Project_Management_Tools by jrskeirwta


									    Project Management Tools

                 L03
Be able to use Project Management Tools
                          key terms
 activity                       network diagram
 annuity                        opportunity cost
 cash inflow                    pay back period
 cash outflow                   predecessor activity
 cost-benefit analysis          present value
 critical path                  present value factor
 depreciation                   slack time
 discounted cash flow           tax benefit of depreciation
 event                          time value of money
 net present value              CPM
                                 Gantt Charts
                                 PERT
                         Project feasibility

1.        The feasibility study for a project should be
          undertaken in the following order:
     1.     technical feasibility
     2.     operational feasibility
     3.     economic feasibility
               Technical feasibility

 Determining the availability of the appropriate
  technology for the project
 Determining its viability in the organisation’s
  operating environment
 Consider:
  computer hardware
  computer software
  information from technical and trade journals
  specialist information technology consultants
                Operational feasibility

 Evaluate information provided by the operations of
  the proposed system to assess user satisfaction
 Dissatisfaction – system may be ineffective and
 Consider for new system:
    willingness of employees to accept operational changes
    management support and commitment
    management input of their system requirements
    transition into the new system
    willingness of the organisation to accept resulting
     organisational changes
                        Economic feasibility

 Cost-benefit analysis of new project to determine:
   whether or not the investment provides expected returns
    and/or recovers the outlay on the project over its useful
 Consider:
   costs involved
         type of costs
         timing of costs
         amount of individual costs
     expected benefits
         timing of monetary benefits
         amount of monetary benefits
          Timing of costs and benefits

 Costs incurred today and costs incurred in the
 future are not comparable because of the

 Costs and benefits of a project occur at different
 times during the projects - to be comparable they
 must be converted to today’s value – the
 PRESENT VALUE - using the present value
 factor - PVF
                   Present value factor

 The present value factor is derived from the compound
  interest formula
 The PVF is represented by (1 + r)n in the formula:

                     A  P( 1  r) or P 

                                          ( 1  r)n
 Where:
   A = amount receivable in the future
   P = present value of the future amount
   r = rate of interest per period
   n = number of periods
      Present value factor of an annuity

 An ANNUITY refers to equal sums of money
  payable at equal intervals over a number of periods
 The present value of $1 payable at the end of each
  year over a number of years at a stated percentage
  of interest is called the present value factor of an
  annuity (PVFA) and is calculated by the formula:
                                  1 
                             ( 1  i)n 
                     PVFA             
                    Opportunity costs

 Mutually exclusive projects:
   opportunity exists to invest in two equally rewarding projects

   only one can be chosen

   by choosing one the alternative is forgone
           Depreciation - tax benefit

 Taxable profit (taxable income) is calculated by
 deducting allowable expenses from revenues
 (assessable income)
 Allowable expenses include depreciation of assets

 Depreciation is not an actual cash flow

 But tax payable is reduced and this is considered a
 cash inflow
                Net present value

 A technique used to economically evaluate the
 financial investment in a project
 NPV uses time value of money to compare projects
 NPV = the Sum of the Present Value of all
 Cash Inflows less Sum of the Present Value
 of all Cash Outflows for the project
 The highest NPV value indicates the most
 profitable project
                    Pay back period

 Compares the length of time different projects take
  to recoup the initial outlay on the project or

 Simple pay back period
   time taken for the actual cash flows to recoup the initial

 Discounted pay back period
   time taken for the discounted cash flows to recoup the
    initial outlay
              Internal rate of return

 A technique used to economically evaluate the
  financial investment in a project
 IRR uses time value of money to compare projects
 IRR is the interest rate that would make the NPV
  equal to zero
 If a project’s IRR exceeds required rate of return –
  project is acceptable
     The Work Breakdown Structure

 A work breakdown structure (WBS) is a deliverable-
  oriented grouping of the work involved in a project
  that defines the total scope of the project
 It is a foundation document in project management
  because it provides the basis for planning and
  managing project schedules, costs, and changes
                  Approaches to Developing WBSs

 Using guidelines: Some organizations, like the DoD, provide
    guidelines for preparing WBSs
   The analogy approach: Review WBSs of similar projects and tailor to
    your project
   The top-down approach: Start with the largest items of the project
    and break them down
   The bottom-up approach: Start with the detailed tasks and roll them
   Mind-mapping approach: Write down tasks in a non-linear format
    and then create the WBS structure
               Basic Principles for Creating WBSs*

