each activity has only one starting and one finishing event point. However many activities

can have the same starting point or the same ending point.

3. No two activities can start at the same event point and end at the same event point. When this

happens a loop is said to exist. To remove the loop a dummy activity is introduced. A

dummy activity is one that consumes no resources and is only introduced into the network to

ensure that the rules of network drawing are followed. It is drawn as a broken arrow and is

denoted by D1, D2, …

4.No activity can start until the tail event is complete and this event will not be complete unless

all activities leading to it are complete.

5. (i) Any activity with no predecessor begins at the point of entry.

(ii) Activities with the same predecessors begin at the same point

(iii) Activities preceding the same activity end at the same point.

6. All activities in a network must be connected to the main network.

The two most common and widely used project management techniques classified under the

title of network analysis are;

- Critical Path Method (CPM)

- Programme Evaluation and Review Techniques (PERT)

Both were developed in 1950s to help managers schedule, monitor and control large and

complex projects.


33

There are six stages common to both CPM and PERT

(i) Define the project and specify all activities/task

(ii) Develop the relationships among the activities and decide upon precedence

(iii)Draw networks to connect all activities

(iv) Assign time and/or costs to each activity

(v) Calculate the longest time path through the network i.e. critical path

(vi) Use network to Plan, Monitor and control the project

NB; Finding the critical path (stepv) is a major activity in controlling project

CRITICAL PATH METHOD (CPM)

- The critical path method (CPAM) places more emphasis on cost control rather than time

control.

- It is assumed that the activity time is known with certainty.

- CPM is used under conditions of certainty. It is used when cost control

outweighs time control.

Example:

Draw a network for the following set of activities:

Activity Predecessors Time (weeks)

A - 6

B - 3

C A 3

D A 4

E A 3

F C 5

G D 5

H B,D,E 5

I H 2

J F,G,I 3

Network diagram


34

C

3

A

6

5 F

4 D G

5

J

3

3 E

0 D1

B

3

2 I

H

5

Critical path: A-D-H-I-J

Project completion time = 20 weeks

Time analysis – This is concerned with the determination of:

(a) The minimum time it will take to complete the project.

(b) The critical path

Time analysis involves two stages:

(i) The forward pass

(ii) The backward pass.

Forwards Pass

Start at the beginning of network at time zero and progressively work through the

network to the finishing point adding the duration of activities cumulatively.

The sums so obtained are referred to as the Earliest Event Starting times (EST).

The last entry will be the earliest completion time of the project.

0 0

6 6

12 9

10 10

17 17 20 20

10 10

15 15


35

Where there is more than one activity leading to an event there will be two or more

possible cumulative sums. In such a case, the bigger of the sums obtained is taken i.e the

longer path is taken.

Backward Pass

Start at the end of the network and work through the network back to the starting point

cumulatively subtracting the duration of the activities.

The figures so obtained are referred to as the latest event starting times (LST)

Whenever there are more than one possible paths to an event, the smaller of the

difference obtained is used.

Critical activities:

The combination of the backward and forward passes enables us to identify those activities that

are critical. A critical activity has the following characteristics:

(i) The earliest starting time (EST) and the latest starting time (LST) is the same at the tail

event.

(ii) The earliest finishing time (EFT) and the latest finishing time (LFT) is the same at the

head event.

(iii) The difference between the head time and tail time is equivalent to the duration of the

activity

- Critical activities in a network form the critical path. Critical path is the longest path

through the network. Any interference with an activity on this path will result in a

similar interference in the overall project.

4.3.4 Program evaluation and review technique

Critical path method assumes that activity completion time is known with certainty.

This is an unlikely situation in practice. The completion time of an activity is better treated as a

random variable described by a probability distribution rather than by a single estimate.

PERT recognizes the uncertainty involved in estimating the duration of an activity that is yet to

take place. The best probability distribution that describes activity completion time is the Beta-

distribution. For Beta distribution, 3 times estimates are required:


36

1. Optimistic time (t0)-This is the shortest time possible of completing an activity

2. Modal time( tm) –This is the most likely time of completing an activity.

3. Pessimistic time (tp) – This is the longest possible time of completing an activity.

Notes:

Expected activity completion time, 04

6

p m

e

t t tt

Variance of activity completion time = Pessimistic time – Optimistic time]2

6

02 2[ ]

6

pt ta

Expected project completion time, tp = summation of expected completion time of

Critical Path activities.

Variance of project completion time, 2 p = summation of the variances of activities

completion times of critical path activities

The distribution of activities in a pert network follows a Beta distribution. Beta distribution is

very similar to the normal distribution except that it has a slight skew. Provided the number of

activities in the project is sufficiently large ( n > 4), normal distribution can be used to describe

project completion time. Once the expected completion time and variance have been

determined, the probability that a project will be completed by a specific time can be assessed.

The assumption is usually made that the distribution of completion time follows that of a normal

distribution curve.

Assumption of using this method

1. Non critical and critical activities maintain their status i.e the critical path does not

change.

2. The activity completion times are statistically independent i.e they do not influence one

another.

Illustration

A construction project consists of the activities shown below:


37

Activities Optimistic

(t0)

Most

likely

(tm)

Pessimistic

(tp)

Expected

time =

(t0+4tm+tp)

Variance

=

6

0tt p 2

A 1-2 4 6 10 6.3 1.00

B 1-3 3 5 9 5.3 1.00

C 2-4 7 12 20 12.5 4.69

D 2-5 3 5 8 5.2 0.69

E 3-4 6 11 15 10.8 2.25

F 4-5 4 6 11 6.5 1.36

G 4-6 3 9 14 8.8 3.36

H 5-6 2 4 8 4.3 1.00

I 6-7 3 5 9 5.3 1.00

Required:

(a) The expected time and variance of each activity. (6 marks)

(b) A project network for the activities. (6 marks)

(c) The expected completion time and variance of the project. (2 marks)

(d) If the project is completed in less than 30 weeks, it will cost Sh.1 million. It will cost

Sh.1.5 million if the project is completed between 30 and 35 weeks and Sh.2 million if it

takes more than 35 weeks. Compute the expected cost of the project. (6 marks)

Solution

a) In the table above

b) Project network for the activities


38

σ=3.008

30 34.9 35

Critical path is 1-2, 2-4, 4-5, 5-6, 6-7

(c) Expected project completion time = 34.9 weeks

Variance of the project completion time= Variances of critical path activities

= 1+4.69 + 1.36 + 1 + 1 = 0.05

(d) Expected completion time = 34.9 weeks.

Project standard deviation, 008.305.9

Project completion time follows a normal probability distribution since number of activities>4.

Project completion time

ettZ

63.1008.3

9.34301

Z Area = 0.4484

03.0008.3

9.34352

Z Area = 0.0120

P(t < 30) = 0.5 – 0.4484 = 0.0516, P(30 < t < 35) = 0.4494 + 0.0120 = 0.4604

P(35 < t) = 0.5 – 0.0120 = 0.488

2

6.3 6.3

1

0 0

3

5.3 8.0

4

18.8

18.8

6

29.6

29.6

7

34.9

34.9

5

25.3

25.3


39

=> Expected cost of the project

= 0.0516 x 1 + 0.4604 x 1.5 + 0.488 x 2

= ∑PiXi = Sh.1.7182 million

4.4 Activities

4.4.1 Differentiate between Critical path method and program evaluation & review

technique

4.4.2 Outline the importance of a project schedule to a project manager

4.5 Summary

A project plan is a formal, approved document used to guide both project execution and

project control. The primary uses of the project plan are to document planning assumptions

and decisions, facilitate communication among stakeholders, and document approved scope,

cost, and schedule baselines. If you plan and organise a job well, it should be a productive

and positive experience for everyone.

