BACHELOR OF COMMERCE

CAM 205: PROJECT MANAGEMENT

PROJECT PLANNING AND ORGANIZATION
PROJECT PLANNING
Project planning is part of project management, which relates to the use of schedules to plan and
subsequently report progress within the project environment. Planning process not only
establishes what is to be done, but also smoothens the way to make it happen. Many experts
believe that proper planning is essential for project success.

Project planning is a discipline for stating how to complete a project within a certain timeframe,
usually with defined stages, and with designated resources.

Functions of a good project plan:

a. Provides a basic for organizing the work of the project and allocating responsibilities.
b. Provides a means of communication and coordination between all those involved in the
project.
c. Induces people to look ahead – the plan helps people to understand the actual work that
must be done.
d. Instills a sense of urgency and time consciousness.
e. Establishes the basis for monitoring and control and guides the project execution.

Detailed planning involves:

• Clearly defining project objectives (definition agreed upon by customers, organizations
/contractors performing the project).
• Dividing and subdividing project scope into major ‘pieces’ or work packages shown by
work breakdown structure (WBS).
• Defining the specific activities that need to be performed for each work package in order
to accomplish the project objectives.
• Graphically portraying the activities inform of network diagrams, Gantt charts, etc .
• Making a time estimate for how long it will take to complete each activity.
• Making a cost estimate for each activity based on the quality and quantity of resources
for each activity.
• Developing a project schedule and budget to determine whether the project can be
accomplished within the required time.
• Documenting a project plan
Project planning tools
1. Work breakdown structures (WBS)
2. Network diagram
3. Gantt charts

Page 1 of 13
1. WORK BREAKDOWN STRUCTURE (assignment)

2. NETWORK DIAGRAMS

A network diagram is a sequential and logical group of activities and events diagrammatically
illustrating the relationship between and among them. It shows the inter-relationship of the
various jobs or tasks which make up the overall project and clearly identifies the critical parts of
the project.
Terminologies
Activity: An activity is one of the tasks in a project. It consumes resources like time, raw
materials, manpower, equipment, capital etc. In the network diagram an activity is represented
by an arrow.
Dummy Activity: It is an activity that does not consume time & resources. It is used to show
clear and logical dependency between activities so as not to violate the rules of drawing a
network. They are represented in the diagram by broken lines ------------------
An event/state/node: An event or node indicates the start or end of an activity; it represents the
state of having completed the job or the state of being ready to start the job. An event has no time
duration and consumes no resource. It is represented on the diagram by a circle.
Network: It is a combination of activities, dummy activities & events in a logical sequence
according to the rules of drawing the network.
Guidelines for drawing network diagrams:
1) A complete network diagram should have only one beginning point and only one end
point.
2) The flow of the diagram should be from left to right.
3) Loops are not allowed in the activities since a network is a progression of activities
always moving forward with time i.e. forward ever backward never.
4) All activities must be tied to the network i.e. danglers are not allowed
5) Arrows should not cross each other unless it is absolutely necessary.
6) Arrows should be kept straight and not bent or curved.
7) Each activity is represented by one and only one arrow in the diagram, hence no single
activity can be represented twice in the network.
8) No activity can begin until all activities preceding it are complete.
9) Each activity must have one beginning point and one end point. However many activities
may have the same beginning event and also use the same end event.
10) The length of the arrow is not proportional to its duration.
11) Dummy activities should only be used when absolutely necessary.
12) Once the diagram is complete the events should be numbered serially from left to right.
The tail event number must be smaller than the head event number. Hence each activity
must uniquely be identified by its tail and head event numbers.

Techniques of Network Analysis

There are two main techniques
a. Critical Path Method (CPM)
b. Project Evaluation & Review Technique (PERT)

Page 2 of 13
 a. Critical Path Method (CPM)
It is a deterministic model that doesn’t take into account uncertainties involved in execution of
an activity. It assumes that time taken to undertake each activity can be certainly determined i.e.
it is known with certainty and remains constant. It is mostly used to determine the critical path of
a project.
A critical path is a sequence of those activities that require maximum time in the conclusion of
the project. It gives the shortest time possible within which the whole project can be completed.
To identify the critical path the following steps are followed.
Steps
I. Identify all the activities and their logical sequence
II. Construct a network
III. Find the Earliest Start Time (EST) by using a forward pass through the network.
IV. Find the Latest Start Time (LST) by using a backward pass through the network.
V. Identify the critical path which consists of those activities with same EST and LST
Notes
a) Each event is illustrated as below. Activity NO

EST LST

b) To determine the EST when using a forward pass, consider the highest values.
c) To determine the LST when using a backward pass, consider the smallest values.
d) The activities on the critical path are usually denoted by

QUESTION ONE
Consider the simplified scenario for the development of a consumer product through the market
test phase shown in the table below.
Activity Symbol Preceding Time estimated
activities (weeks)
Design promotion campaign A - 3
Initial pricing analysis B - 1
Product design C - 5
Promotional costs analysis D A 1
Manufacture prototype models E C 6
Product cost analysis F E 1
Final pricing analysis G B, D, F 2
Market test H G 8
Required
a) Draw the network for this project.
b) Determine the critical path
c) Shortest project completion time.

Page 3 of 13
QUESTION TWO
Consider a project which has been modeled as follows:

Activity Immediate Predecessor (s) Completion Time (hours)

A - 7
B - 10
C A 4
D A 30
E A 7
F B,C 12
G B,C 15
H E,F 11
I E,F 25
J E,F 6
K D,H 21
L G,J 25
Required:
Determine the project’s expected completion time and its critical path.

