UNIT-2
Project Management-MS-210
Role and Responsibility of Project
Manager
The basic roles and responsibilities of a project manager could be grouped under the
following twelve heads :
1. Defining and maintaining the integrity of a project;
2. Development of project execution plan;
3. Organization for execution of the plan;
4. Setting of targets and development of systems and procedures for
5. Accomplishment of project objectives and targets;
6. Negotiation for commitments;
7. Direction, coordination and control of project activities;
8. Contract management;
9. Non-human resource management including fiscal matters;
10. Problem-solving;
11. Man management;
12. Satisfaction of customer, Government and the public; and
13. Achievement of project objectives, cash surplus and higher productivity.
Resource Allocation Framework
The resource allocation framework of the firm, which shapes, guides, and circumscribes
individual project decisions, addresses two key issues : What should be the strategic
posture of the firm ? What pattern of resource allocation sub serves the chosen strategic
posture ?. It is divided into following section :
1. Key criteria
2. Elementary investment strategies
3. Portfolio planning tools
4. Strategic position and action evaluation
1. Key Criteria
The objective of maximising the wealth of shareholders is reflected, at the operational
level, in three key criteria : profitability, risk, and growth.
• Profitability : Profitability reflects the relationship between profit and
investment. While there are numerous ways of measuring profitability, return on equity
is one of the most widely used method. It is defined as :
Profitability = Profit after tax/Net Worth
• Risk :- It reflects variability. How much do individual outcomes deviate from
the expected value ? A simple measure of variability is the range of possible outcomes,
which is simply the difference between the highest and net outcomes.
• Growth :- This is manifested in the increase of revenue, assets, net worth,
profits, dividends, and so on. To reflect the growth of a variable, the measure commonly
employed is the compound rate of growth.
2. Elementary Investment Strategies
The building blocks of the corporate resource allocation strategy are the
following elementary investment strategies :
• Replacement and modernisation
• Capacity expansion
• Vertical integration
• Concentric diversification
• Conglomerate diversification
• Divestment
3.Portfolio Planning Tools
To guide the process of strategic planning and resource allocation, several portfolio
planning tools have been developed. Two such tools highly relevant in this
context are :
• BCG Product Portfolio Matrix
• General Electric’s Stoplight Matrix
4. Strategic Position and Action Evaluation (Space)
SPACE is an approach to hammer out an appropriate strategic posture for a firm arid its
individual business. An extension of the two-dimensional portfolio analysis, SPACE
involves a consideration of four dimensions :
• Company’s competitive advantage.
• Company’s financial strength.
• Industry strength.
• Environmental stability
Cost estimation
and budgeting
Cost Management
• Cost management has been defined to encompass
data collection, cost accounting, and cost control.
• Cost accounting and cost control serve as the chief
mechanisms for identifying and maintaining control
over project costs.
• Cost estimation processes create a reasonable
budget baseline for the project.
Common Sources of Project Cost
Labor
Materials
Subcontractors
Equipment & facilities
Travel
Types of Costs
Direct Vs. Indirect
Recurring Vs. Nonrecurring
Fixed Vs. Variable
Normal Vs. Expedited
Problems with Cost Estimation
Low initial estimates
Unexpected technical difficulties
Lack of definition
Specification changes
External factors
Creating a Project Budget
WBS
Project
Plan The budget is a plan
that identifies the
Scheduling Budgeting resources, goals, and
schedule that allows a
• Top-down firm to achieve those
goals.
• Bottom-up
• Activity-based costing (ABC)
Activity-Based Costing
Projects use activities & activities use resources.
1. Assign costs to activities that use resources.
2. Identify cost drivers associated with this activity.
3. Compute a cost rate per cost driver unit or
transaction.
4. Multiply the cost driver rate times the volume of
cost driver units used by the project.
