Pinto Pm2 Ism Ch13

INSTRUCTOR’S RESOURCE MANUAL

CHAPTER THIRTEENProject Evaluation and Control

To Accompany

PROJECT MANAGEMENT: Achieving Competitive Advantage

ByJeffrey K. Pinto

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

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CHAPTER 13

PROJECT PROFILE: Solar Power on the Rise

Introduction

13.1 CONTROL CYCLES – A GENERAL MODEL

13.2 MONITORING PROJECT PERFORMANCE

Project S-Curves

Milestone Analysis

Gantt Charts

13.3 EARNED VALUE MANAGEMENT

Creating Project Baselines

Why Bother with Earned Value?

Terminology for Earned Value

Conducting an Earned Value Analysis

13.4 USING EARNED VALUE TO MANAGE A PORTFOLIO OF PROJECTS

PROJECT PROFILE: Earned Value at Northrop-Grumman

13.5 ISSUES IN THE EFFECTIVE USE OF EARNED VALUE ANALYSIS

13.6 HUMAN FACTORS IN PROJECT EVALUATION AND CONTROL

Critical Success Factor Definitions

Summary

Key Terms

Solved Problems

Discussion Questions

Problems

Case 13.1 – The IT Department at Kimble College

Case 13.2 – The Superconducting Supercollider

Internet Exercises

MSProject Exercises

PMP Certification Sample Questions

Bibliography


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TRANSPARENCIES

13.1 A GENERAL MODEL OF THE PROJECT CONTROL CYCLE

The Project Control Cycle


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13.2 – BUDGETED COSTS FOR SAMPLE PROJECT

Duration (in weeks)

5 10 15 20 25 30 35 40 45 Total

Design 6 2

Engineer 4 8 8 8

Install 4 20 6

Test 2 6 4 2

Total 6 6 8 12 28 8 6 4 2

Cumul. 6 12 20 32 60 68 74 78 80 80


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13.3 PROJECT S-CURVE

Cumulative Cost

($ in thousands)

80

60

40

20

5 10 15 20 25 30 35 40 45

Elapsed Time (in weeks)


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13.4 PROJECT S-CURVE SHOWING NEGATIVE VARIANCE

Cumulative Cost

($ in thousands)

80

60

$10,000 Negative Var.

40

20

5 10 15 20 25 30 35 40 45


Cumulative Budgeted Cost

Cumulative Actual Cost


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13.5 GANTT CHART WITH MILESTONES

Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.


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13.6 TRACKING GANTT WITH PROJECT ACTIVITY DEVIATION



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13.7 EARNED VALUE TABLE WITH PERCENTAGE OF TASKS COMPLETE

Duration (in weeks)

5 10 15 20 25 30 35 40 45 % Comp.

Design 6 2 100

Engineer 4 8 8 8 100

Install 4 20 6 50

Test 2 6 4 2 0

Total 6 6 8 12 28 8 6 4 2

Cumul. 6 12 20 32 60 68 74 78 80


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13.8 CALCULATING EARNED VALUE

(All numbers are in thousands $)

Planned % Comp. Earned Value

Design 8 100 8

Engineer 28 100 28

Install 30 50 15

Test 14 0 0

Cumul.Earned 51Value


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13.9 PROJECT BASELINE, USING EARNED VALUE

Cumulative Cost

($ in thousands)

80

Project Baseline

60

Earned Value

40

20

5 10 15 20 25 30 35 40 45



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13.10EARNED VALUE MILESTONES

AC Actual

OverspendCost

PV EV Budget

Slip

Schedule Performed

Schedule


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13.11EARNED VALUE TABLE

Activity Jan Feb Mar Apr May Jun Jul Plan % C Value

Staffing 8 7 15 100 15

Blueprinting 4 6 10 80 8

Prototype

Devel 2 8 10 60 6

Full Design 3 8 10 21 33 7

Construction 2 30 32 25 8

Transfer 10 10 0 0

Punch List 15 5 20 0 0

Σ = 118 44

Monthly Plan 8 7 6 17 10 55 15

Cumulative 8 15 21 38 48 103 118

Monthly Actual 8 11 8 11 10 30 0

Cumulative

Actual 8 19 27 38 48 78


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13.12 SCHEDULE VARIANCES FOR EVM

