Project Management Lvl a Prt II 2008_09_edn4

8/9/2019 Project Management Lvl a Prt II 2008_09_edn4

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Project Management:

ISCD: Level A Part IIBijoy S Guha,


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References

Project Management: Harvey Maylor (Pear son Education, 3 rd Edition)

Project Management for Business &Technology: John M Nicholas ( Projects: Prasanna Chandra (Tata McGraw Hill, 6 th Edition)

Project Management: SMU Publication(B0915 Edition: Fall 2008)


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Project?

Routine, repetitive &ongoing throughout;

Necessary to sustain thebusiness;

Incrementalimprovements set.

Unique, temporary &goal directed;

Create strategic

initiatives/Products;New paradigms are putin place.

Organizational Work

ProjectsOperations


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Project? (contd.)

Any non-repetitive activity;

A low-volume high variety activity;

a temporary endeavour undertaken to create a unique product or service;

Any activity with a defined start and finish;

a unique set of coordinated activities, with definite

starting and finish points undertaken to meet specific objectives within defined schedule, cost and

performance pararmeters . (BS 6079: 2000)


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Project? (contd.)

Projects come in many shapes and sizes:By number of tasks (complexity)

By time required to complete (duration)

By resources (thus money) needed

Combination of these factors

Other Characteristics:Project teams are born to die!

New paradigms become the S.O.P

Contributes to organizations learning & growth

Can (re)shape the Organization


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Project? (contd.)Projects come in many shapes and sizes:

By number of tasks (complexity)Diversity of competencies

Efforts of many people

By time required to complete (duration)Changing nature of requirements

Tracking

By resources (thus money) neededFinancial outlayRisk

Combination of these factors


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Project Typology

Complexity

Duration

Improvement Projects

CrisisSolving

Product Design

Orgn.Restruct.

Mergers & Acqzn.

R&D

New toWorld

Area of the bubblesindicate the quantity of projects.


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Project? (contd.)

Time

Perform

ance

S/State 1

Breakthrough

Improvement

Continuous

Improvement

S/State 2

Stabilization

Project for Development

& Growth

Series of miniprojects

Mega Project: Start

of Business


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Project? (contd.)For business continuity, this activity is on-goingand is referred to as the S-Curve of a Firmslife e.g. Tatas Automotive Business

S S S Engineering. &LocomotiveTrucks &

Construction.

Equipment.

Passenger cars

TATA MOTORS

TELCO


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Project Management: What is it?

Project management is the coordinating effort to fulfill the goals of theproject, headed by a Project Manager;

The Project Manager (Leader) uses knowledge, skills, tools and

methodologies to:Identify the goals, objectives, requirements and limitations of the project -Specification

Coordinate the needs (and expectations) of the project stakeholders viz.team, customer, society/ sponsor & supplier Buy-in

Plan and deliver the identified objectives & goals - Execution

Close the project when completed - Closure

Capture (for dissemination) the knowledge accrued - Continuity


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Mindset:Timeliness: how to reduce and then deliver on timeResponsiveness: to ever changing circumstancesInformation Sharing: for involvement and clarityFlexibility: adapting to the situational needStructured Planning: towards efficient resource use & priority

Ability to work with ill-defined organization & support structuresCoping with uncertainty: no two projects are exactly the sameAnalytical yet speedy: no analysis paralysis

Good communication, team-building & networking skills

Project Manager: Characteristics


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Project Management: What is it? (contd)

Project managers have to balance and integrate competing demands to implement all aspects of the project:

Project Scope : specific work to be doneProject Time : Duration with milestonesProject Cost : tracking the budgetHuman Resources : competent teamProcurement : adequate material & equipmentCommunication : progress vis-a-vis changesQuality : establishing and delivering acceptableRisk : analyzing and planning adequate response


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The required knowledge areas & Processes are:


CommunicnManagement

ScopeManagement

H.R.

Management

TimeManagement

Procurement Management

Risk

Management

Quality Management

Cost Management

IntegrationManagement

PROJECT MNANAGER


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RESOURCES (Money)

T I M

E S C O

P E

Principally, Project Management, like in anyfield of management, is bound by:

And Priorities always change!



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Project Management: Conception

Projects start after an authoritative stakeholder decides toimplement a project, involving:

Fair amount of Capital outlay A commitment of Human Resources for (extended) period of time

Irreversibility and attendant riskAnd prioritization/choice from a wide to do listPossible Projects have to be analyzed and feasibility assessed before start.Funds have to found for Feasible Projects, which includes aRisk AnalysisFinally Projects have to be implemented and,Closed !


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Project Management: Concept n (contd)Phases of a Project

Design it Do it Close/Develop itDefine it

Day to day control

How, who& When

What & why

ContinuousImprovemen

t

Time

Activity/Cum.Cost


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Project Management: Concept n (contd)Phases of a Project

Time

Man-hrs

FeasibilityPrepare Implement Close

Time

F

P

IC

FP

IC

Save

ConcurrentModel

Sequential or stage-gate Model

X X


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Project Management: Concept n (contd) Project Analysis

Market AnalysisMarket Potential/Size

Market Share

Techn. AnalysisTechnical viability

Sensible alternatives

Financial AnalysisRisk

Return

Economic AnalysisBenefits and costs

Knock-on impacts

Ecology AnalysisEnvironmental impact

Restoration/containment


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Project Management: Concept n (contd) Project Analysis - Feasibility

IdeationInitial

Screen

Reject/shelve

No Go

Investigate

Go Market Study

Tech/Ecol. Study

Fin./Eco Study OK?

Terminate

No

Project FundingPlan

Yes


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Project Management: Concepts (contd) Feasibility Financial evaluation

Three Basic Questions:Can we produce the Goods and/or Services?Can we sell them?

Can we earn a satisfactory Return on Investment made in theProject? ORDo we have a favorable Cost Benefit Ratio?

Financial appraisal gives answers to the last question,factoring:

Time value of MoneyPay back and ProfitabilityRisk analysis & mitigation


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Project Management: Concepts (contd)Time value of money

A rupee today is more valuable than the samerupee a year hence!

Inflation reduces the purchasing power

However, money invested productively yields returnsand increases the value

People prefer current consumption to future spend.

In projects, cash flows (i.e. income andspending) are at different points of time. For afair analysis, they have to be brought to thesame (current) point of time


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Project Management: Concept n (contd) Time value of money

To normalize cash flows we need to reduce themto a common base, usually the Present Value .Algebraically:

PV = Present Value;FV = Future value;C t = Cash flow at the end of the year tr = Interest rateg = growth rate in cash flows

n = number of periods over which cash flows


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Formula (single sum): FVn = PV(1+r) n

(1+r) n is the Future value interest factor The process of investing money as well asreinvesting the interest earned is calledCompounding .