4.6 Self-assessment

A project has the following activities, precedence relationships, and time estimates in weeks:

Activity Immediate

Predecessors

Optimistic

Time

Most Likely Time Pessimistic Time

A - 15 20 25

B - 8 10 12

C A 25 30 40

D B 15 15 15

E B 22 25 27

F E 15 20 22

G D 20 20 22

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

b) Construct the network diagram

c) Tabulate the values of EST,EFT,LST,LFT and slack for each activity

d) Identify the critical path, and the project duration.

e) What is the probability that the project will take longer than 57 weeks to complete?


40

ECTURE FIVE: PLANNING AND ORGANIZING PHASE (Continued)

5.0Introduction

Project planning and organisation ensures that the project will be executed and completed

within the budgeted time and costs. Identification of flee time of various activities is

important while reorganising the sequence in which the activities are to be executed and also

when crashing project completion time.



i) Determine the total float, Flee float and independent floats of project activities

ii) Determine the duration and cost of a project after it has been crashed

iii) Draw Gantt charts

iv) Discuss the project organisation structures

v) Discuss the procurement of project resources and recruitment of project team

5.2 Lecture Outline:

5.2.1 Project time Floats

5.2.2 Project crashing

5.2.3 Gantt charts

5.2.4 Project organisation structures

5.2.5 Procurement of project resources

5.2.6 Project time Floats

- Float refers to spare time in a network. Activities on the critical path have no float.

- If an activity has some float, it means it can be delayed without having any impact on

other activities or to the overall project.

- By definition, any delay in a critical activity will have a similar delay on the overall

project and therefore such activities have got no float.

- There are three types of floats:

(i) Total float


41

(ii) Free float

(iii) Independent float

(i) Total float

This refers to the amount of time an activity or a path of activities could be

delayed without affecting the overall project duration. It is obtained by the

following formulae; Total float = LFT – EST – Duration of activity

Critical activities have a total float of zero.

(ii) Free float

This is the amount of time that an activity can be delayed without affecting any

other activity in the project. It is given by the formula:

Free float = EFT – EST – Duration

(iii) Independent float

This is the amount of time an activity can be delayed without affecting the next

activity. It is given by the formulae

Independent float = EFT – LST – Duration

Exercise: Compute the total float, free float and independent floats for the

activities of the above project:

Activity Duration

(weeks)

FLOATS

EST LST EFT LFT Total (TF)

=LFT-EST-D

Free (FF)

=EFT-EST-D

Independent (IF)

=EFT-EST-D

A 6 0 0 6 6 0 0 0

B 3 0 0 10 10 7 7 7

C 3 6 6 9 12 3 0 0

D 4 6 6 10 10 0 0 0

E 3 6 6 10 10 1 1 1

F 5 9 12 17 17 3 3 0

G 5 10 10 17 17 2 2 2

H 5 10 10 15 15 0 0 0

I 2 15 15 17 17 0 0 0

J 3 17 17 20 20 0 0 0


42

NB: TF . FF > IF

5.2.7 Project crashing (least cost scheduling)

Least cost scheduling (or crashing) is a technique that is used to analyse the cheapest way of

reducing the overall project duration. The sooner a project is completed the better as time is a

scarce resource. However, in order to be able to reduce the duration of an activity, additional

resources may need to be employed resulting in an increase in costs. Since minimization of cost

is a desirable objective it becomes necessary to identify how best the project duration can be

reduced while still achieving the objective of minimising costs.

Definitions:

1. Normal cost – The cost incurred when an activity is completed within the normal time.

2. Normal time – This is the duration an activity would take if available resources are used

as efficiently as possible. It is the time taken to complete an activity when there is no

delay and no rush.

3. Crash time – This refers to the shortest possible time it would take to complete an

activity if additional resources were employed.

4. Crash cost – cost incurred when an activity is crashed.

5. Cost slope – This refers to the additional cost incurred in crashing an activity by a unit

time.

Cost slope = Crash cost – Normal cost

Normal time – Crash time

Crashing Process:

The process of reducing the duration of a project by employing additional resources is referred to

as crashing or least cost scheduling. This process involves reducing project duration by

concentrating on those critical activities that are cheapest to crash.

Rules of crashing

1. Only activities on the critical path are crashed.

2. Start crashing the critical activity with the least cost slope.

3. A critical path must remain critical throughout.


43

4. Where there are two or more critical paths an activity must be crashed from each path

simultaneously.

5. A non-critical path may become critical after crashing. However after it becomes critical it

must remain critical throughout.

Steps involved when crashing

1. Draw the network and do a time analysis based on the normal time.

2. Determine the overall costs of the project using normal costs.

3. Determine the critical path.

4. Compute the cost slope of the critical activities.

5. Start crashing the critical activity with the least cost slope.

6. Ensure that every reduction effected has an impact on the overall project duration. A

cumulative total project costs should be maintained by adding to total normal costs every

additional cost incurred while crashing.

Illustration

Mrs. Onyango wants to open a cafeteria in Kisumu city. A small business enterprise adviser

whom she approached, listed for her six major activities to be carried out. The table below gives

a summary of the normal time estimates of each activity, crash time and the cost reduction per

week.

Activity Predecessor Normal time

(weeks)

Crash time

(weeks)

A:

B:

C:

D:

E:

F:

Procurement of materials

Plumbing

Masonry

Electrical works

Carpentry

Finishing

-

A

-

C

C

B,D,E

3

6

5

8

6

4

3

4

3

7

4

2


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C 5

A

3

B

6

F

4

d1 0 8 D

6

E

Activity Cost slope (Sh.)

A

B

C

D

E

F

-

45,000

30,000

60,000

22,500

75,000

Required:

(a) The project network diagram (4 marks)

(b) The normal completion time of the project and the critical activities. (2 marks)

(c) (i) The shortest time the project can be completed. (8 marks)

(ii) The additional cost to be incurred if the project is crashed. (2 marks)

(d) Explain the meaning of the cost slope and how it is computed. (2 marks)

(e) Assumptions made when crashing. (2 marks)

(Total: 20 marks)

a) Network diagram

b) Normal completion time = 17 weeks

Critical activities are C, D and F

(c) (i) The shortest time the project can be completed if it is crashed

Activity Cashable time Cost slope

0 0

3 7

13 13

17 17

5

5

11 13


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A 3-3 = 0 -

B 6-4 = 2 45,000

C 5-3 = 2 30,000

D 8-7 = 1 60,000

E 6-4 = 2 22,500

F 4-2 = 2 75,000

Path Time Crash C by 2 Cash D by 1 Crash F by 2

C-D-F 17 15 14 12

A-B-F 13 13 13 11

C-E-F 15 13 13 11

Additional 2 x 30 60 + 60 x 1 120 + 75 x 2

Cost Sh.’000’ = 60 = 120 = 270

Shortest completion time after crashing = 12 weeks

(ii) Additional costs if the project is crashed = Sh.270,000.

(d) Cost slope is the additional cost that is incurred when an activity time is reduced by one

unit.

Cost slope = Crash cost – Normal cost

Normal time – Crash time

(e) Assumptions made when crashing:

- Cost slope is constant

- Direct linear relationship between time and costs.

5.2.8 GANTT CHART AND RESOURCE SCHEDULING

A Gantt chart is a bar chart that is drawn to a time scale.

It shows the activities and their durations. The length of a bar is directly proportional to the

length of activity duration.

A Gantt chart is used to schedule and balance resources. This helps to smooth the distribution of

the resources available over the whole period of the project.


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Resource balancing

This represents an attempt to have a more efficient usage of resources. If the project has to be

completed within critical path duration, then only activities which are not critical can be

rescheduled to achieve some level of balancing. Activities are rescheduled with the help of total

floats of the activities.

Illustration

Clifford is the project manager of Tumaini Construction Company. The Company is bidding on

a contract to build a go down for Unity importer ltd. It has identified the following activities

along with their predecessor restrictions expected times and worker requirements:

Activity Predecessors Duration Weeks Crew Size Workers

A

B

C

D

E

F

G

H

-

-

A

A

B

B

D, E

F, G

4

7

3

3

2

2

2

3

4

2

2

4

6

3

3

4

Clifford has agreed with the client that the project should be completed in the shortest

duration.