Schedule Variances

Planned Value (PV) 103

Earned Value (EV) 44

Schedule Performance Index EV/PV = 44/103 = .43

Estimated Time to Completion (1/.43 x 7) = 16.3 months


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13.13 COST VARIANCES FOR EVM

Cost Variances

Actual Cost of Work (AC) 78


Cost Performance Index EV/AC = 44/78 = .56

Estimated Cost to Completion (1/.56 x $118,000) = $210,714


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13.14 CRITICAL SUCCESS FACTORS IN PROJECT IMPLEMENTATION

1. PROJECT MISSION

2. TOP MANAGEMENT SUPPORT

3. PLANS AND SCHEDULES

4. CLIENT CONSULTATION

5. PERSONNEL

6. TECHNICAL TASKS

7. CLIENT ACCEPTANCE

8. MONITORING AND FEEDBACK

9. COMMUNICATION

10.TROUBLE-SHOOTING


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DISCUSSION QUESTIONS

1. Why is the generic four-stage control cycle useful for understanding how to

monitor and control projects?

One of the more difficult challenges of project control is finding a way to accurately

measure progress. The four-stage cycle breaks project down into specific goals that can

be measured against the project baseline. Deviations from the planned budget or time

line can be identified and corrected swiftly. The fact that it is a cycle, implying repetition

of the process, demonstrates the constant need for project monitoring and control

measures. The final step in the cycle is to recycle the process resulting in continuous

project control.

2. Why was one of the earliest project tracking devices referred to as an “S-curve?”

Do you see value in the desire to link budget and schedule to view project

performance?

This early device compared project time and cost graphically. The nature of project time

and costs creates an S when the points are plotted on a graph, hence the term “S-curve.”

There is value in linking the budget and schedule as an indicator of project performance.

Following the S-curve, managers can get a rough depiction of expected progress. They

can also see deviations of their own project from the typically expected progression.

3. What are some of the key drawbacks with S-curve analysis?

The cause of S-curve drawbacks lies mainly in its lack of tying the schedule and budget

to actual project progress. S-curves give little indication as to the cause of variations

from projections. The S-curve simply points out deviation of cost in relation to time. It

does not relation task completion to time or cost. Therefore, when a deviation is


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discovered it is unknown whether the project is on target so far as physical progress

(whether work is being completed on, ahead or behind the anticipated time and budget).

Without knowing the cause of the variance, managers may make incorrect assumptions

about the status of the project.

4. What are the benefits and drawbacks with the use of milestone analysis as a

monitoring device?

Milestone analysis is beneficial in signaling the completion of important project stages

and in creating distinctions between work packages. This increases the team’s ability to

respond to change and create logical review points. Milestones also provide periodic

goals that keep team members motivated. They represent significant accomplishments

within the larger picture of the project. It also draws the team’s attention to the project’s

status. Overall, the analysis provides a clear picture of project development. However,

this form of analysis only allows for reaction to problems, not foresight or prevention.

Problems are then able to compound and grow to the point of unmanageable resulting in

a significantly over budget/schedule project.

5. It has been said that Earned Value Management (EVM) came about because the

Federal Government often used “Cost plus” contractors with project

organizations. Cost plus contracting allows the contractor to recover full project

development costs plus accumulate profit from these contracts. Why would

requiring contractor firms to employ earned value management help the

government hold the line against project cost overruns?

Earned Value Management goes beyond reporting costs and progress. It links costs

incurred to the time and budget baseline as well as to measurable performance

milestones. By using EVM, the government is requiring that costs incurred during the

project be directly tied to performance or progress of the project. The cost of the project


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is based on the budgeted cost of work performed. Therefore, negative or positive

variances in performance are measured by the value of the work performed, not by the

costs spent to complete the work. This allows companies to have a better understanding

of what variances mean and their impact on the overall project. By understanding why

the meaning of variances, managers are in a better position to take corrective action and

to keep the project on schedule.