Depositing Rs.1000 in the bank today @10% interest will in 8 years grow to:

1000(1.10) 8 = 1000(2.144) = 2144


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The Rule of 72:Investors commonly ask when will my money double? A rule of thumb says divide 72 by the interest rate

E.g. if the interest rate is 12%, the doubling period is72/12 = 6 years

Using the formula: 1000(1.12)6

= 1000(1.974) i.e.1000 becomes 1974 in 6 years.


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Returns come in the future. Thus Rs.1000/-earned 3 years from now will posses less valuetoday . We need to know the present value of

future earnings .The process is simply the reverse/inverse of compounding and is called Discounting.Formula (single sum):

FV n = PV(1+r)n

thus, PV = FV n[1/(1+r) n]

The factor 1/(1+r) n is called discounting factor .


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In financial analysis, more often cashflow streams are uneven i.e. not a singlesum; they vary year to year

The formula for Present Value for uneven (or even) cash flows is:

PV n = A 1/(1+r) + A 2/(1+r) 2 + . A n/(1+r) n

n = At/(1+r) t , where t=1At = Cash flow at the end of t year, n = duration of flow


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@ 12%discounting


Suppose you were to start a fast-food joint for 3years; your estimates are:

Figs: Rs. lakhs Now Year 1 Year 2 Year 3

Start-up Costs 50

Running Costs 30 45 45

Revenues 40 50 60

Sale of Joint 70

NPV positive so worth pursuing

NPV = NPV yr1 + NPV yr2 + NPV yr3

= -50 + (-30 +40)/(1+0.12) 1 + (-45 +50)/(1=0.12) 2 + (-45 +60 +70)/(1+0.12) 3

= 23.415


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Project Management: The process Investment Criteria

There are many (over 30 !) criteria whichcan be broadly typed into:

Discounting Criteria, mainly:Net Present ValueBenefit Cost RatioInternal Rate of Return

Non-discounting Criteria, mainly:Payback PeriodAccounting Rate of ReturnUrgency


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Project Management: The Process (contd) Investment Criteria Non-discounting

Urgency: Simply put, projects which have higher urgency get priority.

Issue: what is the basis for urgency?

Therefore, used only in crisis situations.Pay Back: Is the length of time to recover the initialoutlay. Shorter the pay back, more attractive theproject.

Issue: does not reflect the true worth,but is a rough and ready reckoner to make quickevaluation and benchmarking, for initial assessmentand for small-value projects.


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Project Management: The Process (contd) Investment Criteria Discounting

Net Present Value: represents the sum of allthe cash flows,discounted to the presentvalue. If the sum is +ve,then the project isyielding a surplus onmoney invested. Thusviable.

E.g. given the cash flowalongside and adiscounting of 10%;

Year Cash Flow

0 -1,000,000

1 & 2 200,000

3 & 4 300,0005 350,000

Applying NPV formula:

NPV = 200000/(1.10) + 200000/(1.10) 2 + 300000/(1.10) 3 + ..-1,000,000

= Rs.5273; i.e. a surplus


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Internal Rate of Return (I.R.R): is thediscounting rate at which the net presentvalue of the project is 0. It indicates theminimum returns that the project has togenerate annually for its duration. E.g.:

Yr 0 1 2 3 4

C/F -100 30 30 40 45

The r ate which returns 100 is :

100 = 30/(1+ r ) + 30/(1+ r )2 + ..i.e. r is between 15 & 16%.

Thus accept project if the rate of return is more than the discounting rate .

Project Management: The Process (contd) Investment Criteria Discounting


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Project Management: Concept n (contd) Investment Criteria Observations

NPV is expressed in absoluteterms and does not indicatethe scale of a Project;

NPV favors longer termprojects

The IRR rule does notdifferentiate lending &borrowing; e.g.

IRR is clearer than NPV & isless sensitive to discountingratio.

NPV Invest. Ratio

X +5000 50000 10%

Y +2500 10000 25%

C/Fl.Yr 1

C/Fl.Yr 2

IRR NPV@10%

A -4000 +6000 50% 145

B +4000 -7000 75% -236


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Project Management: The Process (contd) Financial evaluation Discounting Criteria

Economic analysis: is the methodology toevaluate projects from the Societal view point,primarily Public investments.

Social cost/benefits differ from monetary measuresdue to Societal considerations and marketimperfections;

UN has formulated an process to assess this under the UNIDO Guide, in which societal and marketconsiderations have been integrated to assessdesirability of a Project. ( Please read handout onBridge Project & River Valley Project as anexample for the approach )


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Project Management: The Process (contd) Financial Evaluation- Risk

Risk analysis is one of the most slippery aspect of project evaluation there is no one unique method:

Technique 1 stand-alone risk of a projectTechnique 2 risk of a project in the context of the firmand/or the market.

Risk Analysis

Stand Alone Contextual

SSS Analyses

Break Even

Decision Tree

Corporate Risk

Market Risk

Easier tomeasure


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Project Management: The Process (contd) Risk sources of risk

The several sources of risk with respect to projectedearnings and cash-flows are:

Project-specific risk projections may be erroneous

Competitive risk affected by unanticipated actions of competition or new competition

Industry-specific risk Unforeseen technologies/ products,regulatory changes etc.

Market risk Unexpected changes in macroeconomic factors

International risk Extraordinary developments on theexchangerate and/or Political climate


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Project Management: The Process (contd) Risk measures of risk

Risk is measured from:Probability of occurrence :

the variability associated with obtaining

different results (e.g. NPV )

A measure of the risk is the range i.e.difference between the highest/lowest value i.e.900 200 = 700

NPV Prob.200600900

0.30.50.2

The weighted NPV works out to:

3E(NPV) = p i NPV i

i=1

= 0.3x200 + 0.5x600 + 0.2x900= 540


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The higher the spread the more the variability andrisk

Standard Deviation (

) of the NPV distributionquantifies this:

= {0.3(200-540) 2+ {0.5(600-540) 2+ {0.2(900-540) 2}= 250

We can now define a coefficient of variation in whichwe relate the to expected net present value:

CV = / Expected value ; = 250/540 = 0.46

The higher the CV, the higher the risk ranking


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the expected probability of an untoward occurrence(e.g. earthquake )

In real life, this is a geophysical phenomenon and can belinked to a region and a value assigned say 0.2

The expected impact on the project:in case of NPV, the financial impact

in case of untoward occurrence, the time & financialimpact (loss and recovery)

The product likelihood x impact definesconsequence, thus the ranking of risks.