Required:

(i) Draw a network for the project. (6 marks)

(ii) Determine the critical path and the shortest project duration (4 marks)

(iii) Clifford will assign a fixed number of workers to the project for its entire duration

and so he would like to ensure that the minimum number of workers. Draw a

Gantt chart showing how the project will be completed within the shortest project

duration. (8 marks)


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A

4

7

13 2

E

2

F

2 G

3

H

3 D

C

3

iv) Comment on the schedule you have drawn in (iii) above. (2 marks)

Solution

i) Network diagram for the project

ii) Critical path is B-E-G-H

Project duration = 14 weeks

(iii) Time floats: TF = LFT – EST - D

TF (A) = 6-0-4 = 2, TF (B) = 0, TF(C) = 7, TF (D) = 2, TF (E) = 0

TF (F) = 2, TF (G) = 0, TF (H) = 6

Gantt chart and Rescheduling of activities

H

4

G

3

F

3

0 0

4 6

9 9

11 11

14 14

7 7

2

1


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E

D

C

2 2

B

A

4

Time (weeks)

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

Workers

6 6 6 6 8 8 8 9 9 3 3 4 4 4

Reschedule F by 2 weeks 5 5 5 5 8 8 8 6 6 6 6 4 4 4

Reschedule C by 7 weeks 6 6 6 6 6 6 6 6 6 6 6 6 6 6

iv) Minimum number of workers needed throughout the duration is 6 workers.

C & F are pushed to the end of their slack time to ensure there is a smooth engagement of

workers

5.2.9 Project organisation Structure

An organizational structure is a framework of policies and procedures companies use to break

their organization into manageable groups. This process involves setting specific job

responsibilities, creating a line of authority for managers and creating a decision structure for

major business issues or opportunities.

Once management approves a project then the question becomes, how will the project be

implemented? While there are various types of organizations used today, the three most

prominent project management structures are the functional, dedicated project teams and matrix

structure. Project management structures provide a frame work for launching and implementing

project activities within the parent organization.


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Organising projects within the Functional Organization Structure

The structure is vertical with each employee having one boss. Each functional manager was

responsible for hiring employees having a specific field of knowledge or skill set. The projects

are managed within the existing functional hierarchy of the organization.

Once the management decides to implement a project, the different segments of the project are

delegated to the respective functional units with each unit responsible for completing its segment

of the project. Coordination is maintained through normal management channels.

Organizing projects with a dedicated team:

An independent project team is created. The team operates as a separate unit from the rest of the

functions of the parent organization. A full- time project manager recruits the necessary

personnel from both within and outside the parent company.

Organizing projects within a matrix arrangement:

Matrix management is a hybrid organizational form in which a horizontal project management

structure is overlaid on the normal functional hierarchy. In this arrangement, there are two chains

of command, one along functional lines and the other along the project lines. Instead of

delegating segments of a project to different units or creating an autonomous team, project

participants report simultaneously to both functional and project managers.

5.2.10 Procurement of project resources

This involves planning for all the resources - people, goods and services - required by the

project. It includes selection of goods and services, writing and evaluating tenders and

estimates and negotiating contracts to obtain goods and services for the project.


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Activities

Distinguish between Total float and free float

State the advantages of organizing projects with a matrix arrangement

Summary

Organizing is the management function that usually follows after planning. It involves the

assignment of tasks, the grouping of tasks into departments and the assignment of authority

and allocation of resources across the organization.

Self-assessment

James Mutiso is a computer engineer in an information technology firm. The firm has decided to

install a new computer system to be used by the firm’s help desk. James Mutiso has identified

nine activities required to complete the installation.

The table below provides a summary of the activities’ durations and the required number of

technicians:

Activity Duration (weeks) Required number of

technicians

1 – 2

1 – 3

2 – 4

2 – 5

3 – 4

3 – 6

4 – 5

5 – 6

6 – 7

3

1

3

2

2

4

2

2

2

2

4

4

2

4

4

2

2

2

Required:

i) Draw a gantt chart for the project.

ii) Mr. Mutiso would like to reschedule the activities so that not more than 6 technicians are

required each week. Determine if this is possible and how it can be achieved by

rescheduling the activities.


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LECTURE SIX: PROJECT EXECUTION AND CONTROL PHASE

6.0 Introduction

Most project managers start the project off by holding a formal kick-off meeting with all the

key players (client, customer, project team) involved in the project. This is used as an

opportunity to define the roles and responsibilities of very one involved in the project and to

communicate the project plans clearly and concisely.



i. Describe project Execution

ii. Define project control

iii. Responsibility of the project team during Execution and control phase

iv. Report on project schedule and cost control

v. Report on quality assurance and Quality control

vi. Report on cost status of the project

6.2 Lecture Outline

6.2.1 Project Execution

6.2.2 Project Control

6.2.3 Responsibilities of the project team

6.2.4 Project Schedule and cost control

6.2.5 Quality Assurance and Quality Control

6.2.6 Project Execution

Project execution (or implementation) is the phase in which the plan designed in the prior

phases of the project life are put into action. The purpose of project execution is to deliver

the project expected results (deliverable and other direct outputs). Typically, this is the

longest phase of the project management lifecycle, where most resources are applied.

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52

During the project execution the execution team utilizes all the schedules, procedures and

templates that were prepared and anticipated during prior phases. Unanticipated events and

situations will inevitably be encountered, and the Project Manager and Project Team will

have to deal with them as they come up.

The main elements of project execution are:

Conduct Project Execution Kick-off event, where the Project Manager conducts a

meeting to formally begin the Project Execution and Control phase, orient new Project

Team members, and review the documentation and current status of the project.

Manage Project Execution, where the Project Manager must manage every aspect of the

Project Plan to ensure that all the work of the project is being performed correctly and on

time.

Manage CSSQ (Cost, Scope, Schedule, and Quality), where the Project Manager must

manage changes to the Project Scope and Project Schedule, implement Quality Assurance

and Quality Control processes, control and manage costs as established in the Project

Budget.

Monitor and Control Risks, where the project develops and applies new response and

resolution strategies to unexpected eventualities.

Gain Project Acceptance where the project manager acknowledge that all outputs

delivered have been tested, accepted and approved, and that the products/services of the

project has been successfully transitioned to the expected beneficiaries.

6.2.7 Project Control

Project Control involves the comparison of the actual performance with the planned

performance and taking appropriate corrective action to get the desired output. Project controls is

mainly concerned with the metrics of the project, such as quantities, time, cost, and other

resources; however, also project revenues and cash flow can be part of the project metrics under

control.

6.2.8 Responsibilities of the project team

During the project execution and control phase, Project Team is responsible for the following

activities: Team Members execute the tasks as planned by the Project Manager, Project Manager

http://en.wikibooks.org/wiki/Development_Cooperation_Handbook/Designing_and_Executing_Projects/Project_Execution_and_Control/Conduct_Project_Execution_Kick-off_event

http://en.wikibooks.org/wiki/Development_Cooperation_Handbook/Designing_and_Executing_Projects/Project_Execution_and_Control/Manage_Project_Execution

http://en.wikibooks.org/wiki/Development_Cooperation_Handbook/Designing_and_Executing_Projects/Project_Execution_and_Control/Manage_CSSQ

http://en.wikibooks.org/wiki/Development_Cooperation_Handbook/Designing_and_Executing_Projects/Project_Execution_and_Control/Monitor_and_Control_Risks

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is responsible for performance measurement which includes finding variances between planned

and actual work, cost and schedule, Project manager is responsible for providing Project Status

Report to all key stakeholders, All Project Key stakeholders are responsible for the review of the

metrics and variances, All Project Key stakeholders are responsible for taking necessary action

of the variances thus determined so as to complete the project within time and budget.