6. What are the major advantages of using EVM as a project control mechanism?

What do you perceive are its disadvantages?

The major advantages of EVM are that it is a comprehensive approach to measuring

progress (links cost, time and completion), its use of objective criteria, and it enables

more accurate information for decision making. Disadvantages may include the time

consuming nature of analysis in large scale projects, mathematical formulas used for

efficiency do not take into account unique problems that stall the project or spike costs in

one area (which may not lead to overall poor efficiency), and a lack of information

regarding what type of corrective action may need to be taken.

7. Consider the major findings of the research on human factors in project

implementation. What common themes seem to emerge from the research of

Baker, Morris, and Pinto?

The overarching theme is that in order to understand why a project is progressing the way

it is the project must be evaluated on human performance criteria. There are several

human factors proven to be influential in project success. Some of the main areas that

need to be measured are motivation, leadership, expertise and top management support.

The problem with this area of assessment is that it lacks a straightforward, objective

system for measurement.


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8. The ten critical success factors have been applied in a variety of settings and

project types. Consider a project with which you were involved. Did any sub-set

of these factors emerge as clearly the most important for project success? Why?

This question requires students to give a specific answer based on their own experience

with projects. Responses will vary depending upon the project they select to respond to

with the critical success factor model.

9. Identify the following terms: PV, EV, and AC. Why are these terms important?

How do they relate to each other?

PV refers to Planned Value. This is the expected (planned) budget for all project

activities that are planned to occur within a specific time period. Planned Value is

compared with Earned Value to determine the “real” progress that has been made on a

project.

EV refers to Earned Value. Earned value is the budgeted cost of the work performed.

This is important in establishing the true progress of the project and in understanding the

meaning of variances from the project baseline.

AC stands for Actual Cost. These are the total costs incurred to complete project work.

10. What do the schedule performance index and budget performance index

demonstrate? How can a project manager use this information to estimate future

project performance?

The indexes compare the planned value and actual cost of the project with the earned

value (EV) measure to assess “true” project performance. The goal for an organization is


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to maintain SPI and BPI of 1.0 or higher, indicating that the project’s progress is ahead of

schedule. The lower the project’s SPI and CPI are from 1.0, the less progress is being

made on the project and the higher the likely overruns on schedule and budget we can

anticipate.

11. Suppose the SPI is calculated as less than 1.0. Is this good news for the project or

bad news? Why?

This would probably be viewed as bad news. A performance index of less than 1.0

indicates that the project, based on current EV and PV information, is not progressing at

the planned rate. Depending upon how much less than 1.0 the SPI is, the project’s

schedule could either be marginally or significantly delayed.


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CASE STUDIES

Case Study 13.1 - The IT Department at Kimble College

This case identifies some of the serious problems and challenges involved in accurately

tracking and determining the status of ongoing projects. In this case, there is no clear

method for tracking and identifying project performance midstream. Either it succeeds,

or (more often) it comes in very late and over budget. Dan Gray, the new head of the IT

department, is not helping the process because he himself has a tendency to paint a rosy

picture of his projects.

Questions:

1. As a consultant monitoring this problem, what are your proposed solutions? To

what degree has Dan’s management style contributed to the problems?

This department needs to develop a monitoring and control system that allows project

managers and administrators the ability to get real-time information on project

development so there are no end-game surprises, when a project is “suddenly” late

and over budget. The use of earned value, milestones, or some other tracking

mechanism is critical.

2. What are some of the types of project status information you could suggest they

begin to collect to assess the status of their projects?

Use of standard monitoring and control metrics such as milestones would begin to

give some interim updates on project status. The problem with milestones is that they

are a reactive measure (you know you missed one only when you miss one). On the

other hand, earned value, combined with frequent updates regarding project activity

development, can provide real-time information and well as the ability to make


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reasonable projections into the future to avoid any surprises regarding how projects

are performing.