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#1 Sensitivity:Financial statements are worked out with eachline changed for optimistic/realistic/pessimistic values one at a time, the other lines being held at realistic values.

Investigating the situation whatif a change inassumption/projection were to happenIndicates the strength of relationship between the

outcome/result and a given parameter e.g. changein profit if material-costs go up to pessimisticlevels.

Project Management: The Process (contd) Risk the SSS Analyses


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12.793/

2.05 11.497

-

6.233

x 5.264

12.9% 14.8%

12.793

-

1.103 1.219 5.854

+ +

809 925 11.690 11.573%

P&L 6.30% 7.20% -294 5.854 5.728

12.793

Sales

Purchasedmaterials

OperatingIncome

FinancialIncome

Incomebefore Tax

Operatingexpenses

Other Costs

CapitalTurnover

RONA

A 'Du-pont" style Report

Margin

Sales

Total Assets

Interest freeLiabilities

Net Assets

Sales

BalanceSheet


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#2 Scenario:


Variables are interrelated, thus painting different,plausible scenarios involving different (but consistent)sets of variables is helpful. Usually, the factor(s)

chosen represent the largest source of uncertainty(e.g. market growth rate), around which the scenariosare built.

The Best/Worst Case Analysis : where scenariosinvolving best/normal/ worst sets of variables are worked

out, e.g.BEST: high demand, high selling prices, low operatingcosts etc.WORST: low demand, low selling prices, high operatingcosts etc.


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#3 Simulation:


Sensitivity analysis indicates what-if naturecorrelations between dependant and various inputfactors, denoting strength of relationships;

A decision maker would want more certainty i.e. thelikelihood of such occurrences.Simulation techniques help in developing probabilityprofiles of events by combining (randomly) values of variables which have a bearing on chosen criteria.

It is a powerful technique which permits use of great deal of

information and a highly efficient medium of communication;It does not replace judgement, contrarily it requires moreapplication of judgement;A useful technique in the absence of good experience


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Lending institutions/financial managers wantto know how much should be sold/produced at a minimum to ensure the project does not

lose money? Viewpoint 1: Accounting i.e. a value that ensuresreturn of principal without availing of anyopportunity (via the time-value principle).Projects breaking even this way have ve NPVViewpoint 2: Financial - the focus is on valuecreation i.e. the level at which the project willyield a 0 NPV.

Project Management: The Process (contd) Risk the Break Even


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Interest Factor

12%,10yrs

PbT=0.33Sls 3M

Tax = 0.33 PbT PaT = .667 PbT

Sls 9M V.C. 6M F.C. 1M Depr 2M PbT 0M


P & L Forecast for a new Plant

Head Yr0 Yr1-10Investment 20,000

Sales 18,000

Var.Cost 12,000

Fixed Cost 1,000

Deprn. 2,000

Pre-tax Profit 3,000

Taxes(@ 33.3%) 1,000

P.a.T 2,000

Cflow (Oprn) 4,000

Net Cflow 20,000 4,000( Figs. Rs 000)

Accounting BEven :Sales = (Fixed Costs + Deprn.)/

Contribution Margin ratio= (1,000+2,000)/0.333

= Rs. 9 M

Financial BEven (12% rate) :Cash Flow = Deprn.+ P.a.T=0.667(0.333x Sales Rs.3M)+ Rs.2M= 0.222 x Sales

PV = 0.222 x Sales ( Discounted)= 0.222 x Sales x 5.650

i.e.20,000 = 0.222 x Sales x 5.650= Rs. 15.94 M

Contributionmargin %Sales is

33%


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i.e. Tot. accruals/ Tot. Debt burden

In addition to Break Even, financial institutionsalso assess:

Break Even Point for Capacity Evaluation (BEPCU):Projects reach capacity outputs over time. Only onreaching this point can stable operations start.The Fixed Cost/Contribution ratio is multiplied by%age capacity utilization to derive BEPCU

Debt Service Coverage Ratio (DSCR):Borrowers ability to service a debt is important!

DSCR = (P.a.T + Deprn & amorzn + Interests +Lease rentals)/{Repayment & Interest of term debt+ Lease rentals} all values cumulated over theperiod under consideration.


All ratiosare further subjected

toSensitivity Analysis


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A tool developed and used for aiding sequentialdecision making in face of risk involved at everystage e.g. oil-field development.

Identifying the problem and alternatives;Delineating the decision tree: diagrammaticrepresentation of the nature of decisions situations;Specifying the probabilities, impacts and outcomes;

Evaluating the decision alternatives.Study handout on the example of a decision tree

analysis Spectrum with their electric moped.

Project Management: The Process (contd) Risk the Decision Tree Analysis


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Organizing for Projects

Projects are carried out by Institutions themselves(e.g. Aircraft Coys) Or outsourced to Pure ProjectOrganizations (e.g. MMRDA).Pure Project Organizations have a core, leanmanagement team and engage man-power from aContractor Pool allowing for flexibility in bothnature and quantum of Human Resources.

Institutions borrow personnel from internal expertgroups to form Project Teams (who in turn mightoutsource specifics) to execute Projects.


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Organizing for Projects (contd)

Pure Project e.g.Construction

C.E.O

Housing PortsRoads

PM 1

PM 2

PM 1

PM 2

PM 1

Contractor Pool

Project Team e.g. Auto-mobile

Director

Design Markt.Manf.

Mgr 1

Mgr 2

Mgr 1

Mgr 2

Mgr 1

Mgr 2

PM

Rafting or Matrix Structure


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Planning Work in Projects

Elements

Objectives

Activities (What ?)Schedule (When ?)

Budget ( How much ?)

Organization (Who ?)Work methods (Procedure, Standards )


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Planning Work in Projects (contd)

Project Planning & Control System

Objective

Budgets

Reports(Time, cost,

Performance)

ManagementDecision making

Detailing:(SoW, WBS)

Scheduling:PERT, CPM

etc.