The basic processes of the Project Execution and Control can be: Project Plan Execution, Review

of Metrics and Status Reports, Change Control Process. This defines the procedures to handle the

changes that are introduced during Project Execution and Control.

The facilitating processes during Project Execution and Control can be: Quality Assurance and

Quality Control, Performance Monitoring, Information Distribution or Status Reporting, Project

Administration, Risk Monitoring and Control, Scope Control, Schedule and Cost Control,

Contract Administration.

6.2.9 Project Schedule and cost control

The schedule and budget baselines, along with other baselines, are developed in the planning

phase of the project. The project plan is approved prior to execution by the project sponsor or an

appropriate senior level manager. The project plan includes the budget and schedule. Schedule

determines when work elements (activities) are to be completed, milestones achieved, and when

the project should be completed. The budget determines how much each work element should

cost, the cost of each level of the work breakdown schedule (WBS), and how much the total

project should cost. Actual performance can be compared to these plans to determine how well

the project is progressing or finished. The project schedule is also the tool that links the project

elements of work to the resources needed to accomplish that work.

As a minimum, the project schedule includes the following components:

All activities, A planned start date for the project, Planned start dates for each activity, Planned

finish dates for each activity, Planned finish date for the project, Resource assignments, Calendar

based, Activity durations, The “flow” (sequence) of the various activities, The relationships of

activities, An identified critical path(s), Total and free float

Project cost control may be broken down into these categories :


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material cost control

labour cost control

miscellaneous cost control

subcontract cost control

6.2.10 Quality Assurance and Quality Control

Effective quality systems can contribute enormously to the success of projects.

Quality Assurance (QA) is the process of managing quality;

QA is focused on planning, documenting and agreeing on a set of guidelines that are

necessary to assure quality. QA planning is undertaken at the beginning of a project, and

draws on both project specifications and industry or company standards. The typical

outcomes of the QA planning activities are quality plans, inspection and test plans, the

selection of defect tracking tools and the training of people in the selected methods and

processes.

Quality control (QC) is used to verify the quality of the output.

It includes all activities that are designed to determine the level of quality of the delivered

project. QC is a reactive means by which quality is gauged and monitored, and QC

includes all operational techniques and activities used to fulfil requirements for quality.

These techniques and activities are agreed with customers and/or stakeholders before

project work is commenced. QC involves verification of output conformance to desired

quality levels. This means that the project is checked against customer requirements,

with various checks being conducted at planned points in the development lifecycle.

6.2.11 Scope control

Scope involves getting information required to start a project, and the features the product would

have that would meet its stake holder’s requirements. Scope control is both: avoiding of

"unaccepted" new work packages and integrating "accepted" new work packages into the project

scope statement and/or into the WBS.


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Tools and Techniques

A Change Control System is a documented process by which the scope can officially be

changed

The Variance Analysis determines the causes of variances relative to the scope baseline

Re planning can be evoked by the approved change requests and may be realized by

modifications of the WBS .

The Configuration management system is a system for identifying releases of

deliverables

Activities

Outline the importance project schedule and cost control

How does Quality assurance differ from Quality control

Summary

Producing reports, schedules and budget plans help in controlling the project

throughout its life.

Self-assessment

“Controlling cost is much more difficult than monitoring costs”. Discuss


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LECTURE SEVEN: PROJECT PERFORMANCE MEASUREMENT:

7.0 Introduction

Earned value performance measurements look at the project cost and schedule performance by

analyzing the cost and schedule variance along with cost and schedule efficiency. Project

Execution and Control Phase has a direct correlation to project progress and stakeholder's

expectations. Even the minor issues, if unnoticed, can cause major impact on cost, schedule and

risk and deviate the project from the Project Plan.



i) Compare actual and planned performance

ii) Describe the criteria for Investigating Variances

iii) Describe the Earned value performance measurement

v) Estimate project cost at Completion

7.2 Lecture Outline

7.2.1 Comparing Actual and planned performance

7.3.1 Investigation of variances

7.3.2 Earned value performance measurement

7.3.3 1.3.4 Estimate at Completion

7.3.4 Comparing Actual and planned performance

Performance measurements are used to determine the success or failure of a project.

Any system for monitoring project performance should provide the project manager and

stakeholders with the ability to answer questions such as:

What is the current status of the project in terms of schedule and cost?

How much will it cost to complete the project?

When will the project be completed?

Are there potential problems that need to be addressed now?


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What and where are the causes for cost and schedule overruns?

Because plans seldom materialize as expected, it becomes imperative to measure deviations from

plan to determine if action is necessary. Periodic monitoring and measuring the status of the

project allow for comparisons of actual versus expected plans. It is crucial that the timing of the

status reports be frequent enough to allow for early detection of variations from the plan and

early correction of causes. If deviations from plans are significant, corrective action will be

needed to bring the project back in line with the original or revised plan. In some cases,

conditions or scope change, which in turn, will require a change in the baseline plan to

recognize new information.

7.3.5 Investigation of variances

A variance report is a way for business executives to gauge their company's performance by

comparing one set of figures to another. This usually means comparing a planned amount to

an actual amount. Companies frequently use variance reports to analyze how close they've

come to hitting forecasted sales targets or to see if they've met their budgetary goals.

A well-rounded budget variance report will address trends, overspending, and under

spending.

Trends: In challenging economic times, it is important for businesses to carefully monitor

over spending and under spending. If there is a trend towards either, then the entire budget

may need to be revisited..

Overspending: Overspending: this can pose a serious threat to the project, to other projects,

and to the company if resources are scarce.

Under Spending: Under spending may indicate a problem in quality control (i.e., the

manufacturing process may be cutting corners) if the project budget was correct at first. It

can be as serious a problem as overspending.

Variance tables:

Tables which show the variances by item, budget period, and project are the most common

variance report format. Companies typically set an approved variance percentage such as

5% before the item appears in a variance report.


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Over/Under or Favorable/Unfavorable?

Microsoft Office Performance Point 2007 Management Reporter provides two templates for

variance reporting: Over/Under and Favourable/Unfavourable

An Over/Under report is the simpler of the two, both in its purpose and how it is created.

One amount is deducted from another. If the difference is positive, the account is considered

“over”. If the difference is negative, the account is considered “under”.

A Favourable/Unfavourable report not only shows whether an account is over or under. It

also considers the kind of account and its effect on the business. If revenue numbers are

more than what was budgeted, the variance is shown as favorable. However, if actual

expenses are more than what was budgeted for, that variance is shown as unfavorable.

How are Variance Reports used?

Once a Variance report is prepared, company executives can analyze the state of the enterprise.

One way to do this is to evaluate the financial risk to the company should those trends continue.

Another is to address the reasons behind the variances identified in the report. A follow up to

both of those steps may be to create new targets for improvement. Investigating variances is a

key step in using variance analysis as part of performance management.

When should a variance be investigated - factors to consider

i) Size- A standard is an average expected cost and therefore small variations between the actual

and the standard are bound to occur. These are uncontrollable variances and should not be

investigated. In addition, a business may decide to only investigate variances above a certain

amount. The following techniques could be used:

Fixed size of variance, e.g. investigate all variances over sh 5,000

Fixed percentage rule, e.g. investigate all variances over 10% of the budget

Statistical decision rule, e.g. investigate all variances of which there is a likelihood of less

than 5% that it could have arisen randomly.

ii) Favourable or adverse- Firms often treat adverse variances as more important than

favourable and therefore any investigation may concentrate on these adverse variances.

http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Variance%20Analysis.aspx?mode=none

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iii) Cost - For investigation to be worthwhile, the cost of investigation must be less than the

benefits of correcting the cause of the variance.

iv) Past pattern- Variances should be monitored for a number of periods in order to identify any

trends in the variances. A firm would focus its investigation on any steadily worsening trends.

v) The budget- The budget may be unreliable or unrealistic. Therefore, the variances would be

uncontrollable and call for a change in the budget or an improvement in the budgeting process,

not an investigation of the variance.

vi) Reliability of figures- The system for measuring and recording the figures may be

unreliable. If this is the case, the variances will be meaningless and should not be investigated.