Sample Project Budget
Sample Budget Tracking Planned and
Actual Activity Costs
Example of a Time-Phased Budget
Cumulative Budgeted Cost of the Project
Budget Contingencies
The allocation of extra funds to cover uncertainties and
improve the chance of finishing on time
Contingencies are needed because:
1. Project scope may change
2. Murphy’s Law is present(if something can go wrong, it
often will)
3. Cost estimation must anticipate interaction costs
4. Normal conditions are rarely encountered
Benefits to contingency funding
1. Recognizes future contains unknowns
2. Adds provision for company plans for an increase in
project cost
3. Applies contingency fund as an early warning signal
to potential overdrawn budget
Project Scheduling: networks,
duration estimation, and critical
path(PERT and CPM)
Project Scheduling
Project scheduling requires us to follow some carefully
laid-out steps, in order, for the schedule to take shape. PMBoK
states, “an output of a schedule model that presents linked
activities with planned dates, durations, milestones, and
resources.”
Project planning, as it relates to the scheduling process, has been
defined as: The identification of the project objectives and the
ordered activity necessary to complete the project including the
identification of resource types and quantities required to carry
out each activity or task.
NETWORK DIAGRAM – SERIAL
SEQUENTIAL LOGIC
(FIGURE 9.2A)
NETWORK DIAGRAM – NONSERIAL SEQUENTIAL
LOGIC
(FIGURE 9.2B)
Project Scheduling Terms
• Project Network Diagram: Any schematic display of the
logical relationships of project activities.
• Path: A sequence of activities defined by the project network
logic.
• Event: A point when an activity is either started or completed.
• Node: One of the defining points of a network; a junction
point joined to some or all of the other dependency lines
(paths).
Project Scheduling Terms
• Predecessors: Those activities that must be completed prior to
initiation of a later activity in the network.
• Successors: Activities that cannot be started until previous
activities have been completed. These activities follow
predecessor tasks.
• Early start (ES) date: The earliest possible date the
uncompleted portions of an activity can start.
• Late start (LS) date: The latest possible date that an activity
may begin without delaying a specified milestone.
Project Scheduling Terms
• Forward pass: Network calculations to determine earliest
start/earliest finish for an activity through working forward
through each activity in network.
• Backward pass: Network calculations to determine late
start/late finish for uncompleted tasks through working
backward through each activity in network.
• Merge activity: An activity with two or more immediate
predecessors.
• Burst activity: An activity with two or more immediate
successors.
Project Scheduling Terms
• Float: The amount of time an activity may be delayed from its
early start without delaying the finish of the project.
• Critical path: The path through project network with the
longest duration.
• Critical Path Method: A network analysis technique used to
determine the amount of schedule flexibility on logical
network paths in project schedule network and to determine
minimum project duration.
• Resource-limited schedule: Start and finish dates reflect
expected resource availability.
Node Labels
Serial Activities
Serial activities are those that flow from one to
the next, in sequence.
Concurrent activities
When the nature of the work allows for more than one activity
to be accomplished at the same time, these activities are called
concurrent, and parallel project paths are constructed
through the network.
Merge Activity
Burst Activity
Complete Activity Network
Duration Estimation(PERT)
• Experience
• Expert opinion
• Mathematical derivation – Beta distribution
– Most likely (m)
ba
2
– Most pessimistic (b) Activity Variance = s 2
– Most optimistic (a) 6
a 4m b
Activity Duration = TE
6
Symmetrical (normal) distribution
for activity duration estimation
Asymmetrical (beta) distribution for
activity duration estimation
Activity Duration and Variance
Name: Project Delta
Durations are listed in weeks
Activity Description Optimistic Likely Pessimistic
A Contract signing 3 4 11
B Questionnaire design 2 5 8
C Target market ID 3 6 9
D Survey sample 8 12 20
E Develop presentation 3 5 12
F Analyze results 2 4 7
G Demographic analysis 6 9 14
H Presentation to client 1 2 4
Constructing the Critical Path
• Forward pass – an additive move through the
network from start to finish
• Backward pass – a subtractive move through the
network from finish to start
• Critical path – the longest path from end to end
which determines the shortest project length
9-38
Partial project activity network with
task durations
Activity Network with Forward Pass
Activity Network with Backward Pass
Float Times
Activity float analysis provides the information on the margin on allowance
available for the commencement and completion of various activities. Activities
with zero slack value represent activities on the critical path. Two types of
activities floats are identified:
• Total float of a path
• Independent float of activity
PROJECT NETWORK WITH ACTIVITY
SLACK AND CRITICAL PATH
(FIGURE 9.20)
