CHAPTER FOURTEEN

PROJECT MANAGEMENT
14.1 Elements of Project Management
14.2 The Gantt chart
14.3 CPM / PERT
14.4 Probabilistic Activity Times
14.5 Project Crashing and Time-Cost trade off.

Chapter Objectives

When you complete this chapter you should be able to:

1. Use a Gantt chart for scheduling

2. Draw AOA and AON networks
3. Complete forward and backward passes for a project
4. Determine a critical path
5. Calculate the variance of activity times
6. Crash a project
7. Use Microsoft Project software to create a project

In other chapters we discussed the scheduling of repetitive operations and activities, such as
work scheduling and job scheduling, as an important aspect of managing an operation.
Operational schedules are established to keep the flow of products or services through the supply
chain on time. However, not all operational activities are repetitive; some are unique, occurring
only once within a specified time frame. Such unique, one-time activities are referred to as
projects.

Project management is the management of the work to develop and implement an innovation or
change in an existing operation. It encompasses planning the project and controlling the project
activities, subject to resource and budget constraints, to keep the project on schedule. Examples
of projects include constructing facilities and buildings, such as houses, factories, a shopping
mall, an athletic stadium, or an arena; developing a military weapons system, new aircraft, or
new ship; launching a satellite system; constructing an oil pipeline; developing and
implementing a new computer system; planning a rock concert, football bowl game, or
basketball tournament; and introducing new products into the market.

Projects have become increasingly pervasive in companies in recent years. This is a result of the
diversity of new products and product markets and the shorter life span of products, combined
with rapid technological changes. The nature of the international business environment is such
that new machinery and equipment, as well as new production processes and computer support
systems, are constantly evolving. This provides the capability of developing new products and
services, which generates consumer demand for even greater product diversity. As a result a
larger proportion of total organizational effort now goes toward project-oriented activities than in
the past. Thus, the planning and management of projects has taken on a more crucial role in
operations management.
In this chapter we focus on project management using CPM and PERT network scheduling
techniques that are popular because they provide a graph or visual representation of the
interrelationship and sequence of individual project activities, rather than simply a verbal or
mathematical description. However, prior to our presentation of the CPM/PERT technique, we
will discuss the elements of project management.

14.1 The Elements of Project Management

Management is concerned with the planning, organization, and control of an ongoing process or
activity such as the production of a product or delivery of a service. Project management is
different in that it reflects a commitment of resources and people to an important activity for a
relatively short time frame, after which the management effort is dissolved. The features and
characteristics of project management tend to be unique. In this section, we will discuss the three
primary elements of project management: the project team, project planning, and project control.

The Project Team

The project team typically consists of a group of individuals selected from other areas in the
organization or from outside the organization because of their special skills, expertise, and
experience related to the project activities. Members of the engineering staff are often assigned
to project work because of their technical skills, especially if the project is related to production
processes or equipment. The project team may also include managers and staff personnel from
specific areas related to the project. Workers can also be involved on the project team if their job
is a function of the project activity. For example, a project team for the construction of a new
loading dock facility might include truck drivers, forklift operators, dock workers, and staff
personnel and managers from purchasing, shipping, receiving, and packaging, as well as
engineers to assess vehicle flow, routes, and space considerations. A principle of TQM is that the
employees who work in an area be part of the "problem-solving," or project, team in order to
take advantage of their unique perspective and expertise.

The term matrix organization refers to a team approach to special projects. The team is
developed from members of different functional areas or departments in the company. For
example, team members might come from engineering, production, marketing, or personnel,
depending on the specialized skills required by the project. The team members are, in effect, on
loan from their home departments to work on a project. The term matrix is derived from the two-
dimensional characteristics of this type of organizational structure. On one dimension, the
vertical, is the company's normal organizational structure for performing jobs, whereas the
horizontal dimension is the special functional structure (i.e., the functional team members)
required by the project.

In recent years a team approach to problem solving has developed as part of many companies'
commitment to TQM. In a TQM environment the purpose of the team is to bring together
different functional representatives and specialists from inside and outside the company that will
successfully solve problems. An objective of the team approach is to get new products to the
market before competitors. For example, a product design team might include members from
marketing, engineering, purchasing, manufacturing, quality management, and suppliers.

Assignment to a project team is usually temporary, which can have both positive and negative
repercussions. The temporary loss of workers and staff from their permanent jobs can be
disruptive for both the employee and the work area. The employee must sometimes "serve two
masters," reporting to both the project manager and a regular supervisor. Since projects are
usually exciting, they provide an opportunity to do work that is new and innovative, although the
employee may be reluctant to report back to a more mundane, regular job after the project is
completed.

The most important member of the project team is the project manager. Managing a project is
subject to lots of uncertainty and the distinct possibility of failure. Since a project is unique and
usually has not been attempted previously, the outcome is not as certain as the outcome of an
ongoing process would be. A degree of security is attained in the supervision of a continuing
process that is not present in project management. The project team members are often from
diverse areas of the organization and possess different skills, which must be coordinated into a
single, focused effort to complete the project successfully. The project is subject to time and
budgetary constraints that are not the same as normal work schedules and resource consumption
in an ongoing process. There is usually more perceived and real pressure associated with project
management than in a normal management position. However, there are potential opportunities,
including demonstrating management abilities in a difficult situation, the challenge of working
on a unique project, and the excitement of doing something new.