3. How would you blend “hard data” and “managerial or behavioral” information to

create a comprehensive view of the status of ongoing projects at Kimble College?

Using concepts such as earned value, coupled with “softer” information provided by tools

such as critical success factor analysis, will give project managers and top management a

more comprehensive assessment or how projects are performing, how effectively project

teams are functioning, and early-earning signs in cases where behavioral issues may be

poised to negatively affect the project’s performance. “Hard data” and “soft data” each

serve a purpose in detailing a clear view of the project’s current status as well as the

status of project team performance, which is critical to the ability to successfully

complete the project.

Case Study 13.2 – The Superconducting Supercollider

A famous example of a project that started with great fanfare and was quietly shut down

was the Superconducting Supercollider. A particle physics structure as it was conceived,

the project received funding after an intense (and some would argue, divisive)

competition among various communities seeking to house the complex. A combination

of incremental funding coupled with very poor project oversight led to allegations of

slipshod work, inflated costs, and unnecessary expenses. All these problems contributed

to a rapid decline in the attitude of the Federal Government toward keeping the project

alive and it was finally killed through withdrawal of funding. This case also makes an

excellent discussion point for that argument that good project management also requires


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good stakeholder management; that is, keeping all the powerful project stakeholders

happy and supportive of the project.

Questions:

1. Suppose you were a consultant called into the project by the Federal Government

in 1990, when it was still seemingly viable. Given the start to the project, what

steps would you have taken to reintroduce some positive “spin” on the

Superconducting Supercollider?

This question asks students to think about developing stakeholder management strategies

for the project to enhance its reputation. Early warning signs were already emerging

about poor cost control and slow, expensive development. However, there was still a

window of time in which a canny project manager could have worked to reestablish

support for the project from the key funding agencies and powerful congressional

members. Students should consider steps to reengage these crucial supporters.

2. What were the warning signs of impending failure as the project progressed.

Could these signs have been foreseen and addressed or, in your opinion, was the

project simply impossible to achieve? Take a position and argue its merits.

There are several points of departure that students can adopt in answering this question.

First, the divisive nature of the competition for the location of the Superconducting

Supercollider was guaranteed to ensure that losing communities, and their federal


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representatives, would be upset and unlikely to give the project the benefit of the doubt

downstream. Second, the way that project funding was initially doled out at a slow pace

(due to Federal budget deficit concerns) made it difficult for the project to kick off

strongly; in fact, they had to begin slowly and never were able to gain much momentum.

Third, the project also was sold on the basis of European financial support, which never

materialized. When this lack of funding became evident, it gave the project’s enemies

powerful ammunition to move to kill the program.

The larger question regarding how much of these problems were foreseeable is a

debatable issue and one that can generate a lot of in-class discussion as students take one

position or the other. The ultimate goal of this component of the case is for them to

develop some guidelines for their own careers in projects, in terms of how to uncover

warning signs of project difficulties and what positive steps can be taken to address them

before they become debilitating to the project.

3. Google “Superconducting supercollider” on the internet. How do the majority of

stories about the project present it? Given the negative perspective, what are the

top three lessons to be learned from this project?

This is a summary question that asks students to consider the lessons to be learned from

this disaster. Most internet sites that address just the science underlying the

Superconducting Supercollider offer a mixed view of it and are supportive of the particle


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physics science that drove its development. Federal watchdog groups, on the other hand,

view the project as a classic case of governmental waste with nothing to show for it.


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PROBLEMS

1) Using the following information, develop a simple S-curve representation of the

expected cumulative budget expenditures for this project.

Duration (in days)

10 20 30 40 50 60 70 80

Activities 4 8 12 20 10 8 6 2

Cumulative 4 12 24 44 54 62 68 70

(Figures are in thousands $)


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Solution:

2) Suppose the above expenditure figures were modified as follows:

Duration (in days)

10 20 30 40 50 60 70 80

Activities 4 8 10 14 20 24 28 8

Cumulative 4 12 22 36 56 80 108 116

Figures are in thousands

Draw this S-curve. What does the new S-curve diagram represent? How would you

explain the reason for the different, “non S” shape of the curve?