7.3.6 Earned value performance measurement

Earned value performance measurements look at the project cost and schedule performance

by analyzing the cost and schedule variance along with cost and schedule efficiency. There

are three key components to earned value: Planned Value, Earned Value and Actual Cost.

–PV is the physical work scheduled or “what you plan to do”.

–EV is the quantification of the “worth” of the work done to date or “what you physically

accomplished”.

_ AC is the cost incurred for executing work on a project or “what you have spent”.

Performance measurement is how one determines success or failure on a project

Earned Value performance measurements focus on cost and schedule management.

The Cost Management focuses on the cost performance of the project. It looks at the

relationships between the Earned Value (EV) and the Actual Cost (AC)

Schedule Management focuses on the schedule performance of the project. It looks at the

relationships between the Earned Value (EV) and the Planned Value (PV).

Earned value performance measurements look at the project cost and schedule performance

by analyzing the cost and schedule variance along with cost and schedule efficiency. The

formulas used are as follows:


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Variance Analyses:

Cost Variance (CV) is the difference between the earned value of work performed and the

actual cost. CV tells you the earned value of work performed for each shilling’s worth of

work scheduled.

Cost Variance (CV) = Earned Value (EV) –Actual Cost (AC)

If the result is POSITIVE, project is experiencing an “Underrun”

If the result is NEGATIVE, project is experiencing an “Overrun”

Potential Causes of Unfavorable (-) Cost Performance

•Work more complex than anticipated •Design review comments extensive Rework•Unclear

Requirements •Scope Creep •Unfavorable Market Fluctuations in the Cost Labor or

Material •Overhead Rate Increases

Potential Causes of Favorable (+) Cost Performance

•Efficiencies being realized •Work less complex than anticipated •Fewer revisions and

rework •Favorable Market Fluctuations in the Cost of Labor or Material •Overhead Rate

Decreases

Schedule Variance (SV) is the difference between the earned value of work performed and

the work scheduled. SV tells you the value of work performed less value of work scheduled

Schedule Variance (SV) = Earned Value (EV) –Planned Value (PV)

If the result is POSITIVE, project is on schedule or exceeding the schedule

If the result is NEGATIVE, project is behind schedule

Potential Causes of Unfavorable (-) Schedule Performance

•Manpower shortage •Revised Execution Plan •Supporting organizations behind

Schedule , Late Vendor delivery •Delayed customer feedback/direction •Rework

•Work more complex than anticipated •Design review comments extensive

•Unclear requirements •Scope creep

Potential Causes of Favorable (+) Schedule Performance

•Efficiencies being realized •Work less complex than anticipated •Fewer revisions and rework

•Favorable Market Fluctuations in the Cost of Labor or Material•Subcontractor ahead of

schedule


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Performance Indices:

Cost Performance Index (CPI) is a measure of Cost Efficiency. The CPI measures the value of

work performed against the actual cost.

Cost Performance Index = Earned Value (EV)/Actual Cost (AC)

If the result is less than 1.0, cost is GREATER than budgeted

If the result is greater than 1.0, cost is LESS than budgeted

Schedule Performance Index (SPI) is a measure of Schedule Efficiency. The SPI measures the

value of work performed against the work scheduled.

Schedule Performance Index = Earned Value (EV)/Planned Value (PV)

If result is less than 1.0, project is “BEHIND” schedule

If the result greater than 1.0, project is “AHEAD of schedule

Reporting Variances

The size and complexity of the project determines the reporting needed. Different industries and

government agencies will set variance thresholds at different levels, but most set the variance

level between + or - 7% to 10%. This means that a SPI or CPI of .90 to 1.1 will require an

official variance analysis to explain what is happening on the project. Note that you need to

explain positive variances as well as negative variances.

7.3.7 Estimate at Completion

Now it is time to learn how to analyze the future or what is expected to happen

on a project given the progress measurements reported to date. Anticipating

future progress requires determining when the project will be completed and

how much it will cost to complete it. To complete our analysis, we will look at the Estimate at

Completion (EAC) and the Budget at Completion (BAC).

The Estimate at Completion (EAC) is the actual cost to date plus an objective estimate of costs

for remaining authorized work. The objective in preparing an EAC is to provide an accurate

projection of cost at the completion of the project. The Budget at Completion (BAC) is the sum


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of all budgets allocated to a project scope. The Project BAC must always equal the Project Total

PV. If they are not equal, your earned value calculations and analysis will be inaccurate.

The chart on the following page lists the parameters of the BAC and EAC along with the other

EVM items we have covered

Item Questions

Planned Value (PV) How much work should be done?

Earned Value (EV) How much work was done?

Actual Cost (AC) How much did the work cost?

Budget at Completion (BAC) What is the total job budgeted to cost?

Estimate at Completion (EAC) What do we expect the total job to cost?

Another term you may hear is Latest Revised Estimate (LRE). The LRE is equal to the EAC.

Estimate At Completion = Latest Revised Estimate

For the remainder of the Modules, we will refer to Estimate at Completion as

“EAC”.

The EAC is the best estimate of the total cost at the completion of the project.

The EAC is a periodic evaluation of the project status, usually on a monthly

basis or when a significant change happens to the project. EACs are developed with varying

degrees of detail and supporting documents.

A comprehensive EAC is usually prepared annually or if there are any major changes in the

project. The EAC should be reviewed on a monthly basis by the Control Account Manager

(CAM) or those responsible. The EAC is developed for projects as well as control Accounts and

Work Packages.

There are multiple ways to develop an EAC. The technique selected is based upon the shilling

value of the project, the risk, accounting system available and the accuracy of the estimates.


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Calculating Estimate at Completion

The first EAC calculation we will look at is Estimate to Complete:

EAC = Actual Cost (AC) + Estimate to Complete (ETC)

The Estimate to Complete (ETC) is the estimated cost of completing the authorized remaining

work. A detailed ETC will include a description of the work remaining and any revisions to the

estimated resources or cost for completing the project. This formula assumes that all remaining

work is independent of the burn-rate incurred to date.

EAC is the best estimate of the total cost at the completion of the project. It is also used to

determine the Variance at Completion (VAC) for the project. The VAC is calculated as follows:

VAC = BAC –EAC

If the result is POSITIVE, project is projecting an “Underrun”

If the result is NEGATIVE, project is projecting an “Overrun”

The second EAC formula is as follows: EAC = AC/EV x BAC

This calculation uses the Actual cost, Earned value and Budget at Completion for the project.

This formula is the easiest to use, but it assumes that the “burn-rate” will be the

same for the remainder of the project

The third EAC formula is as follows: EAC = BAC/CPI

This calculation uses the Budget at Completion (BAC) and the Cost Performance (CPI) Index to

calculate EAC.

This formula is also easy to use and assumes that the “burn-rate” remains constant for the

remainder of the project. This formula is derived from the previous formula and thus should

result in the same EAC figure. Note that with this formula you need additional information than

the previous formula.

The fourth EAC formula is as follows:

EAC = AC/EV x [Work Completed and in Progress]+[Cost of work not yet begun]


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This calculation uses the Actual cost, Earned value, the value of work completed and in process

and the cost of work not yet begun. This formula assumes that the work not yet begun will be

completed as planned.

7.3.1 Activity- Distinguish between a Cost Variance and a Schedule Variance

1.1 Summary

Performance measurement defines how success or failure is determined on a project. In

the case of Earned Value Management, performance measurements focus on cost and

schedule management.