Project Planning

Planning a project requires that the objectives of the project be clearly defined so the manager
and the team know what is expected. Sometimes this is in the form of a formal written
description of what is to be accomplished, the work to be done, and the project time frame, called
a statement of work (or project scope). All activities (or steps) in the project must be completely
identified. This is not a simple task, since the work in the project is new, without a great deal of
experiential references to draw on. An activity is the performance of an individual job or work
effort that requires labor, resources, and time and that is subject to management control or
supervision. Once the activities have been identified, their sequential relationship to each other,
called a precedence relationship, must be determined; that is, it must be decided which
activities come first, which follow, and so on. In the CPM/PERT technique we discuss later in
the chapter, the precedence relationship is visually displayed in the form of a graph called a
network. The following graph is a very simplified project network for constructing a new
sidewalk:

This network shows the precedence relationship between two project activities--"constructing the
sidewalk forms," followed by "pouring concrete into the forms."
Once the activities of the project have been identified and their relationship to each other has
been determined, the project activities must be scheduled. Scheduling is accomplished by
determining estimates of the time required by each activity and then using these estimates to
develop an overall project schedule and time to project completion. The estimated project time
must be compared to the project objective; if the project time estimate is too long, then means
must be sought to reduce project time. This is usually accomplished by assigning more resources
or work effort to activities to reduce the time they require.

To summarize, the elements of the project planning process are

 Define project objective(s).

 Identify activities.
 Establish precedence relationships.
 Make time estimates.
 Determine project completion time.
 Compare project schedule objectives.
 Determine resource requirements to meet objectives.

Project Control

Project management consists of two distinct phases, planning and control. Once the project
planning process is completed, the project can physically be initiated--the activities can begin. At
this point project management focuses on the control of the work involved in the project. Control
includes making sure all activities are identified and included and making sure the activities are
completed in the proper sequence. Resource needs must be identified as work is initiated and
completed, and the schedule must be adjusted to reflect time changes and corrections. In most
cases the primary focus of control is on maintaining the project schedule and making sure the
project is completed on time.

The work breakdown structure (WBS) is a method for project planning and control. In a WBS
a project is broken down into its major components, referred to as modules. These components
are then subdivided into detailed subcomponents, which are further broken down into activities
and, finally, individual tasks. The end result is a project organizational structure made up of
different levels, with the overall project at the top of the structure and the individual tasks for
each activity at the bottom level. The WBS format is a good way to identify activities and to
determine the individual task, module, and project workloads and resources required. Further, it
helps to identify relationships between modules and activities. It also identifies unnecessary
duplication of activities.

14.2 The Gantt Chart

A Gantt chart is a traditional management technique for scheduling and planning small projects
with relatively few activities and precedence relationships. The scheduling technique (also called
a bar chart) was developed by Henry Gantt, a pioneer in the field of industrial engineering at the
artillery ammunition shops of the Frankford Arsenal in 1914. The Gantt chart has been a popular
project scheduling tool since its inception and is still widely used today. It is the direct precursor
of the CPM/PERT technique, which we will discuss later.

The Gantt chart is a graph with a bar representing time for each activity in the project being
analyzed.

Figure 14.1

Figure 14.1 illustrates a Gantt chart for a simplified project description for building a house. The
project contains only seven general activities, such as designing the house, laying the foundation,
ordering materials, and so forth. The first activity is "design house and obtain financing," and it
requires three months to complete shown by the bar from left to right across the chart. After the
first activity is finished, the next two activities, "lay foundation" and "order and receive
materials," can start simultaneously. This set of activities demonstrates how a precedence
relationship works; the design of the house and the financing must precede the next two
activities.

The activity "lay foundation" requires two months to complete, so it will be finished, at the
earliest, at the end of month 5. "Order and receive materials" requires one month to complete,
and it could be finished after month 4. However, observe that it is possible to delay the start of
this activity one month until month 4. This delay would still enable the activity to be completed
by the end of month 5, when the next activity, "build house," is scheduled to start. This extra
time for the activity "order materials" is called slack. Slack is the amount by which an activity
can be delayed without delaying any of the activities that follow it or the project as a whole. The
remainder of the Gantt chart is constructed in a similar manner, and the project is scheduled to be
completed at the end of month 9.
The Gantt chart provides a visual display of the project schedule, indicating when activities are
scheduled to start, when finished, and where extra time is available and activities can be delayed.
The project manager can use the chart to monitor the progress of the activities and see which
ones are ahead of schedule and which ones are behind schedule. The Gantt chart also indicates
the precedence relationships between activities; however, these relationships are not always
easily discernible. This problem is one of the disadvantages of the Gantt chart method, and it
limits the chart's use to smaller projects with relatively few activities. The CPM/PERT network
technique does not suffer this disadvantage.

14.3 CPM/PERT

In 1956 a research team at E. I. du Pont de Nemours & Company, Inc., led by a du Pont
engineer, Morgan R. Walker, and a Remington-Rand computer specialist, James E. Kelley, Jr.,
initiated a project to develop a computerized system to improve the planning, scheduling, and
reporting of the company's engineering programs (including plant maintenance and construction
projects). The resulting network approach is known as the critical path method (CPM). At the
same time the U.S. Navy established a research team composed of members of the Navy Special
Projects Office, Lockheed, and the consulting firm of Booz, Allen, and Hamilton, led by D. G.
Malcolm. They developed a similar network approach for the design of a management control
system for the development of the Polaris Missile Project (a ballistic missile-firing nuclear
submarine). This network scheduling technique was named the project evaluation and review
technique, or PERT. The Polaris project eventually included 23 PERT networks encompassing
3,000 activities.

Both CPM and PERT are derivatives of the Gantt chart and, as a result, are very similar. There
were originally two primary differences between CPM and PERT. With CPM a single estimate
for activity time was used that did not allow for any variation in activity times--activity times
were treated as if they were known for certain, or "deterministic." With PERT, multiple time
estimates were used for each activity that allowed for variation in activity times--activity times
were treated as "probabilistic." The other difference was related to the mechanics of drawing the
project network. In PERT activities were represented as arcs, or arrowed lines, between two
nodes, or circles, whereas in CPM activities were represented as the nodes or circles. However,
over time CPM and PERT have been effectively merged into a single technique conventionally
referred to as CPM/PERT.