Tracking:Time/Cost/Performance

Feedback


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Major Project Plan Documents1. Statement of Work/Scope of Work (SoW)

A general description of the work to be performed- called deliverableswork excluded

Overall schedule of project

Construction of HouseConstruction, painting, internal electrical wiring, provision of electrical points,

plumbing as per the design of the Architect and the work specifications

Electrical fittings and Sanitary fittings to be supplied by the owner (exemption)

Completion date- 6 th June 2004


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2. Work Breakdown Structure (WBS)The breaking of overall project into sub elementsCould be further broken downEnables preparation of individual work schedules, their inter relation ships and precedenceEnables estimation of Resource requirementsEnables realistic Costing

It is the basis for costing and scheduling & is monitored in the

project control process to compute variance with actual costsand schedules.Identifies the Functional divisions/ Managers, Contractors to beinvolved for apportioning responsibilities


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Example of WBS - Construction of a building

1. Excavation

2. Foundation

3. Frame

4. Walls

5. Ceilings

6. Electrical wiring

7. Plumbing

8. Painting

Each of these will have a detailed Specification


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3. SpecificationsThe requirements to be met

Could be compatibility with established standards or a new specified requirement

Helps in realistic costing

Avoids ambiguity and consequent cost and timeover runs & legal issues


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A typical User (Customer) Contractor Exchange (inabsence of clear specifications)

Contractor: The lighting for the office is finished. As weagreed, I wired 20 ceiling lights

Customer : But you said there would be enough lights tomake the room bright. This room seems kind of dark

Contractor : For a room this size, 15 lights are standard.

As we agreed, I put in 20 just to be sureCustomer: Yes, but you said 20 would make the room

bright and they dont. You will have to put in more lights


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Planning Work in Projects (contd) Constructing process maps is a method

currently favoured by Project Managers,e.g. 4-fields mapping . It captures Projectphases, Tasks in the phases, Responsibilitymatrix for Tasks & the Standards for tasks

#3 Task flow

#1 Team Members# 4 Standards

Listed for eachtask

*****

*****

*****

#2 Phases (WBS)

With start/endCriteria. ABC

(ResponsibilityMatrix)

Eachphase hasmanytasks


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Planning Work in Projects (contd) Designing & Tracking Tools

The Project Planning process stages are:Identify the constituent activities;Determine their logical sequence;Prepare estimates of time & resources;Present the plan in a readily readable format.

The general approach to planning involves starting with arough overview and then conducting revisions of thisthrough an iterative process i.e. going through the cycle

several times to test the effect of the revisions made on theoutcomes;The objective is to make major revisions early in theplanning cycle and then make minor refinements in the plan.


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The development of detailed time plans have varyingcomplexity, in line with the nature of the project, however the significant area of commonality is:

A construction of comprehensive but comprehensible picture

of the project activities;Communication with others.The preference for graphical techniques hinges on theability of people to understand what is going on i.e.visibility , illustrating inter-relations between activitiesand time. The 3 most commonly used charts are:

The Gantt ChartP rogram Evaluation & Review Technique: PERT chartsCritical P ath Method: CPM charts .


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Gantt (Bar) Charts: Simple to construct and understandSimple to construct and understand Can track progress of individual Activity easilyCan track progress of individual Activity easily Good for small projects; e.gGood for small projects; e.g Boil Water for TeaBoil Water for Tea

Activities:1. Fill kettle. 02mins.2. Put on the stove..01min

3. Light the stove. 01min.4. Wait for boiling . 05mins.5. Take off kettle . 01min.6. Put off stove . 01min.

Actualactivity

Plannedactivity


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Network Scheduling Developed to address the drawbacks of GanttDeveloped to address the drawbacks of Gantt

chart esp. inter relationships/ inter dependencieschart esp. inter relationships/ inter dependenciesbetween Activitiesbetween Activities

Suited for complex projects involving manySuited for complex projects involving manyactivities.activities.

PERT developed for US Navy to manage complexPERT developed for US Navy to manage complexPolaris Missile Program.Polaris Missile Program.

CPM dCPM d eveloped in 1957 in an industrial setting (for Planteveloped in 1957 in an industrial setting (for Plantconstruction project for DuPont), and gives relativelyconstruction project for DuPont), and gives relativelymore importance to project cost.more importance to project cost.


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Concepts in Network DiagramsConcep ts in Network DiagramsActivity-on-Arrow (AoA)Activity-o n-Arrow (AoA)

Activity Symbol of Activity Time required

Fill kettle A 01 min.

Event- Beginning or End of an Activity

Beginning of filling End of filling

A

01min.1 2

IMPORTANT RULE: There can be ONLY ONE Arrow (Activity) between two events!


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Concurrent ActivitiesConcurrent Activities Activities that can be carried out concurrently / simultaneouslyActivities that can be carried out concurrently / simultaneously Not interdependentNot interdependent

1

2

3B

A A = Fill kettle

B = Light stove

C

2 D3 4

5

C Preceding Activity

D Succeeding Activity

Activity Symbol of Activity Time required

Observing for water to boil C 5 mins.

Take kettle off stove D 1 min

1

Succeeding/Preceding ActivitiesSucceeding /Preceding Activities


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1 2

3

4

AB

C

Example of two Activities with a Common immediate Predecessor

Dummy Activity- An imaginary Activity which does not consume resourcesbut included in the Network diagram to maintain network logic and understand inter dependency of Activities

2 4

A: Fill KettleB: Set up tea cupsC: Wait for water to boil


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Activities:Description Predecessor

A. Fill kettle. 02mins. StartB. Place on the stove..01min AC. Light the stove. 01min. StartD. Observe boiling . 05mins. CE. Take off kettle . 01min DF. Put off stove . 01min. E

e.g. A-o-A chart for Boiling of water for tea:

A B

C

D E F

0 1

2

3 4 5 6

Note: If we were to include set up tea cups as an activity and we would do it whilewaiting for water to boil; activity D would then become a dummy & activity set uptea cu s would be a real activit .


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The Critical PathThe major use of networks is for determining:

how long the project will take &when each activity should be scheduled.

The project duration is determined by finding the longest path through the network:

A path is any route comprised of one or more arrows

(activities) connected in sequence;The longest path from the origin node to the terminal node iscalled the Critical Path ;This gives the expected duration of the project.


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The Critical Path: an Example

DA

St 1

B

C2 3

E

F

En

4

A Shopping (H&W) - 1B Prepare to cook (W) A C Cooking (W) B 2

D Bathe & dress (W) C 1E Tidy house (H) A 1F Bathe & dress (H) E

Project: Dinner party (H & W)

There are TWO paths: #1 St 1 -2 3 En (A-B-C-D) St 1 4 En (A-E-F)

Path # 1 takes: 1 + + 2 + 1 = 4 H Path # 2 takes: 1 + 1 + = 3 H

The Project requires 4 H and path #1 determines the duration: thus Critical


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Activities not on the critical path can be delayedwithout delaying the project however, by howmuch?

The logic is to determine the latest allowable time that the activitycan be completed without delaying the completion of the project, i.e.the start can be late (or early);The time difference between early start and late start is calledslack or float;The total slack time is the maximum delay that can occur for non-critical activities. Once this slack is used up, non-critical activitiesbecome critical and any further delays will extend the projectcompletion.