1.2 Self assessment- Outline the importance of variance analysis in project management


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LECTURE EIGHT: PROJECT RISK MANAGEMENT

8.0 Introduction

Project risk can be defined as an unforeseen event or activity that can impact the project's

progress, result or outcome in a positive or negative way. Risk management is the

identification, assessment, and prioritization of risks followed by coordinated and economical

application of resources to minimize, monitor, and control the probability and/or impact of

unfortunate events or to maximize the realization of opportunities.



i) Differentiate between a risk and an opportunity

ii) Give examples of project risks

iii) Describe the various methods of project risk identification

iv) Discuss project risk quantification strategies

v) Discuss project risk response strategies

vi) Discuss project risk monitoring and control

8.2 Lecture Outline

8.2.1 Project risk and a project opportunity

8.2.2 Examples of project risks

8.2.3 Methods of identifying project risk

8.2.4 Project risk quantification strategies

8.2.5 Project risk response strategies

8.2.6 Project risk monitoring and control

8.2.7 Project risk and a project opportunity

Project risk is an unforeseen event or activity that can impact the project's progress, result

or outcome in a positive or negative way. A project Opportunity is a positive condition,


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situation or event that has a potential to have a favourable impact on the project outcome

or objectives.

Risk management is the identification, assessment, and prioritization of risks followed by

coordinated and economical application of resources to minimize, monitor, and control

the probability and/or impact of unfortunate events or to maximize the realization of

opportunities.

8.2.8 Examples of project risks

Unreliable project completion estimates, Team turnover, Changes in requirements; Design

errors, omissions and misunderstandings; Poorly defined or understood roles and

responsibilities; Insufficiently skilled staff, Natural disasters eg earth quakes, Shortage of

Skilled Labour, Shortage of materials, Over running the project cost, Inability to complete

the project as scheduled, Government interference, Accidents at the site, etc

8.2.9 Methods of identifying project risk

This involves identification and naming of the risks. It also includes determining which risk may

adversely affect the project objectives and what the consequences of each risk might be if they

occur. The most common tools and techniques used for developing a list of project risks are

brainstorming, nominal grouping technique, mind mapping, Delphi technique and lessons

learned from similar projects.

1. Brainstorming

The steps involved are as follows:

Chose a facilitator other than the project manager;

Chose a scribe to capture the risks and opportunities;

Use a category or categories to start the creativity flowing; Do not judge or analyze

during this effort; and

Focus on getting the universe of risks and opportunities for the project.

2. Nominal Grouping Technique



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Gather the core team for a risk workshop;

Use flip-chat paper or a white board the collect the information for the team;

Begin by requesting that each person identify potential areas of risk;

Request that each person write about three (3) to five (5) risk events for each area.

Participants should not share lists;

Request that the first person provide the first item on his/ her list then proceed to the next

person and repeat the request for his/ her first item; and

Repeat until everyone's items have been listed.

This helps to avoid duplicate listings of the same risk(s) and also saves time taken to perform this

task.

3. Mind Mapping


Begin by drawing a circle that represents a risk category;

Represent major risks for that category with lines connecting with the circle;

For each major risk, identify smaller risks that are part of that risk;

Do not judge or evaluate at this point; and

Continue until no more risks can be identified.

At the end of this activity, there should be a fish bone diagram that shows the different

relationships for each risk.

4. Delphi Technique


Identify a person to act as the facilitator;

The facilitator identifies qualified experts to participate in the exercise;

The facilitator poses questions to the experts individually;

The facilitator then conducts a factor analysis on the data to identify common themes;

This information is shared with the panel of experts for validation;


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The list of themes is refined and again shared with the panel; and

The facilitator then creates a single results document.

5. Lessons Learned from Similar Projects


Identify comparable projects using the project characteristics;

Locate the relevant post project review reports;

Review the lessons learned documents for a list actual risk events that occurred,

response(s) to the risk event, effectiveness of the risk event and any new risks identified

during the project.

Additionally, categories such as cost, schedule, technology, resources, environmental, legal,

economic and political can be used to group risk. Personal experience and intuition (thinking

outside the box) are also quite useful in risk identification.

Involving the stakeholders early in the project opens communication and there is less risk of

interpreting what the stakeholders want and/ or require.

Make sure that there is an adequate amount of the correct information. By applying more than

one of these various tools and techniques appropriately, the list of risks and opportunities will be

the most comprehensive.

At the end result of the risk identification process the project teams knows what may happen and

what will be the impact. The team understands the source and can estimate when it may occur.

8.2.10 Project risk quantification strategies

a) The quantitative approach relies on the use of numeric value. It uses objective data to

determine values and requires an understanding of probability theory. The level of

uncertainty is removed (or at least greatly reduced) due to historical data that must be

provided. Below are some of the quantitative techniques used:

i. Expected monetary value, EMV=ΣPiXi where Xi is the risk event value (expected

gain or loss that will be incurred if the risk event occurred) and Pi is the risk event

probility. The higher the EMV the higher the risk


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ii. Statistical sums- Used to calculate a range of total project costs from cost

estimates and a range of project completion time.

iii. Simulation of project networks- Results of a schedule simulation may be used to

quantify the risk of various schedule alternatives, different project strategies,

different paths through the network or individual activities

iv. Decision trees- Diagrams that depicts key interactions among decisions and

associated chance events as they are understood by the decision maker. The

branches of the tree represent either decision or chance events. Using the roll back

method EMVs of various decision alternatives are evaluated.

b) The qualitative approach (Expert judgment) - uses subjective values such as High Risk,

Medium Risk or Low Risk. It requires common understanding of the team's preferred

ordinal ranking system and is less precise than the quantitative approach. It relies more

on experience and is an effective way of prioritizing risk.

8.2.11 Project risk response strategies

The project team should begin in defining the steps for responses to opportunities and threats. A

risk response is performed whenever, a new risk is identified, an existing risk changes,

influential factors change or new information about the project surfaces. When developing a

project's risk response, it should be approached it from a project-wide perspective. Relationships

between risk events are extremely important. The project team should develop risk responses for

each risk event within the sphere of project influence and control.

The following documents can be used to assist in developing the project's risk response plan:

List of the project's risks, opportunities and threats;

Project Contract;

Statement of Work or Scope of Work;

Schedule;

Resource List; and

Any other pertinent information.

There are several ways/strategies of dealing with risks. These include:


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1. Risk avoidance. Risk can be eliminated usually by eliminating the cause. An example of

this is using a less complicated or less sophisticated programming language.

2. Risk mitigation. This is done by reducing the risk event probability, risk event value or

both. An example of this is using a proven technology.

3. Risk acceptance. The project team could just decide to accept the consequences and take

it from there. An example of this is changing the relationships on a schedule, thereby

making one or more of the tasks in the sequence late. If the late task(s) are not critical, the

project team will just let it be.

4. Risk transfer. This is done by removing the impact or consequences of the risk event. It

is important to make this distinction from mitigation. An example of transference is

gathering information through user groups and not the project team, insuring some risks,

etc

8.2.12 Project risk monitoring and control

Monitoring risk means to review it and update it continuously.

Identify new risks as soon as possible

Decide where and how to handle that risk

Look for other risks that might be reduced or eliminated and no longer need coverage

Check operating volumes - they change so that coverage levels need to change

Risk control is the process of implementing measures to reduce the risk associated with a

hazard. The control process must follow the control hierarchy, in order, as prescribed in some

health and safety legislation. It is important that control measures do not introduce new hazards,

and that the ongoing effectiveness of the controls is monitored.

"Risk control hierarchy": ranks risk control measures in decreasing order of effectiveness:

elimination of hazard;

substitution of hazardous processes or materials with safer ones;

engineering controls;

administrative controls; and


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Personal protective equipment.