1. A unit of work should appear at only one place in the WBS.
2. The work content of a WBS item is the sum of the WBS items below it.
3. A WBS item is the responsibility of only one individual, even though
   many people may be working on it.
4. The WBS must be consistent with the way in which work is actually going
   to be performed; it should serve the project team first and other purposes
   only if practical.
5. Project team members should be involved in developing the WBS to
   ensure consistency and buy-in.
6. Each WBS item must be documented to ensure accurate understanding of
   the scope of work included and not included in that item.
7. The WBS must be a flexible tool to accommodate inevitable changes while
   properly maintaining control of the work content in the project according
   to the scope statement.
Sample Intranet WBS
Organized by Product
 Sample Intranet
Organized by Phase
           Intranet WBS in Tabular Form

1.0 Concept
         1.1 Evaluate current systems
         1.2 Define Requirements
                  1.2.1 Define user requirements
                  1.2.2 Define content requirements
                  1.2.3 Define system requirements
                  1.2.4 Define server owner requirements
         1.3 Define specific functionality
         1.4 Define risks and risk management approach
         1.5 Develop project plan
         1.6 Brief Web development team
2.0 Web Site Design
3.0 Web Site Development
4.0 Roll Out
5.0 Support
Intranet Project with Gantt Chart
Intranet WBS and Gantt Chart Organized by Project
          Management Process Groups
Sample Mind-Mapping Approach
                 Sample Gantt Chart

The WBS is on the left, and each task’s start and finish
date are shown on the right using a calendar timescale.
Early Gantt Charts, first used in 1917, were drawn by
                       Sample Network Diagram

Each box is a project task from the WBS. Arrows show dependencies
between tasks. The bolded tasks are on the critical path. If any tasks on the
critical path take longer than planned, the whole project will slip
unless something is done. Network diagrams were first used in 1958 on the
Navy Polaris project, before project management software was available.
Project Time Management Processes

  Project time management involves the
  processes required to ensure timely
  completion of a project. Processes include:
     Activity definition
     Activity sequencing
     Activity duration estimating
     Schedule development
     Schedule control
         Activity Definition

 Project schedules grow out of the basic document
  that initiate a project
   Project charter includes start and end dates and
    budget information
   Scope statement and WBS help define what will
    be done
 Activity definition involves developing a more
  detailed WBS and supporting explanations to
  understand all the work to be done so you can
  develop realistic duration estimates
                Activity Sequencing

 Involves reviewing activities and determining
    Mandatory dependencies: inherent in the nature of the
     work; hard logic
    Discretionary dependencies: defined by the project
     team; soft logic
    External dependencies: involve relationships between
     project and non-project activities
 You must determine dependencies in order to
 use critical path analysis
           Project Network Diagrams

 Project network diagrams are the preferred
  technique for showing activity sequencing
 A project network diagram is a schematic display of
  the logical relationships among, or sequencing of,
  project activities
Sample Activity-on-Arrow (AOA) Network Diagram for
                      Project X
                        GANTT Charts

 A Gantt chart is a graphical representation of the duration of tasks
  against the progression of time. A Gantt chart is a useful tool for
  planning and scheduling projects.
  A Gantt chart is helpful when monitoring a project's progress. A
  Gantt chart is a type of bar chart that illustrates a project schedule.
  Gantt charts illustrate the start and finish dates of the terminal
  elements and summary elements of a project.
  Terminal elements and summary elements comprise the work
  breakdown structure of the project. Some Gantt charts also show
  the dependency relationships between activities.
  Gantt charts can be used to show current schedule status using
  percent-complete shadings and a vertical "Today" line.
   Monitoring a Project Using Gantt Chart

 A Gantt chart lets you see immediately what should
 have been achieved at any point in time.

 A Gantt chart lets you see how remedial action may
 bring the project back on course. Most Gantt charts
 include "milestones" which are not part of a
 traditional Gantt Chart.