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Solution:

The “non-S” shape of the curve reflects the fact that project expenditures occurred later in

the project, suggesting that the project’s activities may not have followed the traditional

life cycle model for resource usage.


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3) Assume the following information:

Budgeted Costs for Sample Project

Duration (in weeks)

5 10 15 20 25 30 35 40 45 Total

Design 4 4 2

Engineer 3 6 12 8

Install 4 12 24 6

Test 2 6 6 4 2

TotalMonthly

Cumul.

a) Calculate the monthly budget and the monthly cumulative budgets for the

project.

b) Draw a project S-curve identifying the relationship between the project’s

budget baseline and its schedule.


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Solution:

a)

Budgeted Costs for Sample Project

Duration (in weeks)

5 10 15 20 25 30 35 40 45 Total

Design 4 4 2

Engineer 3 6 12 8

Install 4 12 24 6

Test 2 6 6 4 2

TotalMonthly 4 7 12 24 34 12 6 4 2

Cumul. 4 11 23 47 81 93 99 103 105

a. S-Curve rendering


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4) Use the following information to construct a “Tracking Gantt” chart using MS

Project.

Activities Duration Preceding Activities

A 5 days none

B 4 days A

C 3 days A

D 6 days B, C

E 4 days B

F 2 days D, E

Highlight project status on day 14 using the tracking option and assuming that all tasks to

date have been completed on time. Print the output file.


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Solution:



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5) Using the above information, highlight the project’s status on day 14 but assume that activity D has not yet begun. What

would the new tracking Gantt chart show? Print the output file.

Solution:



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6) Use the following table to calculate project schedule variance based on the units

listed below.

Schedule Variance Work Units

A B C D E F Total

Planned

Value

20 15 10 25 20 20 110

Earned

Value

10 10 10 20 25 25

Schedule

variance

Solution:

Schedule Variance Work Units

A B C D E F Total

Planned

Value

20 15 10 25 20 20 110

Earned

Value

10 10 10 20 25 25 100

Schedule

variance

-10 -5 0 -5 5 5 -10


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7) Using the following data, calculate the planned and actual monthly budgets through the end of June. Assume the project is planned for a 12-month duration and $250,000 budget.

Activity Jan Feb Mar Apr May Jun Plan % C Value

Staffing 8 7 15 100

Blueprinting 4 6 10 100

Prototype Development 2 8 10 70

Full Design 3 8 10 21 67

Construction 2 30 32 25

Transfer 10 10 0

Monthly Plan

Cumulative

Monthly Actual 10 15 6 14 9 40

Cumul. Actual


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Solution:

Activity Jan Feb Mar Apr May Jun Plan % C Value

Staffing 8 7 15 100 15

Blueprinting 4 6 10 100 10

Prototype Development 2 8 10 70 7

Full Design 3 8 10 21 67 14

Construction 2 30 32 25 8

Transfer 10 10 0 0

Σ = 54

Monthly Plan 8 11 8 11 10 50

Cumulative 8 19 27 38 48 98

Monthly Actual 10 15 6 14 9 40

Cumul. Actual 10 25 31 45 54 94


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8) Using the data from #7 above, calculate the following values:

Schedule Variances

Planned Value of Work Scheduled (PV)

Earned Value (EV)

Schedule Performance Index (SPI)

Estimated Time to Completion

Cost Variances

Actual Cost of Work Performed (AC)

Earned Value (EV)

Cost Performance Index (CPI)

Estimated Cost to Completion

Solution:

Schedule Variances

Planned Value (PV) 98


Schedule Performance Index (SPI) EV/PV = 54/98 = .55

Estimated Time to Completion (1/.55) x 12 mos. = 21.75

mos.