9-27
Options for Reducing the Critical Path
1. Eliminate tasks on the critical path.
2. Replan serial paths to be in parallel.
3. Overlap sequential tasks.
4. Shorten the duration on critical path tasks.
5. Shorten early tasks.
6. Shorten longest tasks.
7. Shorten easiest tasks.
8. Shorten tasks that cost the least to speed up.
Crashing with CPM
The process of accelerating a project
Primary methods for crashing:
1.Improving existing resources’ productivity
2.Changing work methods
3.Compromise quality and/or reduce project scope
4.Institute fast-tracking
5.Work overtime
6.Increasing the quantity of resources
Crash process
• Determine activity fixed and variable costs
• The crash point is the fully expedited activity
• Optimize time-cost tradeoffs
• Shorten activities on the critical path
• Cease crashing when:
– the target completion time is reached
– the crashing cost exceeds the penalty cost
Time/cost trade-offs for crashing
activities
Project Activities and Costs
Fully crashed project activity network
(figure 10.15)
Relationship between cost and days
saved in crashed project
(figure 10.16)
Contraction of network for Cost
Optimization/Time-cost trade-off
Crashing is a decision to shorten activity duration times through adding resources and
paying additional direct costs. There is a clear relationship between the decision to
crash project activities and their subsequent effect on the budget. As we took the same
example of crash activity we have activity A,D,E,H on the critical path. Therefore the
first decision relates to which of the critical activity we should crash. A simple side by
side comparison of the activities and their crash cost reveals the following:
Activity Crash Cost
A 500₹
D Can’t be crashed
E 5250₹
H 6000₹
Suppose that overhead cost is 200 rupees per day and a series of late penalties is
due to kick in if the project is not completed within 24 days.
Project Direct Liquidated Overhead Total Costs
duration costs damage Costs
Penalty
27 22450 5000 5400 32850
25 22950 3000 5000 30950
22 28200 - 4400 32600
19 34200 - 3800 38000
Choice of schedule due to resource
constraint(Resource allocation)
with regard to resource constraints, a project manager may face one of the
following two situations:
1. Resource levelling
2. Resource smoothing
Resource Leveling
A process that address the complex challenges of
project constraints
Objectives:
• To determine the resource requirements so that they
will be available at the right time
• To allow each activity to be scheduled with the
smoothest possible transition across resource usage
levels
General Procedure for Leveling
1. Create a project activity network diagram.
2. Develop resource loading table.
3. Determine activity late finish dates.
4. Identify resource overallocation.
5. Level the resource loading table.
Construct a resource-loading chart
To construct a time-limited resource loading chart for resource
scheduling, there are six main steps to follow:
1. Create activity network.
2. Produce table for each activity, resource requirements,
duration, early start time, slack, and late finish time.
3. List activities in order of increasing slack.
4. Draw an initial resource-loading chart with each activity
scheduled at its earliest start time.
5. Rearrange activities within their slack to create a profile
that is as level as possible
6. Use judgment to interpret and improve activity leveling.
Creating Resource Loading Charts
Activity Resource Duration ES Slack LF
A 6 4 0 0 4
B 2 1 4 0 5
C 2 3 4 4 11
D 7 4 5 0 9
E 3 2 9 0 11
F 6 1 11 0 12
Resource-loading chart
Modified resource-loading chart when
splitting task c