The Critical Path


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Estimating Activity Duration( PERT)Estimating Activity Duration( PERT) The target Project completion date is dependent on theThe target Project completion date is dependent on the

proper estimation of duration of all Activities involvedproper estimation of duration of all Activities involved

Estimation of Activity duration is not always a straightEstimation of Activity duration is not always a straightforward process because of an element of uncertaintyforward process because of an element of uncertainty

PERTPERT addresses the uncertainty in the duration by usingaddresses the uncertainty in the duration by usingthree time estimatesthree time estimates

OptimisticOptimistic Most likelyMost likely PessimisticPessimistic


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Estimating Activity DurationEstimating Activity Duration contdcontd

Optimistic Time estimateOptimistic Time estimate aa -- Every thing goes accordingEvery thing goes accordingto plan with minimum difficultiesto plan with minimum difficulties

Pessimistic time estimatePessimistic time estimate bb Maximum possible time for Maximum possible time for completion considering all unfavourable conditionscompletion considering all unfavourable conditions

Most likely Time estimateMost likely Time estimate mm -- Lies between OptimisticLies between Optimisticand Pessimistic time estimates. Time required toand Pessimistic time estimates. Time required tocomplete in normal conditionscomplete in normal conditions

Estimates are obtained from, experience, people &Estimates are obtained from, experience, people &experts knowledgeable about the difficulties involvedexperts knowledgeable about the difficulties involved


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Expected Time (tExpected Time (t ee ) for completion of activity) for completion of activity PERT assumes thatPERT assumes that a, ba, b areare equallyeq ually like to occur, wherelike to occur, where

asas mm isis four timesfour times more likely to occur more likely to occur

Thus,Thus, tt ee = (a+4m+b)/6= (a+4m+b)/6

Variance,Variance, v = {(b-a)/6}v = {(b-a)/6} 22 is the measure of variability inis the measure of variability inthe activity completion timethe activity completion time

Standard Deviation,Standard Deviation, = v= v 1/21/2

The larger the difference between a & b, the larger theThe larger the difference between a & b, the larger thevariance and uncertainty with tvariance and uncertainty with t ee ; i.e the higher the; i.e the higher thelikelihood of completing earlier or later than tlikelihood of completing earlier or later than t ee ..


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Probability of Project CompletionProbability of Project Completion The expected Project Completion Time is theThe expected Project Completion Time is the SUM SUM of theof the

Expected completion timeExpected completion time ttee of of ALLALL activities on the Criticalactivities on the CriticalPath;Path;

The Standard Deviation,The Standard Deviation,

, for Project Completion Time is, for Project Completion Time isthethe Square root of the sums of VariancesSq uare root of the sums of Variances of of ALLALL activitiesactivitiesalong the Critical Path:along the Critical Path:

= ( v= ( v 11 + v+ v 22 + v+ v nn ))1/21/2 The probability of completing the project in the givenThe probability of completing the project in the given

completion duration,completion duration, ttss ,is determined by the number of ,is determined by the number of standard deviations separating them:standard deviations separating them:

z = (tz = (t ss t t ee )/)/ , the corresponding probability can be, the corresponding probability can befound from a standard z-table.found from a standard z-table.


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Probability of Project Completion (example)Probability of Project Completion (example)

Avity to(a)(a)

tp(b)

tm(m)

te/v

A 2 10 3 4/1.78

B 3 5 4 4/0.11

C 4 12 5 6/1.78

D 5 7 6 6/0.11

E 5 9 7 7/0.44

F 4 12 5 6/1.78

Path PathVariance

path Z (t s = 11days)

Prob. in11 days

A-D 1.78+0.11 1.37 ( 11 -10 )/1.37 0.7673

B-E 0.11+0.44 0.74 (11-11)/0.74 0.5000

C-F 1.78+1.78 1.87 (11-12)/1.87 0.2981

A

B

C

DE

F

The probability

of finish in lessthan 11 days =.7673 x.5 x.2981= 0.1143 i.e.

< 12% chance

ttee = (a+4m+b)/6; v = {(b-a)/6}= (a+4m+b)/6; v = {(b-a)/6}22

pathpath = ( v= ( v 11 + v+ v 22 + v+ v nn))1/21/2

z = (tz = (t ss t t ee )/)/ athath

(t s = 11 days)


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Avity to(a)(a)

tp(b)

tm(m)

t e

A 2 10 3 4

B 3 5 4 4

C 4 12 5 6

D 5 7 6 6

E 5 9 7 7

F 4 12 5 6

A

B

C

DE

F

The Critical Path

Path A-D (S-1-E): 4 + 6 = 10 daysPath B-E (S-2-E): 4 + 7 = 11 daysPath C-F (S-3-E): 5 + 7 = 12 days

i.e. the project is not expected tobe completed in less than 12 days.The longest Path is C-F (S-3-E) andis critical, defining the duration.

S E

1

2

3


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Developed in 1957 gives relatively more importance toproject cost, when Project activities are more accuratelyforecast-able and a definite relationship between time andcost can be established for each activity.The CPM assumes that the estimated completion times canbe influenced by applying resources to particular keyactivities that the time for any activity is variable,depending on the amount of resources applied.The PERT method has been criticized because it is basedon assumptions that sometimes yield uncertain results!

The Critical Path Method(CPM)


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CPM and PERT: a comparisonCPM and PERT: a comp arison Both employ Network diagrams & analysis of criticalBoth employ Network diagrams & analysis of critical

pathspaths CPM, however, use a deterministic approach in timeCPM, however, use a deterministic approach in time

estimates for each Activity:estimates for each Activity: only one time estimateonly one time estimate isisused. Thus, in CPM there is no statistical treatment of used. Thus, in CPM there is no statistical treatment of uncertainty.uncertainty.

CPM is more Activity oriented. Hence it is possible toCPM is more Activity oriented. Hence it is possible tomeasure percentage completion of an Activitymeasure percentage completion of an Activity CPM more suited for well defined projects, withCPM more suited for well defined projects, withrelatively small uncertainties like construction or in therelatively small uncertainties like construction or in theProcess industriesProcess industries


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CPM and PERT: a comparisonCPM and PERT: a comp arison

CPM includes a mathematical procedure for estimatingCPM includes a mathematical procedure for estimatingthe trade off between Project duration and Costthe trade off between Proj ect duration and Cost

PERT, puts greater emphasis on uncertainties and onPERT, puts greater emphasis on uncertainties and onEvents (Mile stones)Events (Mile stones)

PERT is more suitable for R&D type of projects wherePERT is more suitable for R&D type of projects whereuncertainties are more and duration of an Activity cannotuncertainties are more and duration of an Activity cannotbe estimated accuratelybe estimated accurately


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Planning Work in Projects (contd) Analyzing Networks

For analyzing networks, e.g. to determine CriticalPath, Slack, Probable Completion Times, etc. weneed information on:

Activity & Interrelations (preceding/succeeding)

Earliest event time & latest event time (to bedetermined)

Conventionally, these are included in the nodesas under (for a single activity):

Event Label

10

Earliest Event Time

0

Latest Event Time0

205

5


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10 00

20

30

40

50

60 70A5

B

3

D

5

C4

E

6

F7G

5

H8

5

8

9

10

16

Latest !