 However, for representing deadlines and other
 significant events, it is very useful to include this
 feature on a Gantt chart.
                                               Gantt Chart

 Disadvantages
   Does not show interdependencies well
   Does not uncertainty of a given activity (as does PERT)

 Advantages
   Easily understood
   Easily created and maintained

 Note: Software now shows dependencies among
    tasks in Gantt charts
       In the “old” days Gantt charts did not show these
        dependencies, bar charts typically do not

Q7503, Principles of Project Management, Fall 2002
                  Gantt charts

 Show the sequence and duration of each activity
 within a project

 The bar for each activity runs from the start date to
 the completion date of that activity
Gantt Chart for Project X
Gantt Chart for Software Launch Project

 Milestones are significant events on a project that
  normally have zero duration
 You can follow the SMART criteria in developing
  milestones that are:
     Specific
     Measurable
     Assignable
     Realistic
     Time-framed
Sample Tracking Gantt Chart
     Critical Path Method (CPM)

 CPM is a project network analysis technique
  used to predict total project duration
 A critical path for a project is the series of
  activities that determines the earliest time by
  which the project can be completed
 The critical path is the longest path through
  the network diagram and has the least amount
  of slack or float
             Finding the Critical Path

 First develop a good project network diagram
 Add the durations for all activities on each path
  through the project network diagram
 The longest path is the critical path
Simple Example of Determining the Critical Path

 Consider the following project network diagram. Assume
 all times are in days.

                                              C=2   4   E=1
                   A=2          B=5
     start    1             2            3                       6   finish

                                              D=7   5   F=2

             a. How many paths are on this network diagram?
             b. How long is each path?
             c. Which is the critical path?
              d. What is the shortest amount of time needed to
             complete this project?
Determining the Critical Path for
          Project X
 The Program Evaluation and Review Technique

 Used to manage and schedule a network of
 interdependent project activities
 A network diagram depicts the order in which
 activities are performed
 Used to calculate the time the project will take to
 Critical path – the sequence of activities that will
 take the longest time
    PERT- Program Evaluation
           and Review

   PERT as CPM is another Network Planning technique
   Devloped for expensive, high risk and state-of-art
    projects – quite similar to today’s large IT projects

   PERT is a Probabilistic Method used to evaluate
    uncertainty of the task duration estimates.
 6 steps common to Network
1.   Define the Project activities or tasks.

1.   Define the relationships among the activities. Decide which
     activities must precede and which must follow others.

1.   Draw the "Network" connecting all the activities.

1.   Assign duration estimates to each activity

1.   Compute the longest time path through the network. This is called
     the critical path.

1.   Use the Network to help plan, schedule, monitor and control the
    PERT: 3 estimates for task

   Unlike in CPM metod, PERT is using 3 dfferent
    estimates for the task duration for projects that are not
    certain about the outcomes of activities:
   Optimistic Time (o): the shortest time in which we could complete
    the activity.

   Pessimistic Time(p): the worst possible time allowing all kind of
    delays during the activity

   Most Likely Time(m): the time we would expect the task to take
    under normal circumstances.
        Expected duration formula

   PERT combines 3 estimates mentioned above
    to calculate a single expected value:

   Expected durations are used to carry out a
    forward pass through network
   This can be supported on AOA or AON diagram
    PERT activity time estimates
                                  Activity Duration (weeks)
Activity   Predecessors Optimistic   Most Likely   Pessimistic Extected
                        (o)          (m)           (p)         (Te)
A          -                 5            6            8         6.17
B          -                 3            4            5           4
C          A                 2            3            3         2.83
D          B                3.5          4             5         4.08
E          B                 1           3             4         2.83
F          -                 8           10           15         10.5
G          E,F               2           3             4           3
H          C,D               2           2            2.5        2.08
Forward Pass for Expected

                       2      t=2.83

              B                D                      H
 1                      3      t=4.08        4        t=2.08   6
                     TE3=4     E            TE4=9              TE6=13.5
 0                             t=2.83
                    F                               G
                    t=10.5                          t=3
                  PERT steps

   Unlike CPM method, the PERT does not
    indicate the earliest date by which we could
    complete the project, but the expected date(
    most likely)

   Requesting 3 estimates for each activity
    emphasizes the fact that we are not certain
    what will happen…

 PERT, Quality Systems Notes on Moodle, Last
  Retrieved 1st December 2010.
 John W. Chinneck, Practical Optimization: A Gentle
  Introduction, Course Notes, Carleton University
  available at
  ml, Last Retrieved 1st December 2010.
 Jayant Rajgopal, Operations Research, Course
  Notes, Pittsburgh University, available at, Last Retreived 1st
  December 2010.
              Website References


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