The advantage of CPM/PERT over the Gantt chart is in the use of a network to depict the
precedence relationships between activities. The Gantt chart does not clearly show precedence
relationships, which is a disadvantage that limited its use to small projects. The CPM/PERT
network is a more efficient and direct means of displaying precedence relationships. In other
words, in a network it is visually easier to see the precedence relationships, which makes
CPM/PERT popular with managers and other users, especially for large projects with many
activities.

CPM / PERT Techniques

CPM (Critical Path Method) was developed by Walker to solve project scheduling problems.
PERT (Project Evaluation and Review Technique) was developed by team of engineers
working on the polar’s missile programme of US navy.

The methods are essentially network-oriented techniques using the same principle. PERT and
CPM are basically time-oriented methods in the sense that they both lead to determination of a
time schedule for the project. The significant difference between two approaches is that the time
estimates for the different activities in CPM were assumed to be deterministic while in PERT
these are described probabilistically. These techniques are referred as project scheduling
techniques.

Applications of CPM / PERT

These methods have been applied to a wide variety of problems in industries and have found
acceptance even in government organizations. These include:
 Construction of a dam or a canal system in a region
 Construction of a building or highway
 Maintenance or overhaul of airplanes or oil refinery
 Space flight
 Cost control of a project using PERT / COST
 Designing a prototype of a machine
 Development of supersonic planes

Basic Steps in PERT / CPM

Project scheduling by PERT / CPM consists of four main steps

1. Planning

The planning phase is started by splitting the total project in to small projects. These smaller
projects in turn are divided into activities and are analyzed by the department or section.

The relationship of each activity with respect to other activities are defined and established and
the corresponding responsibilities and the authority are also stated.

Thus the possibility of overlooking any task necessary for the completion of the project is
reduced substantially.

2. Scheduling

The ultimate objective of the scheduling phase is to prepare a time chart showing the start and
finish times for each activity as well as its relationship to other activities of the project.

Moreover the schedule must pinpoint the critical path activities which require special attention if
the project is to be completed in time.
For non-critical activities, the schedule must show the amount of slack or float times which can
be used advantageously when such activities are delayed or when limited resources are to be
utilized effectively.

3. Allocation of resources

Allocation of resources is performed to achieve the desired objective. A resource is a physical

variable such as labour, finance, equipment and space which will impose a limitation on time for
the project.

When resources are limited and conflicting, demands are made for the same type of resources a
systematic method for allocation of resources become essential.

Resource allocation usually incurs a compromise and the choice of this compromise depends on
the judgment of managers.

4. Controlling

The final phase in project management is controlling. Critical path methods facilitate the
application of the principle of management by expectation to identify areas that are critical to the
completion of the project.

By having progress reports from time to time and updating the network continuously, a better
financial as well as technical control over the project is exercised.

Arrow diagrams and time charts are used for making periodic progress reports. If required, a new
course of action is determined for the remaining portion of the project.

The Project Network

A CPM/PERT network consists of branches and nodes, as shown in Figure 14.2.

Figure 14.2
When CPM and PERT were first developed, they employed different conventions for
constructing a network. With CPM the nodes, or circles in Figure 14.2, represented the project
activities. The arrows in between the nodes indicated the precedence relationships between
activities. For the network in Figure 14.2, activity 1, represented by node 1, precedes activity 2,
and 2 precedes 3. This approach to network construction is called activity-on-node (AON).
With PERT the opposite convention was taken. The branches represented the activities and the
nodes in between them reflected events, or points in time such as the end of one activity and the
beginning of another. In this approach, referred to as activity-on-arrow (AOA), the activities are
normally identified by the node numbers at the start and end of an activity; for example, activity
1-2 precedes activity 2-3 in Figure 14.2. In this text we will employ the AOA convention.

In a network representation of a project certain definitions are used

1. Activity

Any individual operation which utilizes resources and has an end and a beginning is called
activity. An arrow is commonly used to represent an activity with its head indicating the
direction of progress in the project. These are classified into four categories
a. Predecessor activity – Activities that must be completed immediately prior to the start of
another activity are called predecessor activities.
b. Successor activity – Activities that cannot be started until one or more of other activities
are completed but immediately succeed them are called successor activities.
c. Concurrent activity – Activities which can be accomplished concurrently are known as
concurrent activities. It may be noted that an activity can be a predecessor or a successor
to an event or it may be concurrent with one or more of other activities.
d. Dummy activity – An activity which does not consume any kind of resource but merely
depicts the technological dependence is called a dummy activity. The dummy activity is
inserted in the network to clarify the activity pattern in the following two situations
 To make activities with common starting and finishing points distinguishable
 To identify and maintain the proper precedence relationship between activities that is
not connected by events.
 For example, consider a situation where B and C are concurrent activities. C is
dependent on A and D is dependent on A and B both. Such a situation can be handled
by using a dummy activity as shown in the figure.

2. Event
An event represents a point in time signifying the completion of some activities and the
beginning of new ones. This is usually represented by a circle in a network which is also called a
node or connector.
The events are classified in to three categories
a. Merge event – When more than one activity comes and joins an event such an event is
known as merge event.
b. Burst event – When more than one activity leaves an event such an event is known as
burst event.
c. Merge and Burst event – An activity may be merge and burst event at the same time as
with respect to some activities it can be a merge event and with respect to some other
activities it may be a burst event.

3. Sequencing - The first prerequisite in the development of network is to maintain the

precedence relationships.