The risk control measures implemented for the hazards identified should always aim to be as

high in the list as practicable

Risk monitoring and control is a continuous process until the project ends

The monitoring and control of risks in project ensures that the resources of a company put aside

for a project is operating properly. Risk monitoring and control therefore helps to ensure that the

project stays on the track or on course. Risks are monitored because projects are usually dynamic

due to constantly changing variables. It’s imperative therefore to keep these variables and their

associated risk stay within the acceptable limits for the project. Risk monitoring control is

performed at the concept phase of the project and ends at the close-our phase. It should be

included in the regular communication process of the project.In particular, risk control is also

performed prior and the during the risk event. It is performed whenever there are changes to the

project scope and on a regularly scheduled basis.

Tools Available for Risk Control

Risk Metrics are appropriate metrics that will aid in monitoring risks on the project. These

include risk events, probability, value and impact. Timeframe, type, priority and status are also

part of this list.

Monitoring and control tools include:

Work Breakdown Structure;

Project budget both estimates and actual ;

Project schedule;

Earned value of project activities whether it be actual point-in-time or forecasting;

Project resource list and plan; and

Change control log and forms.

Risk triggers are actions, events or circumstances that, if ignored, will cause the occurrence of a

risk event. The project manager needs to identify potential triggers that would indicate that a risk


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event will occur and to ensure that these triggers are visible to the project team. He/ she will need

to monitor these triggers frequently.

8.3 Activity

Explain the importance of a project risk quantification exercise

8.4 Summary

When we discuss project risk management, there are two main schools of thoughts.

The first school of thoughts view risks as threats; always. Human nature lead

people to think of a “risk event” as “threat”, “danger”, “hazard”, or any other word

that reflect negative or bad situation. Another school of thoughts; mostly reflecting

a business perspective, view “risk events” as uncertain events that could have

negative or positive consequences on the objective of the task, project, or mission

that we are undertaking. Regardless of which school one follows, we need to shift

our paradigm to think of positive and negative consequences to events on our

projects and our lives. If you subscribe to the second school of thought, then you

already “understand” or “accept” that risks could be a threat or an opportunity. On

the other hand, if you are from the first school, then you can continue to think of

risk as bad but you also need to think of opportunities.

A risk can be assessed using two factors: impact and probability. If the probability is

1, it is an issue. This means that risk is already materialized. If the probability is

zero, this means that risk will not happen and should be removed from the risk

register.

8.5 Self assessment

Discuss the various techniques used to mitigate project risks.

http://en.wikipedia.org/wiki/Impact

http://en.wikipedia.org/wiki/Probability

http://en.wikipedia.org/wiki/Risk_register

http://en.wikipedia.org/wiki/Risk_register


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LECTURE NINE: PROJECT CLOSURE PHASE:

8.0 Introduction

Project Closure Phase is the last phase of the Project Life Cycle. The commencement of the

Project Closure Phase is determined by the completion of all Project Objectives and acceptance

of the end product by the customer.



i) Outline the tasks undertaken during the project closure phase.

ii) Outline process of the Project Closure Phase

iii) Discuss the Lessons Learned

iv) Describe project stages Exit criteria

8.2 Lecture Outline

8.2.1 Tasks undertaken during the project closure phase

8.2.2 Process of the Project Closure Phase

8.2.3 Lessons Learned

8.2.4 Project stages Exit criteria

8.2.5 Tasks undertaken during the project closure phase

Project Closure includes the following tasks:

Release of the resources, both staff and non-staff, and their redistribution and reallocation

to other projects, if needed.

Closure of any financial issues like labour, contract etc.

Collection and Completion of All Project Records.

Archiving of All Project Records.

Documenting the Issues faced in the Project and their resolution. This helps other projects

to plan for such type of issues in the Project Initiation Phase itself.


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Recording Lessons Learned and conducting a session with the Project Team on the same.

This helps in the productivity improvement of the team and helps identify the dos and

donts of the Project.

Celebrate the project completion.

1.3.1 Process of the Project Closure Phase

The basic process of the Project Closure Phase involves:

Administrative Closure. This is the process of preparation of closure documents and

process deliverables. This includes the release and redistribution of the Project

Resources.

Development of Project Post Implementation Evaluation Report. It includes

o Project Sign-Off

o Staffing and Skills

o Project Organizational Structure

o Schedule Management

o Cost Management

o Quality Management

o Configuration Management

o Customer Expectations Management

1.3.2 Lessons Learned

Lessons Learned forms an integral part of the Project Closure Phase. It helps answer the

following typical question during Project Closure.

Did the delivered product / solution meet the project requirements and objectives?

Was the customer satisfied?

Was Project Schedule Met?

Was the Project completed within Budgeted Cost?

were the risks identified and mitigated?

What could be done to improve the process?

http://www.visitask.com/Lessons-learned.asp

http://www.visitask.com/project-teamwork.asp


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1.3.3 Project stages Exit criteria

Exit criteria refer to how one can tell that an element of the plan is complete So that he can ‘exit’

that phase and move on to the next phase. At any milestone, based upon the information that is

being reviewed decisions have to be made. In terms of major project stages these decisions will

be made by senior management.

Decision points usually require one of the three outcomes :

1. Yes. The project carries on to the next stage since everything is on track.

2. No. The project is stopped and closed in a formal manner.

3. Maybe. In this case, more data is required before a further review may allow the project

to continue.

PROJECT PHASE EXIT PLAN

Project Name:

Prepared by:

Date :

Phase exit information

List Project Phases and for each phase list exit criteria, i.e. those deliverables that must be accepted and those tasks that

must be completed before the project team can move to the next project phase. Sample information is included in

the form below:

Project Phase Exit Criteria

Initiation 1. Project Charter is approved

2. Project Manager is assigned

http://www.project-management-basics.com/project_management_049_Milestones_part_1_General.shtml


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Planning 1. Project Plan is approved. Must include at least the following:

a. Project Budget

b. Project Schedule

c. Scope Statement and WBS

d. Resource Plan

e. Risk Management Plan

f. Change Management Plan

2. Requirements Document(s) approved

3. Specifications Document(s) approved

Execution 1. Use cases work as designed

2. Product (or service) is released for test with no known stop-

ship defects (i.e., all Requirements have been tested)

3. Documentation released for review

4. Training materials released for review

5. Test plan is approved

Closer

(Test &deployment)

1. Product Testing is complete with no stop-ship defects

2. Documentation is complete with no stop-ship defects

3. Training is complete

4. Customer accepts the work of the project

5. Post-partum session is complete and lessons learned recorded

6. Project records are properly archived


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Project phase Exit Signatures

Project Name:

Project

Manager:

I have reviewed the information contained in this Project Phase Exit Plan and agree:

Name Role Signature Date

The signatures above indicate an understanding of the purpose and content of this document

by those signing it. By signing this document, they agree to this as the formal Project Phase

Exit Plan document.

1.3 Activity

What is the importance of discussing the lessons learnt a the project closure phase

Summary

The outputs from Project Closure Phase provides as a stepping stone to execute the

next projects with much more efficiency and control.

1.4 Self assessment

Outline the Phase exit information for a project of your choice


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LECTURE TEN: PROJECT SUCCESS CRITERIA AND SUCCESS FACTORS:

10.1Introduction

For those involved with a project, project success is normally thought of as the achievement of

some pre-determined project goals; while the general public has different views, commonly

based on user satisfaction.



i) Describe the project Success Criteria

ii) Outline the project success factors

10.3 Lecture Outline

10.3.1 Project Success Criteria

10.3.2 Project success factors

10.3.3 Project Success Criteria

Many lists of success criteria have been introduced in the previous decades by various

researchers. Primal success criteria have been an integrated part of project management

theory given that early definitions of project management included the so called ‘Iron

Triangle’ success criteria – cost, time and quality. (Atkinson, 1999)

A more structured approach to project success is grouping the criteria into categories.