Cost Variances

Actual Cost of Work Performed (AC) 94


Cost Performance Index (CPI) EV/AC = 54/94 = .58


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Estimated Cost to Completion (1/.58) x $250,000 = $434,622

9) You are calculating the estimated time to completion for a project of 1-year

duration and a budgeted cost of $500,000. Assuming the following information,

please calculate the schedule performance index and estimated time to

completion.

Schedule Variances

Planned Value of Work Scheduled (PV) 65


Schedule Performance Index

Estimated Time to Completion

Solution:

Schedule Performance Index (SPI) = 58/65 = .89

Estimated Time to Completion = (1/.89) x 12 months = 13.45 months, or almost 2

months behind schedule.


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10) Suppose, for the problem above, that your PV was 75 and your EV was 80.

Recalculate the SPI and estimated time to completion for the project with this new

data.

Solution:

Schedule Performance Index (SPI) = 80/75 = 1.07

Estimated Time to Completion = (1/1.07) x 12 months = 11.25 months, or

approximately 3 weeks ahead of schedule.


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11) Assume you have collected the following data for your project. Its budget is

$75,000 and it is expected to last 4 months. After two months, you have

calculated the following information about the project:

PV = $45,000

EV = $38,500

AC = $37,000

Calculate the SPI and CPI. Based on these values, estimate the time and budget

necessary to complete the project? How would you evaluate these findings (i.e., are they

good news or bad news?)

Solution:

SPI = EV/PV = $38,500/45,000 = .86

CPI = EV/AC = $38,500/37,000 = 1.04

Estimated Time to Completion = (1/.86) x 4 months = 4.68 months

Estimated Cost to Completion = (1/1.04) x $75,000 = $72,078

The findings are a bit of good news and a bit of bad. The good news is that your

estimated cost to completion is lower than the original budget; however, the bad news is

that the project is behind schedule and is likely to take 4.65 months to complete, rather

than the originally planned 4 months.


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MSProject EXERCISES

Problem 13.1

Using the following data, enter the various tasks and create a Gantt chart using

MSProject. Assign the individuals responsible for each activity and once you have

completed the network, update it with the percentage complete tool. What does the

MSProject output file look like?

Activity Duration Predecessors Resource % complete

A. Research product 6 - Tom Allen 100

B. Interview customers 4 A Liz Watts 75

C. Design Survey 5 A Rich Watkins 50

D. Collect Data 4 B, C Gary Sims 0

Solution:



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Problem 13.2

Now, suppose we assign costs to each of the resources in the following amounts:

Resource Cost

Tom Allen $50/hour

Liz Watts $55/hour

Rich Watkins $18/hour

Gary Sims $12.50/hour

a. Create the resource usage statement for the project as of the most recent update. What

are project expenses per task to date?

Solution:



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Problem 13.3

Use MSProject to create a Project Summary Report of the most recent project status.

Solution:



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Problem 13.4

Using the data shown in the network precedence table below, enter the various tasks onto

MSProject. Then select a date approximately halfway through the overall project

duration and update all tasks in the network to show current status. You may assume that

all tasks in the first half of the project are now 100% completed. What does the Tracking

Gantt look like?

Project - Remodeling an Appliance

Activity Duration Predecessors

A. Conduct competitive analysis 3 -

B. Review field sales reports 2 -

C. Conduct tech capabilities assessment 5 -

D. Develop focus group data 2 A, B, C

E. Conduct telephone surveys 3 D

F. Identify relevant specification improvements 3 E

G. Interface with Marketing staff 1 F

H. Develop engineering specifications 5 G

I. Check and debug designs 4 H

J. Develop testing protocol 3 G

K. Identify critical performance levels 2 J

L. Assess and modify product components 6 I, K

M. Conduct capabilities assessment 12 L

N. Identify selection criteria 3 M

O. Develop RFQ 4 M

P. Develop production master schedule 5 N, O

Q. Liaison with Sales staff 1 P

R. Prepare product launch 3 Q


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Solution:



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Pinto Pm2 Ism Ch13

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