24

Estimation of Earliest Event Times

Forward Pass


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10 00

20

30

40

50

60 70A5

B

3

D

5

C4

E

6

F7G

5

H8

5

8

9

10

16

Latest !

24

Estimation of Latest Event Times

2416

10

9

11

5

Earliest Reverse Pass


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What do we do with determination of CriticalPath?

Provides us the key to prioritization

Provides us the back bone for further analysis:Of Resource needs and costsImpact of adjusting Project SchedulesFor reporting on an agreed base

If we can establish a Time-Cost relationship .


A l i N k Ti C


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Analyzing Networks: Time-CostRelationship (CPM)

In repeat or standard projects, duration & costof activities are reasonably well established:

Resource requirements per unit of work is definedTechnological or other minimum time to finish a job is

knownA standard or normal time and cost can beestablished

The Critical Path in a network are derived usingthe standard times.

But client requirements and/or deadlinepressures may require a Project to be expedited.

With additional resource inputs, time reduction ispossible


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Time-Cost Relationship: CPM (contd)

Definitions:Standard Time: the timeusually/normallyrequired to carry out anactivity: TsCrash Time: theminimum time requiredto carry out an activity.Reduction impossible: Tc

Standard & CrashCosts: Costs for resources associatedwith these Times: C s, C c Time

Cost

TsTc

C c

C s

Cost Slope:Cost per time-unit

of activity.


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Example:Activity T s Tc Cs C c Sequence

A 5 3 30 60 StartB 9 5 50 90 After AC 8 7 50 100 After AD 6 4 20 50 After BE 3 2 10 20 After CF 4 2 50 80 After D, E

1 2

3

4

5 6A

B

C

D

E

F4/1

3/2

6/4

8/7

9/5

5/3 13

0 5

14

20 24

0 5 2420

14

17

ProjectDuration: 24WCost:Rs.210m



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1 2

3

4

5 6A

B

C

D

E

F4/1

3/2

6/4

8/7

9/5

5/3 13

0 5

14

20 24

0 5 2420

14

17

If the Client wants a 1W reduction we will need to crashsome activities. Which one?

Activity Ts Tc Cs CcA 5 3 30 60B 9 5 50 90

C 8 6 50 100D 6 4 20 50E 3 2 10 20F 4 2 50 80


We want to reduce theProject Duration. So we lookfor activities on the Critical Path:

A, B, D or F?Reduction must be at the

least cost/time unit. So we lookfor activity with lowest cost slope.B has the least slope: wereduce B, adding Rs.10m to

Cost.

Cost Slope1510

50151015

ProjectDuration: 23W

Cost:Rs.220m

8/5 23

13

192319

16



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1 2

3

4

5 6A

B

C

D

E

F4/1

3/2

6/4

8/7

8/5

5/3

If the Client now wants to execute at the least possible time.What can the Project manager offer?


C 8 7 50 100D 6 4 20 50E 3 2 10 20F 4 2 50 80

Cost Slope1510

50151015

We can crash B by 3 moreweeks to 5 at an additionalcost of Rs.30m. B then is at

Crash. This reduces the Projectduration to 20W.

This makes the other Path i.e.A, C, E & F Critical too!

So any further reduction willneed to effect both Paths.

A-B-D-F: 23 WA-C-E-F: 20 W

5/5 20 W,250m



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1 2

3

4

5 6A

B

C

D

E

F4/1

3/2

6/4

8/75/3

If the Client now wants to execute at the least possible time.What can the Project manager offer?


C 8 7 50 100D 6 4 20 50E 3 2 10 20F 4 2 50 80

Cost Slope1510

50151015

5/5 20 W,250m

We can reduce F by 3W, costing 45 m & A by2 W, costing 30m. A & Fare crashed.

C, D & E are not yet atcrash. D can be reducedby 2 W, costing 30m.

C & E can be crashed by

1 W each, costing 60m.

3/31/1

4/4

7/7 3/3 14 W,Rs. 415m


1414

1010

6

6

33

0

077



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To run a Project, an establishment need to beset up.

This is relatively independent of the Project contente.g. Project Office, Communication, Security etc.

the extent may vary with nature of Projects.This set-up exists for the entire duration of theProject and is hardly affected by activity variance.Thus, the cost for this is fixed/structural in natureand has to be incurred for the duration of the

project and is directly proportional to time. (Activityis inversely proportional to time).Activity Cost and Establishment costs displaycontrary time-trends.



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Time

Cost

Activity

Establishment

Total

The Total Cost passes isis U shaped i.e. passes througha minimum point.

Thus crashing a Project is also

determined by the establishmentcost to determine the Optimumor least cost.

E.g. In our previous example if wewere asked for the Optimum Cost,given the establishment cost is

@ Rs.15m/week. We would need to factor in this cost along with thecrashed activity costs.


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Duration Activity Cost Estabish--ment Cost @

Rs.15 m /w

Total Cost

24 W Rs.210m Rs.360m Rs.570m

23 W Rs.220m Rs.345m Rs.555m

20W Rs.250m Rs.300m Rs.550m

14W Rs.415m Rs.210m Rs.625mCrashedDuration

NormalDuration

OptimumDuration


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Project Control

The basic questions that need toanswered are:

Is the project as a whole (and its parts) on/ahead /behind Schedule?Has the cost of the Project as a whole (andits parts) as per/ more than/ less thanbudget?

What is the trend in performance?The Standard Variance analysisapproach is inadequate!


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Project Control (contd)

E.g. (Costs in Rs. 000)Activity A Activity B

Bud. Cost in Period 50 30Cum. Bud. Till Date 200 75Actual cost in Period 55 28Cum. Actual till date 240 80

Standard Budgetory Control Variances:Variance for Period: - 5 2Cum. Variance till Date - 40 - 5

Is work on

schedule?