Wideman (1996) describes four groups, all of them time dependent: " project objectives ,

benefit to customer, direct contribution (in the medium term) and future opportunity (in the

long term)". All the above success criteria "should be simple and attainable and, once

defined, they should also be ranked according to priority

10.3.4 Project success factors

Success factors are those inputs to the management system that lead directly or indirectly to

the success of the project. These factors include the following:


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1. The project manager

Having a project manager is not going to guarantee the success of a project. He must have a

number of skills to use during the project to guide the rest of the team to successfully

complete all the objectives. Business, communication, responsiveness, process, results,

operational, realism and technological skills are mentioned as some of the most important

skills a project manager should have to deliver success.

2. The project team

Apart from their skills and commitment, project team members should have clear

communication channels to access "both the functional manager and the project manager

within a matrix organization. Effective management of this dual reporting is often a critical

success factor for the project.

3. The project itself

The type of a project underlines some factors that are important to success. For example, if

a project is urgent, the critical factor in that case is time.

4. The organization

Top management support is the principal success factor, which means that no project can

finish successfully unless the project manager secures true support from the senior or

operational management. It is extremely difficult to work in a hostile environment where

nobody understands the benefits that the project will deliver to the organization.

5. The external environment

External environment can be the political, economic, socio-culture and technological in

which the project is executed. Factors like the weather, work accidents or the government’s

favourable or unfavourable legislation can affect the project in all of its phases.

Competitors should also be accounted as external factors which can undermine project

success because the original project could be overshadowed by a more glamorous and

successful project launched by another organization.


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1.3 Activities

1.3.1 Why do projects go wrong?

1.3.2 Discuss the hard and soft success criteria of a project

1.4 Summary

It is critical for a project manager to understand what the stakeholders consider

as a successful project. In order to avoid any surprises at the end of the project,

there is an urgent need to identify the different perspectives of what success

means before the project goes live. It is also vital to remember that success

criteria are the standards by which a project will be judged, while success

factors are the facts that shape the result of projects.

1.5 Self assessment

Outline the benefits of project management


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UNIVERSITY EXAMINATIONS 2009/2010

YEAR 2 STAGE III EXAMINATION FOR THE BACHELOR OF COMMERCE

CAM 205: PROJECT MANAGEMENT (DAY CLASSES)

DECEMBER 2010 TIME 2 HOURS

INSTRUCTIONS: Answer Question ONE and any other two questions

QUESTION ONE

a) Explain the terms below as used in project management:

i) Critical path (2 marks)

ii) Directing project activities (2 marks )

iii) Configuration management ( 2 marks)

iv) Feasibility studies ( 2 marks)

v) Dummy activity (2 marks )

b) Mrs. Otieno wants to open a cafeteria in Nakuru. A small business enterprise adviser whom

she approached, listed for her six major activities to be carried out. The table below gives a

summary of the normal time estimates of each activity, crash time and the cost reduction per day.

Activity Predecessor Normal time

(weeks)

Crash time

(weeks)

A:

B:

C:

D:

E:

F:

Procurement of materials

Plumbing

Masonry

Electrical works

Carpentry

Finishing

-

A

-

C

C

B,D,E

3

6

5

8

6

4

3

4

3

7

4

2

Activity Cost slope (Sh.)

A

B

C

D

E

-

45,000

30,000

60,000

22,500


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F 75,000

Required:

(I) The normal completion time of the project and the critical activities.( 6 marks)

(II) (i) The shortest time the project can be completed if it is crashed.( 8 marks)

(ii) The additional cost to be incurred if the project is crashed. ( 2 marks)

(III) Explain the meaning of the cost slope and how it is computed. ( 2 marks)

(IV) Assumptions made when crashing. ( 2 marks)

(Total: 30 marks)

QUESTION Two

a) Discuss the responsibilities of a project manager (10 marks )

b) Distinguish between hard and soft success criteria of a project ( 4 marks)

c) For a project that is already underway in your organization, Identify the key areas

requiring monitoring and suggest the kind of information and procedures that would be

involved. (6 marks)

QUESTION Three

(a) Outline the important stages which makes up the project life cycle (10 marks)

(b) Explain the importance of procedural handling of exits and phase-out from one stage of the

project to the other (10 marks)

QUESTION Four

The management of the project is an activity which does not only focus on the project

management tools and procedures but also extends it self to management of risks in the project

environment. As a project manager, describe the plan you will follow in managing risk.

(20 marks)

QUESTION Five

a) Describe the main responsibilities of a Project Support Office. (10 marks)

b) Briefly explain the various phases of Change management in an organization.

(10marks)


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UNIVERSITY EXAMINATIONS 2009/2010

YEAR 2 STAGE III EXAMINATION FOR THE BACHELOR OF COMMERCE

CAM 205: PROJECT MANAGEMENT (DAY CLASSES)

DECEMBER 2010 TIME 2 HOURS

INSTRUCTIONS: Answer Question ONE and any other two questions

QUESTION ONE

a) State and explain three main responsibilities of a project manager (6 marks)

b) Discuss the hard and soft success criteria of a project (8 marks)

c) Outline the common problems faced by Project Managers during the Initiation Phase.

(4 marks)

d) Explain the Factors that Affect Individual and Organizational Perceptions of project

Risks (4 marks)

e) Outline the tasks undertaken during the Project Closure phase. (4 marks)

f) Explain the terms below as used in project management:

vi) Configuration management ( 2 marks)

vii) Feasibility studies ( 2 marks)

QUESTION Two

d) For a project that is already underway in your organization, Identify the key areas

requiring monitoring and suggest the kind of information and procedures that would be

involved. (6 marks)

e) Ujenzi Company ltd has been awarded a construction project. The chief Engineer of the

company has established the following cost and time information relating to the contract:


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Activity Predecessor(s) Normal

time

(Days)

Normal

cost

(sh)

Crash time

(Days)

Crash cost

(sh)

A - 30 90,000 25 105,000

B - 25 180,000 20 190,000

C - 10 50,000 8 54,000

D C 10 7,500 7 9,000

E B,D 10 4,200 10 4,200

F A,E 20 20,000 16 30,000

G A,E 35 28,000 30 35,000

H B,D 20 12,000 18 15,000

I F 20 14,000 15 24,000

Required

(i) The critical path and the normal completion time of the project (6 marks)

(ii) The minimum project duration and the additional project cost for that duration.

(8 marks)

QUESTION THREE

a) “Research with hundreds of project teams has shown that a one-size-fits-all approach to

change management is not sufficient. To be effective at leading change, companies will need

to customize and scale their change management efforts, based on the unique characteristics

of the change and the attributes of the impacted organization” (Change Management

Learning Centre, 2004).

Discuss the stages of a successful change management (16 marks)

(b) Explain the importance of procedural handling of exits and phase-out from one stage of

the project to the other (4 marks)

QUESTION Four

a) Define the following terms as used in network analysis:


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(i) Crash time, (2 marks)

(ii) Optimistic time, (2 marks)

(iii) Forward pass, (2 marks)

(iv) Dummy activity, (2 marks)

(v) Slack. (2 marks)

(b) James Mutiso is a computer engineer in an information technology firm. The firm has

decided to install a new computer system to be used by the firm’s help desk. James

Mutiso has identified nine activities required to complete the installation.

The table below provides a summary of the activities’ durations and the required number

of technicians:

Activity Duration (weeks) Required number of

technicians

1 – 2

1 – 3

2 – 4

2 – 5

3 – 4

3 – 6

4 – 5

5 – 6

6 – 7

3

1

3

2

2

4

2

2

2

2

4

4

2

4

4

2

2

2

Required:

(i) Draw a gantt chart for the project. (6 marks)

(ii) Mr. Mutiso would like to reschedule the activities so that not more than 6

technicians are required each week. Determine if this is possible and how it can

be achieved by rescheduling the activities. (4 marks)

QUESTION Five

Discuss the contents of the project Standards and Procedures Manual. (20 marks)

Cam 205. Project Management Final

Documents

Transcript of Cam 205. Project Management Final