In order to make a network, the following points should be taken into considerations
 What job or jobs precede it?
 What job or jobs could run concurrently?
 What job or jobs follow it?
 What controls the start and finish of a job?
Since all further calculations are based on the network, it is necessary that a network be drawn
with full care

Rules for Drawing Network Diagram

Rule 1
Each activity is represented by one and only one arrow in the network

Rule 2
No two activities can be identified by the same end events

Rule 3
In order to ensure the correct precedence relationship in the arrow diagram, following questions
must be checked whenever any activity is added to the network
 What activity must be completed immediately before this activity can start?
 What activities must follow this activity?
 What activities must occur simultaneously with this activity?
In case of large network, it is essential that certain good habits be practiced to draw an easy to
follow network
 Try to avoid arrows which cross each other
 Use straight arrows
 Do not attempt to represent duration of activity by its arrow length
 Use arrows from left to right. Avoid mixing two directions, vertical and standing
arrows may be used if necessary.
 Use dummies freely in rough draft but final network should not have any redundant
dummies.
 The network has only one entry point called start event and one point of emergence
called the end event.

Common Errors in Drawing Networks

The three types of errors are most commonly observed in drawing network diagrams
1. Dangling
To disconnect an activity before the completion of all activities in a network diagram is known
as dangling. As shown in the figure activities (5 – 10) and (6 – 7) are not the last activities in the
network. So the diagram is wrong and indicates the error of dangling

2. Looping or Cycling
Looping error is also known as cycling error in a network diagram. Drawing an endless loop in a
network is known as error of looping as shown in the following figure.
3. Redundancy
Unnecessarily inserting the dummy activity in network logic is known as the error of redundancy
as shown in the following diagram

To demonstrate how these components are used to construct a network, we will use our example
project of building a house used in the Gantt chart in Figure 14.1. The comparable CPM/PERT
network for this project is shown in Figure 14.3.

Figure 14.3

The precedence relationships are reflected in this network by the arrangement of the arrowed (or
directed) branches in Figure 14.3. The first activity (1-2) in the project is to design the house and
obtain financing. This activity must be completed before any subsequent activities can begin.
Thus, activities 2-3, laying the foundation, and 2-4, ordering and receiving materials, can start
only when node 2 is realized, indicating the event that activity 1-2 is finished. (Notice in Figure
14.3 that a time estimate of three months has been assigned for the completion of this activity).
Activity 2-3 and activity 2-4 can occur concurrently; neither depends on the other and both
depend only on the completion of activity 1-2.

When the activities of laying the foundation (2-3) and ordering and receiving materials (2-4) are
completed, then activities 4-5 and 4-6 can begin simultaneously. However, before discussing
these activities further, notice activity 3-4, referred to in the network as a dummy.

A dummy activity is inserted into the network to show a precedence relationship, but it does not
represent any actual passage of time. Activities 2-3 and 2-4 have the precedence relationship
shown in Figure 14.4.
Figure 14.4

However, in a CPM/PERT network, two or more activities are not allowed to share the same
starting and ending nodes. (The reason will become apparent later when we develop a schedule
for the network.) Instead, activity 3-4 is inserted to give two activities separate end nodes and,
thus, two separate identities as shown in Figure 14.4(b). Notice, though, that a time of zero
months has been assigned to activity 3-4. The dummy activity shows that activity 2-3 must be
completed prior to any activities beginning at node 4, but it does not represent the passage of
time.

Returning to the network in Figure 14.3, two activities start at node 4. Activity 4-6 is the actual
building of the house, and activity 4-5 is the search for and selection of the paint for the exterior
and interior of the house. Activity 4-6 and activity 4-5 can begin simultaneously and take place
concurrently. Following the selection of the paint (activity 4-5) and the realization of node 5, the
carpet can be selected (since the carpet color depends on the paint color). This activity can also
occur concurrently with the building of the house (activity 4-6). When the building is completed
and the paint and carpet are selected, the house can be finished (activity 6-7).

The Critical Path

A network path is a sequence of connected activities that runs from the start node to the end node
in the network. The network in Figure 14.3 has several paths through it. In fact, close
observations of this network show four paths, identified as A, B, C, and D:
The project cannot be completed (i.e., the house cannot be built) sooner than the time required by
the longest path in the network, in terms of time. The path with the longest duration of time is
referred to as the critical path.

By summing the activity times (shown in Figure 14.3) along each of the four paths, we can
compute the length of each path, as follows:

Because path A is the longest path, it is the critical path; thus the minimum completion time for
the project is 9 months. Now let us analyze the critical path more closely.

Figure 14.5

From Figure 14.5 it can be seen that activities 2-3 and 2-4 cannot start until 3 months have
passed. It is also easy to see that activity 3-4 will not start until 5 months have passed. The start
of activities 4-5 and 4-6 is dependent on two activities leading into node 4. Activity 3-4 is
completed after 5 months (which is determined by adding the dummy activity time of zero to the
time of 5 months until node 3 occurs), but activity 2-4 is completed at the end of 4 months. Thus,
there are two possible start times for activities 4-5 and 4-6, 5 months and 4 months. However,
since no activity starting at node 4 can occur until all preceding activities have been finished, the
soonest node 4 can be realized is 5 months.

Now consider the activities leading from node 4. Using the same logic as before, activity 6-7
cannot start until after 8 months (5 months at node 4 plus the 3 months required by activity 4-6)
or after 7 months (5 months at node 4 plus the 2 months required by activities 4-5 and 5-6).
Because all activities ending at node 6 must be completed before activity 6-7 can start, the
soonest they can occur is 8 months. Adding 1 month for activity 6-7 to the time at node 6 gives a
project duration of 9 months. This is the time of the longest path in the network--the critical path.

This brief analysis demonstrates the concept of a critical path and the determination of the
minimum completion time of a project. However, this was a cumbersome method for
determining a critical path. Next, a mathematical approach to scheduling the project activities
and determining the critical path will be discussed.