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Definitions:Budgeted cost of work Scheduled (BCWS): representsthe total cost budgets for all work packets to becompleted and work-in-progress scheduled to befinished on date;

Budgeted cost of work Performed (BCWP): representsthe total cost budgets for all work packets to becompleted and work-in-progress executed on date;

Actual cost of work Performed (ACWP): represents thetotal cost budgets for all work packets to be completedand work-in-progress executed on date;


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With these 3 parameters, a Project may bemonitored:

Cost Variance = BCW P ACW P

Cost Performance Index: BCWP/ACWPSchedule Variance = BCW P BCW S (in cost terms)

Schedule Performance Index: BCWP/BCWS

Estimated Cost Performance Index: BCTW/(ACWP +

ACC)Where, BCTW = Budgeted cost of total work & ACC = Additional

cost for completion)


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E.g. Project Start 01/01; End 30/10 andreview 30/06 i.e. 24 w (figs. In Rs. L)

BCWS: 15BCWP: 14

ACWP: 16BCTW: 25(40 w)

ACC: 12Cost Variance: BCWP ACWP (14 -16) = -2Schedule Var.: BCWP BCWS (14 15)= -1

Time Variance: Status date Date at which BCWS=BCWP

Est. Cost Index: {BCTW/(ACWP+ ACC)} {25/(16+12)} = 0.89

SpentMore

BehindSchedule

Will spend more;funds required


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25

40 Weeks

Rs. L

BCTW

Review Date

24

BCWS

BCWP

Time.Var

ACWP Cost Var.

ScheduleVar.

X ACWP + ACC

Overspend


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Project Control (contd)What do these terms really indicate?

A project manger can charge the client at pre-agreed ratesfor work completed on date of review This is BCWP andrepresents the Earned value of the project.The manager has paid out at actual to his supplier for the

work performed This is ACWP.

If the Actual is less then Earned, then the cost is successfullymanaged!However, if the progress is behind schedule then the clientpays only for completed task and the Projects earnings areless than budgeted. Schedule variance is this shortfall.


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Project Control (Practice Problem)

You have employed a Contractor to install 10000computers @ 20 computers/day and @ Rs.200 /installation. Every 10 days, there is a review andpayment. At the end of the 30 th Review, you find:

#s installed 5800Bill raised Rs.62000/-

A) Determine: Time, Cost & Schedule VariancesB) What is the earned value for the Contractor?C) What do you report to your management about the

Completion of the project, assuming the Contractor has put his best efforts and unforeseen situationshave arisen in work execution.


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BCWS: 30x10x20 x Rs.200= Rs.1.2 MBCWP: 5800 x Rs.200/- = Rs.1.16 MACWP: Rs.0.62 MCost Variance: Rs.1.16 Rs.0.62 = Rs. 0.54 M

Schedule Var.: Rs.1.16 Rs.1.20 = - Rs. 0.04 MTime Variance: 1 week late (5800 should have been installed by the 29 th review!)Earned Value: 5800 x Rs.200 = Rs.1.16 M, (contractor has probablyunder billed.)Project will be at least 1 week late and will complete the project withinthe budget, subject to bill verification.

Project Control (Practice Problem)

P j C l (P i P bl )


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BCWS = Rs.1.2 M; BCWP = Rs.1.16 MACWP: Rs.1.18 MCost Variance: Rs.1.16 Rs.1.18 = - Rs. 0.02 MSchedule Var.: Rs.1.16 Rs.1.20 = - Rs. 0.04 MTime Variance: 1 week late (5800 should have been installed by the29 th review!)Earned Value: 5800 x Rs.200 = Rs.1.16 M, contractor will be paidthis amount. The Rs.0.02 M excess has to be examined.Project will be at least 1 week late and the project will overshoot thebudget if the billing is found correct. Then the installation rate worksout to (Rs.1.18M/5800) Rs. 204/- per installation

ACC: (10000-5800) x Rs.204 = Rs.0.87 M ;Projected Cost: Rs.( 1.18+ 0.87 ) = Rs.2.05 M against BCTW: Rs.(10000 x Rs.200) = Rs.2.00 M

Project Control (Practice Problem)If the billing is corrected to Rs.1.18 M

Project Scheduling with Resource


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Project Scheduling with ResourceConstraints

In real life, there will be constraints on availability &use of resource:

Not every resource required will be freely available influencing design of project activitiesParticularly true when multiple activity/ projectsrequires the same resource e.g. Specialist skillsFurther, crashing will need to take this constraintinto consideration

P j t S h d li ith R


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Project Scheduling with ResourceConstraints ctd.

Resource Loading is the amount of resource necessary for the Project:

Changes through the duration of the execution since natureand type of activities vary with timeResults in variable requirement/loading of a resource over

timeThe usual resource loading pattern is:

A slow but steady build-upIntense peaking at a certain point in timeA gradual decline

Most Projects require few resources at early and latestages and many in the middle.This problematic for mangers who would like to dealwith uniform pool of workers, equipment etc.

P j t S h d li ith R


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The process of smoothening the resourcerequirements though the Project duration istermed Resource Leveling :

Aimed at sequencing the project activities to level the

requirement of the constrained resource, e.g. shiftworking on bottle-neck machine.The results in resource requirements for the overallproject is maintained at a fairly constant levelFair amount of leveling can done by juggling theactivities around:

Taking advantage of SlackDelaying non-critical activities.

P j t S h d li g ith R


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Consider a Maintenance Project involving overhauling amachine using a team of mechanics. The machine hasdifferent sub-systems which can be independentlyworked upon: Hydraulic, Electrical & Mechanical. TheProject details are given as under:

Activity days team strengthA) Disassembly (1-2) 2 3B)Ohaul Hydraulic (2-3) 2 2C)Ohaul Mechanical (2-4) 4 3D)Ohaul Electrical (2-5) 1 1E)Assembly (4-6) 2 3

Note: No mechanic can work more than 5 days at a stretch

Project Sched ling ith Reso rce


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A B C D E

Gang 1 1 1 1 1

Man /day

2 2 3 1 3

Durn. 2 2 4 1 21 2 A

2

3

4

5

6

B

2

4C

D1

2 E

1 2 3 4 5 6 7 8

2 2 6 4 3 3 3 3

1 1 3 2 1 1 1 1

Man Reqd.

Gang Reqd.

Day

Project Scheduling with Resource


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A B C D E

Gang 1 1 1 1 1

Man /day

2 2 3 1 3

Durn. 2 2 4 1 21 2 A

2

3

4

5

6

B

2

4C

D

1

2 E

1 2 3 4 5 6 7 8

2 2 3 4 5 5 3 3

1 1 1 2 2 2 1 1

Man Reqd.

Gang Reqd.