Basic Scheduling Computations

The notations used are

(i, j) = Activity with tail event i and head event j
Ei = Earliest occurrence time of event i
Lj = Latest allowable occurrence time of event j
Dij = Estimated completion time of activity (i, j)
(Es)ij = Earliest starting time of activity (i, j)
(Ef)ij = Earliest finishing time of activity (i, j)
(Ls)ij = Latest starting time of activity (i, j)
(Lf)ij = Latest finishing time of activity (i, j)

The procedure is as follows

1. Determination of Earliest time (Ej): Forward Pass computation

Step 1

The computation begins from the start node and move towards the end node. For easiness, the
forward pass computation starts by assuming the earliest occurrence time of zero for the initial
project event.

Step 2
I. Earliest starting time of activity (i, j) is the earliest event time of the tail end event i.e.
(Es)ij = Ei
II. Earliest finish time of activity (i, j) is the earliest starting time + the activity time i.e. (Ef)ij
= (Es)ij + Dij or (Ef)ij = Ei + Dij
III. Earliest event time for event j is the maximum of the earliest finish times of all activities
ending in to that event i.e. Ej = max [(Ef)ij for all immediate predecessor of (i, j)] or Ej
=max [Ei + Dij]
2. Backward Pass computation (for latest allowable time)

Step 1
For ending event assume E = L. Remember that all E’s have been computed by forward pass
computations.

Step 2
Latest finish time for activity (i, j) is equal to the latest event time of event j i.e. (Lf)ij = Lj

Step 3
Latest starting time of activity (i, j) = the latest completion time of (i, j) – the activity time or
(Ls)ij =(Lf)ij - Dij or (Ls)ij = Lj - Dij

Step 4
Latest event time for event ‘i’ is the minimum of the latest start time of all activities originating
from that event i.e. Li = min [(Ls)ij for all immediate successor of (i, j)] = min [(Lf)ij - Dij] = min
[Lj - Dij]

3. Determination of floats and slack times

There are three kinds of floats and only applicable to noncritical activities

Total float – The amount of time by which the completion of an activity could be delayed
beyond the earliest expected completion time without affecting the overall project duration time.
Mathematically
(Tf)ij = (Latest start – Earliest start) for activity ( i – j)
(Tf)ij = (Ls)ij - (Es)ij or (Tf)ij = (Lj - Dij) - Ei

Free float – The time by which the completion of an activity can be delayed beyond the earliest
finish time without affecting the earliest start of a subsequent activity.
Mathematically
(Ff)ij = (Earliest time for event j – Earliest time for event i) – Activity time for ( i,j)
(Ff)ij = (Ej - Ei) - Dij

Independent float – The amount of time by which the start of an activity can be delayed without
effecting the earliest start time of any immediately following activities, assuming that the
preceding activity has finished at its latest finish time.
Mathematically
(If)ij = (Ej - Li) - Dij
The negative independent float is always taken as zero.

Event slack - It is defined as the difference between the latest event and earliest event times.
Event slack is zero for critical activities
Mathematically
Head event slack = Lj – Ej, Tail event slack = Li - Ei

4. Determination of critical path

Critical event – The events with zero slack times are called critical events. In other words the
event i is said to be critical if Ei = Li

Critical activity – The activities with zero total float are known as critical activities. In other
words an activity is said to be critical if a delay in its start will cause a further delay in the
completion date of the entire project.

Critical path – The sequence of critical activities in a network is called critical path. The critical
path is the longest path in the network from the starting event to ending event and defines the
minimum time required to complete the project.

Worked Example

Example 1

Determine the early start and late start in respect of all node points and identify critical path for
the following network.

Solution
Calculation of E and L for each node is shown in the network
Example 2

In the analysis of the critical path, the soonest time that each activity could be finished was
determined. For example, it was found that the earliest time activity 4-5 could start was 5
months. This time is referred to as the earliest start time, and it is expressed symbolically as ES.

To determine the earliest start time for every activity, a forward pass through the network is
made. That is, start at the first node and move forward through the network. The earliest start
time for an activity is the maximum time in which all preceding activities have been completed--
the time when the activity start node is realized.

The earliest finish time, EF, for an activity is simply the earliest start time plus the activity time
estimate. For example, if the earliest start time for activity 1-2 is at time 0, then the earliest finish
time is 3 months. In general, the earliest start and finish times for an activity i-j are computed
according to the following mathematical relationship (where i < j).

The earliest start and earliest finish times for all the activities in our project network are shown in
Figure 14.6.

Figure 14.6

The earliest start time for the first activity in the network (for which there are no predecessor
activities) is always 0, or, ES12 = 0. This enables us to compute the earliest finish time for
activity 1-2 as

The earliest start for activity 2-3 is

and the corresponding earliest finish time is

For activity 3-4 the earliest start time (ES34) is 5 months and the earliest finish time (EF34) is 5
months, and for activity 2-4 the earliest start time (ES24) is 3 months and the earliest finish time
(EF24) is 4 months.

Now consider activity 4-6, which has two predecessor activities. The earliest start time is

and the earliest finish time is

All the remaining earliest start and finish times are computed similarly. Notice in Figure 14.6
that the earliest finish time for activity 6-7, the last activity in the network, is 9 months, which is
the total project duration, or critical path time.

Companions to the earliest start and finish are the latest start and latest finish times, LS and
LF. The latest start time is the latest time an activity can start without delaying the completion of
the project beyond the project critical path time. For our example, the project completion time
(and earliest finish time) at node 7 is 9 months. Thus, the objective of determining latest times is
to see how long each activity can be delayed without the project exceeding 9 months.

In general, the latest start and finish times for an activity i-j are computed according to the
following formulas:

The term min (LSj) means the minimum latest start time for all activities leaving node j. Whereas
a forward pass through the network is made to determine the earliest times, the latest times are
computed using a backward pass. The computations start at the end of the network at node 7
and work backward, computing the latest times for each activity. Since it is required to determine
how long each activity in the network can be delayed without extending the project time, the
latest finish time at node 7 cannot exceed the earliest finish time. Therefore, the latest finish time
at node 7 is 9 months. This and all other latest times are shown in Figure 14.7.
Figure 14.7

Starting at the end of the network, the critical path time, which is also equal to the earliest finish
time of activity 6-7, is 9 months. This automatically becomes the latest finish time for activity 6-
7, or

Using this value, the latest start time for activity 6-7 is

The latest finish time for activity 5-6 is the minimum of the latest start times for the activities
leaving node 6. Since activity 6-7 leaves node 6, the latest finish time is

The latest start time for activity 5-6 is

For activity 4-6, the latest finish time (LF46) is 8 months, and the latest start time (LS46) is 5
months; for activity 4-5, the latest finish time (LF45) is 7 months, and the latest start time (LS45)
is 6 months.

Now consider activity 2-4, which has two activities, 4-6 and 4-5, following it. The latest finish
time is computed as
The latest start time is

All the remaining latest start and latest finish times are computed similarly.

Figure 14.8

Figure 14.8 includes the earliest and latest start times, and earliest and latest finish times for all
activities.

Activity Slack

The project network in Figure 14.8, with all activity start and finish times, highlights the critical
path (1-2-3-4-6-7) determined earlier by inspection. Notice that for the activities on the critical
path, the earliest start times and latest start times are equal. This means that these activities on
the critical path must start exactly on time and cannot be delayed at all. If the start of any activity
on the critical path is delayed, then the overall project time will be increased. We now have an
alternate way to determine the critical path besides simply inspecting the network. The activities
on the critical path can be determined by seeing for which activities ES = LS or EF = LF. In
Figure 14.8 the activities 1-2, 2-3, 3-4, 4-6 and 6-7 all have earliest start times and latest start
times that are equal (and EF = LF); thus, they are on the critical path.

For activities not on the critical path for which the earliest and latest start times (or earliest and
latest finish times) are not equal, slack time exists. We introduced slack with our discussion of
the Gantt chart in Figure 14.1. Slack is the amount of time an activity can be delayed without
affecting the overall project duration. In effect, it is extra time available for completing an
activity.

Slack, S, is computed using either of the following formulas:

For example, the slack for activity 2-4 is

If the start of activity 2-4 were delayed for 1 month, the activity could still be completed by
month 5 without delaying the project completion time. The slack for each activity in our example
project network is shown in Figure 14.1 and Figure 14.9.

Figure 14.9

Figure 14.9 shows there is no slack for the activities on the critical path (marked with an
asterisk); activities not on the critical path have slack.

Notice in Figure 14.9 that either activity 4-5 can be delayed 1 month or activity 5-6 can be
delayed 1 month, but they both cannot be delayed 1 month. If activity 4-5 starts at month 6
instead of 5, then it will be completed at month 7, which will not allow the start of activity 5-6 to
be delayed. The opposite is also true. If 4-5 starts at month 5, activity 5-6 can be delayed 1
month. The slack on these two activities is called shared slack. This means that the sequence of
activities 4-5-6 can be delayed 1 month jointly without delaying the project.
Slack is beneficial to the project manager since it enables resources to be temporarily diverted
from activities with slack and used for other activities that might be delayed for various reasons
or for which the time estimate has proved to be inaccurate.

The times for the network activities are simply estimates, for which there is usually not a lot of
historical basis (since projects tend to be unique undertakings). As such, activity time estimates
are subject to quite a bit of uncertainty. However, the uncertainty inherent in activity time
estimates can be reflected to a certain extent by using probabilistic time estimates instead of the
single, deterministic estimates we have used so far.

14.4 Probabilistic Activity Times

In the project network for building a house in the previous section, all activity time estimates
were single values. By using only a single activity time estimate, we are, in effect, assuming that
activity times are known with certainty (i.e., they are deterministic). For example, in Figure 14.3,
the time estimate for activity 2-3 (laying the foundation) is 2 months. Since only this one value is
given, we must assume that the activity time does not vary (or varies very little) from 2 months.
It is rare that activity time estimates can be made with certainty. Project activities are likely to be
unique. There is little historical evidence that can be used as a basis to predict activity times.
Recall that one of the primary differences between CPM and PERT is that PERT uses
probabilistic activity times.

Probabilistic Time Estimates

In the PERT-type approach to estimating activity times, three time estimates for each activity are
determined, which enables us to estimate the mean and variance of a beta distribution of the
activity times.

It will assumed that the activity times can be described by a beta distribution for several reasons.
The beta distribution mean and variance can be approximated with three time estimates. Also,
the beta distribution is continuous, but it has no predetermined shape (such as the bell shape of
the normal curve). It will take on the shape indicated--that is, be skewed--by the time estimates
given. This is beneficial, since typically there is no prior knowledge of the shapes of the
distributions of activity times in a unique project network. Although other types of distributions
have been shown to be no more or less accurate than the beta, it has become traditional to use the
beta distribution to estimate probabilistic activity times.

The three time estimates for each activity are:

Most likely time (tm): It is the estimate of the normal time the activity would take. This assumes
normal delays. If a graph is plotted in the time of completion and the frequency of completion in
that time period, then most likely time will represent the highest frequency of occurrence. This is
denoted by tm. The most likely time is a subjective estimate of the activity time that would most
frequently occur if the activity were repeated many times.
Optimistic time (ta): It is the shortest possible time in which the activity can be finished. It
assumes that everything goes very well. This is denoted by ta. The optimistic time is the shortest
possible time to complete the activity if everything went right.

Pessimistic time (tb): It represents the longest time the activity could take if everything goes
wrong. As in optimistic estimate, this value may be such that only one in hundred or one in
twenty will take time longer than this value. This is denoted by tb. The pessimistic time is the
longest possible time to complete the activity assuming everything went wrong. The person most
familiar with an activity or the project manager makes these "subjective" estimates to the best of
his or her knowledge and ability.