Day

1 mechanic can join from day 3, 1 morefrom day 4, 1 more from day 5 and 2 mechanics can leave from day 7; so nomechanic works more than 5 days


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Improvement ProjectsMany Projects which are done in companies areaimed at improving the current status or solvingrecurring problems, e.g.:

In Operations: reduction of rejectionsIn Design: reducing documentation & testing timeIn Finance: reducing accounts receivable & bad debts

Though the subjects are different, most of theserequire the same approach based on utilizing in-company knowledge and experienceThus there is a standard process for theseProjects, developed from the TQM philosophy.

I P j I f i & D i i


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Improvement Projects: Information & Decision

When work is delegated or distributed two dimensions, Responsibilityand Authority are prime concerns. But there is more, especially during aset-up/change process;People have to "do" something to make the processes happen. Thereforeit is useful to describe what should be done by whomThe RAS CI model is a relatively straightforward tool that can be used for

identifying roles and responsibilitiesR = Responsible - owns the problem / project A = to whom "R" is Accountable - who must sign off ( Approve ) on workbefore it is effectiveS = can be Supportive - can provide resources or can play a supportingrole in implementationC = to be Consulted - has information and/or capability necessary tocomplete the workI = to be Informed - must be notified of results, but need not beconsulted

Information & Decision contd


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IRIA

I, SIRA

RAIC

IRCA

RASCI Chart for Road Repair

Resume trafficflow

Repair road &certify

Divert & usealternate route

Stop access

for period

PublicPoliceContractorMunicipality

Information & Decision contd


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Providing Information and granting Decision Rights requires to be

supported by decision-making abilities.Decision-making is a universally important competence in business.

Some decisions clearly have a greater impact on the businessthan others, but the underlying skill is the same;The difference is in the scope and depth of the process you go

through to reach your decisionIn day-to-day operations, these are mostly in the domain of:

Choice makingProblem-solving/Improvements

In these areas, the people need to be supported with simple tools/aids,viz.

Decision support tools for making a choice quantitativelyProblem Solving tools

E.g. The 8-D methodology, Six Sigma


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Decision Making: informed choice

One reason why decision-making can be so problematic is that the mostcritical decisions tend to have to be made in the least amount of time .

People feel pressured and anxious;The time pressure means taking shortcuts , jumping to conclusions , or relying heavily on instinct to guide your way.

The other extreme is the guy who simply can't make a decision becausehe analyses the situation to death!

Between instinct and over-analysis is a logical and practical approach todecision-making that doesn't require endless investigation, but helpsweigh up the options and impacts is needed.

Decision-making is a skill set that needs be learned and improved;One such approach is called the Kepner-Tregoe Matrix . It provides anefficient, systematic framework for gathering, organizing and evaluating

decision making information.

Making an informed choice


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Kepner-Tregoe describes the following steps to approachdecision analysis:

1. Prepare a decision statement having both an action and aresult component;2. Establish strategic requirements ( Musts ), operational objectives(Wants );

3. Generate alternatives. Check if Musts are met by eachalternative;4. Rank objectives (Wants) and assign relative weights;5. Assign a relative score for each alternative on an objective-by-

objective basis;6. Calculate weighted score for each alternative and identify toptwo or three;7. Make a final, single choice between top alternatives.


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ALTERNATIVES

MUSTS

WANTS

1 23

Problem Solving


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The problem with problems is not that they occurin spite of our best efforts, stuff happens. Unforeseen circumstances will always conspireagainst us to disrupt the smooth operation of our production and operations systems and upset our plans.The problem with problems is that we fail to prevent them from

happening again . Problems do not confine themselves to organizational niches or structures: they encompass many parts, even the whole organization.Solutions, therefore, more often than not require a team effort to find alasting cure:

Engaging different skills, knowledge & aptitudeRequiring divergent resourcesThese reside scattered in different parts of the organization

Problem Solving

Problem Solving: Team approach


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Ford Motors is credited with formalizing TOPS (Team Oriented P roblem S olving)methodology:

Involvement: cross-functional and cross-hierarchical,

Knowledge & Information sharing,

Camaraderie and bonding,

Multi-dimensional, thus a holistic solution,Using the 8D (8 Disciplines) process, renamed Global 8D (G8D):

Step-by-step (P-D-S-A) approach:subsequent steps based on soundly established previous steps, few come-backs,Problems tackled in bite-size piecesProvisions for emergency response, escape and recurrence preventing measures

The 8-D method of problem solving is appropriate in "cause unknown" situations andis not the right tool if concerns center solely on decision-making or problemprevention

8 D Process


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D 0 - The Planning Stage: . 8-D is especially useful as it results innot just a problem-solving process, but also a standard and areporting format .

Does this problem warrant/require an 8D? If so comment why andproceed.

Is an E mergency R esponse Action needed? D 1 - Establishing the Team: Establish a small group of peoplewith the process/ product knowledge, allocated time, authority andskill in the required technical disciplines to solve the problem and

implement corrective actions.Team to set Objectives & Goals: brings belief, commitment &realism

8 D Process


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D 2 - Problem Definition: Provides the starting point for solvingthe problem or nonconformance issue.Need to have correct problem description (photos, verbatimstatements, eye-witness accounts) to identify causes.

5Ws + H approach in is and is not answers e.g. Who is or is notaffected by the problem

Need to use terms that are understood by all.D 3 - Developing I nterim C ontainment A ctions :Temporary actions to contain the problem and fix until permanentcorrection is in place - document actions in an Action Item Table.D 4 - Identifying & Verifying Root Cause: Analyze for Root

Cause of the problem.Brainstorming, 5 Whys, Ishikawa Diagrams, DOE etc.document actions in an AIT.Identify and verify the Escape Point

8 D Process


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D 5 - Identify Permanent Corrective Actions:solutions that address and correct the root cause.

Solutions determined to be the best of all the alternatives.Document and verify the Permanent Corrective Action (PCA) in theAIT.

D 6 - Implementing & Validating the PCA

Implement and validate to ensure that corrective action does what itis supposed to do.

Detect any undesirable side effects. Document this on the AIT.Return to root cause analysis, if necessary

D 7 - Preventing Recurrence: determine what improvements insystems and processes would prevent problem from recurring.

Ensure that corrective action remains in place and successfulAddress similar systemsRevise related documentation (Design/Process/Q-Systems)

8 D Process


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D 8 - Congratulate Your Team: ( ensure: was this problem solvingexercise effective? Has it been verified with a follow-up? )

Use all forms of employee recognition and document as necessary.Celebrate successful conclusion of the problem solving effort.Formally disengage the team and return to normal duties OR

Go for the next round of problem solving for the remaining issues

PD 0,1,2

& 3

D 6

AD 7 & 8