These three time estimates are used to estimate the mean and variance of a beta distribution, as
follows:

These formulas provide a reasonable estimate of the mean and variance of the beta distribution, a
distribution that is continuous and can take on various shapes, or exhibit skewness.

Figure 14.10 illustrates the general form of beta distributions for different relative values of a, m,
and b.
Figure 14.10

EXAMPLE
A Project Network with Probabilistic Time Estimates
14.1

The Southern Textile Company has decided to install a new computerized order-processing
system. In the past, orders were processed manually, which contributed to delays in delivery
orders and resulted in lost sales. The new system will improve the quality of the service the
company provides. The company wants to develop a project network for the installation of the
new system.

The network for the installation of the new order-processing system is shown in the
accompanying figure. The network begins with three concurrent activities: The new computer
equipment is installed (activity 1-2); the computerized order-processing system is developed
(activity 1-3); and people are recruited to operate the system (activity 1-4). Once people are
hired, they are trained for the job (activity 4-5), and other personnel in the company, such as
marketing, accounting, and production personnel, are introduced to the new system (activity 4-
8). Once the system is developed (activity 1-3) it is tested manually to make sure that it is
logical (activity 3-5). Following activity 1-2, the new equipment is tested, any necessary
modifications are made (activity 2-6), and the newly trained personnel begin training on the
computerized system (activity 5-7). Also, event 5 begins the testing of the system on the
computer to check for errors (activity 5-8). The final activities include a trial run and
changeover to the system (activity 7-9), and final debugging of the computer system (activity 6-
9).

The three time estimates, the mean, and the variance for all the activities in the network as
shown in the figure are provided in the following table:

SOLUTION:

As an example of the computation of the individual activity mean times and variance, consider
activity 1-2. The three time estimates (a = 6, m = 8, b = 10) are substituted in the formulas as
follows:

The other values for the mean and variance are computed similarly.

Once the mean times have been computed for each activity, we can determine the critical path
the same way we did in the deterministic time network, except that we use the expected activity
times, t. Recall that in the home building project network, we identified the critical path as the
one containing those activities with zero slack. This requires the determination of earliest and
latest start and finish times for each activity, as shown in the following table and figures:
From the table, we can see that the critical path encompasses activities 1-3-5-7-9, since these
activities have no available slack. We can also see that the expected project completion time (tp)
is the same as the earliest or latest finish for activity 7-9, or tp = 25 weeks. To determine the
project variance, we sum the variances for those activities on the critical path. Using the
variances shown in the table for the critical path activities, the total project variance can be
computed as follows:

Probabilistic Network Analysis

The CPM/PERT method assumes that the activity times are statistically independent, which
allows us to sum the individual expected activity times and variances to get an expected project
time and variance. It is further assumed that the network mean and variance are normally
distributed. This assumption is based on the central limit theorem of probability, which for
CPM/PERT analysis and our purposes states that if the number of activities is large enough and
the activities are statistically independent, then the sum of the means of the activities along the
critical path will approach the mean of a normal distribution. For the small examples in this
chapter, it is questionable whether there are sufficient activities to guarantee that the mean
project completion time and variance are normally distributed. Although it has become
conventional in CPM/PERT analysis to employ probability analysis using the normal distribution
regardless of the network size, the prudent user should bear this limitation in mind.

Probabilistic analysis of a CPM/PERT network is the determination of the probability that the
project will be completed within a certain time period given the mean and variance of a normally
distributed project completion time. This is illustrated in Figure 14.11.

Figure 14.11

The value Z is computed using the following formula:

where

This value of Z is then used to find the corresponding probability in Table A.1 (Appendix A).

EXAMPLE
Probabilistic Analysis of the Project Network
14.2

The Southern Textile Company in Example 14.1 has told its customers that the new order-
processing system will be operational in 30 weeks. What is the probability that the system
will be ready by that time?
SOLUTION:

The probability that the project will be completed within 30 weeks is shown as the shaded
area in the accompanying figure. To compute the Z value for a time of 30 weeks, we must
2
first compute the standard deviati ).

Next we substitute this value for the standard deviation along with the value for the mean, 25
weeks, and our proposed project completion time, 30 weeks, into the following formula:

A Z value of 1.91 corresponds to a probability of 0.4719 in Table A.1 in Appendix A. This

means that there is a 0.9719 probability of completing the project in 30 weeks or less (adding

EXAMPLE
Probabilistic Analysis of the Project Network
14.3

A customer of the Southern Textile Company has become frustrated with delayed orders and
told the company that if the new ordering system is not working within 22 weeks, it will not
do any more business with the textile company. What is the probability the order-processing
system will be operational within 22 weeks?

SOLUTION:
 The probability that the project will be completed within 22 weeks is shown as the shaded
area in the accompanying figure.

The probability of the project's being completed within 22 weeks is computed as follows:

Appendix
A ability that the system will be
operational in 22 weeks.

14.5 Project Crashing and Time-Cost Trade-Off

The project manager is frequently confronted with having to reduce the scheduled completion
time of a project to meet a deadline. In other words, the manager must finish the project sooner
than indicated by the CPM/PERT network analysis. Project duration can often be reduced by
assigning more labor to project activities, in the form of overtime, and by assigning more
resources (material, equipment, and so on). However, additional labor and resources increase the
project cost. Thus, the decision to reduce the project duration must be based on an analysis of the
trade-off between time and cost. Project crashing is a method for shortening the project duration
by reducing the time of one (or more) of the critical project activities to less than its normal
activity time. This reduction in the normal activity time is referred to as crashing. Crashing is
achieved by devoting more resources, usually measured in terms of dollars, to the activities to be
crashed.

Project Crashing

To demonstrate how project crashing works, the CPM/PERT network for constructing a house in
Figure 14.3 will be used for demonstration. This network is repeated in Figure 14.12, except that
the activity times previously shown as months have been converted to weeks. Although this
sample network encompasses only single-activity time estimates, the project crashing procedure
can be applied in the same manner to PERT networks with probabilistic activity time estimates.

It will be assumed that the times (in weeks) shown on the network activities are the normal
activity times. For example, 12 weeks are normally required to complete activity 1-2. Further, it
will be assumed that the cost required to complete this activity in the time indicated is $3,000.
This cost is referred to as the normal activity cost. Next, it will be assumed that the building
contractor has estimated that activity 1-2 can be completed in 7 weeks, but it will cost $5,000
instead of $3,000 to complete the activity. This new estimated activity time is known as the
crash time, and the cost to achieve the crash time is referred to as the crash cost.

Activity 1-2 can be crashed a total of 5 weeks (normal time - -7 = 5 weeks) at a

total crash cost of $2,000 (crash cost - -3,000 = $2,000). Dividing the
total crash cost by the total allowable crash time yields the crash cost per week:

If it is assumed that the relationship between crash cost and crash time is linear, then activity 1-2
can be crashed by any amount of time (not exceeding the maximum allowable crash time) at a
rate of $400 per week. For example, if the contractor decided to crash activity 1-2 by only 2
weeks (reducing activity time to 10 weeks), the crash cost would be $800 ($400 per week x 2
weeks). The linear relationships between crash cost and crash time and between normal cost and
normal time are illustrated in Figure 14.13.

The objective of project crashing is to reduce project duration while minimizing the cost of
crashing. Since the project completion time can be shortened only by crashing activities on the
critical path, it may turn out that not all activities have to be crashed. However, as activities are
crashed, the critical path may change, requiring crashing of previously noncritical activities to
reduce the project completion time even further.

EXAMPLE
Project Crashing
14.4
Recall that the critical path for the house building network in Figure 14.12 encompassed
activities 1-2-3-4-6-7 and the project duration was 9 months, or 36 weeks. Suppose the
home builder needed the house in 30 weeks and wanted to know how much extra cost
would be incurred to complete the house by this time.

The normal times and costs, the crash times and costs, the total allowable crash times, and
the crash cost per week for each activity in the network in Figure 14.12 are summarized in
the following table:

SOLUTION:

We start by looking at the critical path and seeing which activity has the minimum crash
cost per week. Observing the preceding table and the following figure, we see activity 1-2
has the minimum crash cost of $400 (excluding the dummy activity 3-4, which cannot be
reduced). Activity 1-2 will be reduced as much as possible. The table shows that the
maximum allowable reduction for activity 1-2 is 5 weeks, but we can reduce activity 1-2
only to the point where another path becomes critical. When two paths simultaneously
become critical, activities on both must be reduced by the same amount. If we reduce the
activity time beyond the point where another path becomes critical, we may be incurring an
unnecessary cost. This last stipulation means that we must keep up with all the network
paths as we reduce individual activities, a condition that makes manual crashing very
cumbersome. For that reason we will rely on the computer for project crashing; however,
for the moment we pursue this example in order to demonstrate the logic of project
crashing.
It turns out that activity 1-2 can be crashed by the total amount of 5 weeks without another
path becoming critical, since activity 1-2 is included in all four paths in the network.
Crashing this activity results in revised project duration of 31 weeks at a crashing cost of
$2,000. The revised network is shown in the following figure.

Since we have not reached our crashing goal of 30 weeks, we must continue and the
process is repeated. The critical path in the preceding figure remains the same, and the
minimum activity crash cost on the critical path is $500 for activity 2-3. Activity 2-3 can
be crashed a total of 3 weeks, but since the contractor desires to crash the network only to
30 weeks, we need to crash activity 2-3 by only 1 week. Crashing activity 2-3 by 1 week
does not result in any other path becoming critical, so we can safely make this reduction.
Crashing activity 2-3 to 7 weeks (i.e., a 1-week reduction) costs $500 and reduces the
project duration to 30 weeks.

The total cost of crashing the project to 30 weeks is $2,500. The contractor could inform
the customer that an additional cost of only $2,500 would be incurred to finish the house in
30 weeks.

Suppose we wanted to continue to crash this network, reducing the project duration down
to the minimum time possible; that is, crashing the network the maximum amount possible.
We can determine how much the network can be crashed by crashing each activity the
maximum amount possible and then determining the critical path of this completely
crashed network. For example, activity 1-2 is 7 weeks, activity 2-3 is 5 weeks, 2-4 is 3
weeks, and so on. The critical path of this totally crashed network is 1-2-3-4-6-7 with a
project duration of 24 weeks. This is the least amount of time the project can be completed
 in. If we crashed all the activities by their maximum amount, the total crashing cost is
$35,700, computed by subtracting the total normal cost of $75,000 from the total crash cost
of $110,700 in the preceding table. However, if we followed the crashing procedure
outlined in this example, the network can be crashed to 24 weeks at a cost of $31,500, a
savings of $4,000.

The General Relationship of Time and Cost

In our discussion of project crashing, it was demonstrated how the project critical path time
could be reduced by increasing expenditures for labor and other direct resources. The objective
of crashing was to reduce the scheduled completion time to reap the results of the project sooner.
However, there may be other reasons for reducing project time. As projects continue over time,
they consume indirect costs, including the cost of facilities, equipment, and machinery, interest
on investment, utilities, labor, personnel costs, and the loss of skills and labor from members of
the project team who are not working at their regular jobs. There also may be direct financial
penalties for not completing a project on time. For example, many construction contracts and
government contracts have penalty clauses for exceeding the project completion date.

In general, project crashing costs and indirect costs have an inverse relationship; crashing costs
are highest when the project is shortened, whereas indirect costs increase as the project duration
increases. This time-cost relationship is illustrated in Figure 14.14. The best, or optimal, project
time is at the minimum point on the total cost curve.

Figure 14.14