QUESTION THREE
Central and Eastern Industries is planning to introduce a new mobile phone service. To do so,
the following activities are necessary:

Activity Preceding Expected Time

Activity (weeks)
A - 6
B - 3
C A 5
D A 4
E A 3
F C 3
G D 5
H B, D, E 5
I H 2
J F, G, I 3

Required
a. Draw the network for this project.
b. Determine the critical path
c. Shortest project completion time.

Page 4 of 13
b. Program Evaluation & Review Technique (PERT)
It is a probabilistic model i.e. takes into account uncertainties involved in the completion of
activity time. It is primarily concerned with project time. It is generally used for those projects
where time required to complete various activities is not know with certainty in advance. This is
usually the case in projects which are non repetitive in nature e.g. research and development
projects.
It uses three time estimates
i. Optimistic time (Ot)
It is the minimum time required to complete an activity if everything goes according to plan i.e.
under an ideal condition.
ii. Most Likely time (MLt)
It is the most probable time which an activity will take. This is time between optimistic and
pessimistic time.

iii. Pessimistic time (Pt)

It is the best guess estimate of the maximum time that will be required to complete an activity if
bad luck was encountered at each stage.
How to incorporate uncertainties in the PERT model
Uncertainties can be incorporated in the PERT model by assuming that activity time has a beta
distribution. This enables us to calculate the expected time and variance for each activity
Expected time (Et)
This is the average time that an activity would take if it was repeated many times. It is computed
as follow
Et = Ot + 4MLt + Pt
6
Activity variance
This is the range or deviations that actual activity time can assume over or below the expected
time. It is given by
Variance = Pt-Ot
6
Project variance
This is the variance of the critical path duration which is in turn the sum of the variances of
activities on it.
QUESTION FOUR
A construction project consists of the activities shown below:
Time (weeks)
Activities Optimistic Most likely Pessimistic
1-2 4 6 10
3 5 9
2-4 7 12 20
2-5 3 5 8
3-4 6 11 15
4-5 4 6 11
4-6 3 9 14
5-6 2 4 8
6-7 3 5 9

Page 5 of 13
Required:
a. The expected time and variance of each activity.
b. A project network for the activities.
c. The expected completion time and variance of the project
d. Probability of completing the project in less than 30 weeks
e. If the project is completed in less than 30 weeks, it will cost Sh.1 million. It will cost Sh.1.5
million if the project is completed between 30 and 35 weeks and Sh.2 million if it takes more
than 35 weeks. Compute the expected cost of the project.

QUESTION FIVE
A construction project consists of the activities shown below:
Time (weeks)
Activities Optimistic Most likely Pessimistic
1-2 1 4 7
1-3 1 4 8
1-4 2 2 8
2-5 1 1 1
3-5 2 5 14
4-6 2 5 8
5-6 3 6 15
Required:
a. The expected time and variance of each activity.
b. A project network for the activities.
c. Critical path
d. The expected completion time and variance of the project
e. Probability of completing the project at least 3 weeks after the expected completion time.

Project time Floats

Float refers to spare time in a network. Activities on the critical path have no float.
If an activity has some float, it means it can be delayed without having any impact on other
activities or to the overall project. By definition, any delay in a critical activity will have a
similar delay on the overall project and therefore such activities have got no float.
There are three types of floats but the most important one is the total float; This refers to the
amount of time an activity or a path of activities could be delayed without affecting the overall
project duration. It is obtained by the following formulae;
Total float = LFT – EST – Activity Duration
Critical activities have a total float of zero.

Project crashing (least cost scheduling)

This is a technique that is used to analyse the cheapest way of reducing the overall project
duration. The sooner a project is completed the better as time is a scarce resource. However, in
order to be able to reduce the duration of an activity, additional resources may need to be
employed resulting in an increase in costs. Since minimization of cost is a desirable objective it
becomes necessary to identify how best the project duration can be reduced while still achieving
the objective of minimising costs.

Page 6 of 13
Definitions:
 Normal cost – The cost incurred when an activity is completed within the normal
time.
 Normal time – This is the duration an activity would take if available resources are
used as efficiently as possible. It is the time taken to complete an activity when there
is no delay and no rush.
 Crash time – This refers to the shortest possible time it would take to complete an
activity if additional resources were employed.
 Crash cost – cost incurred when an activity is crashed.
 Cost slope – This refers to the additional cost incurred in crashing an activity by a
unit time. It is computed as follows
Crash cost−Normal cost
Cost slope=
Normaltime−Crash time
Crashing Process:
The process of reducing the duration of a project by employing additional resources is referred to
as crashing or least cost scheduling. This process involves reducing project duration by
concentrating on those critical activities that are cheapest to crash.
Rules of crashing
1. Only activities on the critical path are crashed.
2. Start crashing the critical activity with the least cost slope.
3. A critical path must remain critical throughout.
4. Where there are two or more critical paths an activity must be crashed from each path
simultaneously.
5. A non-critical path may become critical after crashing. However after it becomes
critical it must remain critical throughout.
Assumptions made when crashing:
• Cost slope is constant and can be certainly determined.
• There exists a direct linear relationship between time and costs.
Steps involved when crashing
1. Draw the network and do a time analysis (critical Path) based on
the normal time.
2. Determine the overall costs of the project using normal costs.
3. Compute the cost slope of the critical activities.
4. Rank the activities in ascending order of their cost slope.
5. Start crashing the critical activity with the least cost slope.
6. Ensure that every reduction effected has an impact on the overall
project duration
QUESTION SIX
Ujenzi Company has been awarded a construction project. The drief engineer of the company
has established the following cost and time information relating to the contact.
Activity Predecessor Normal Normal cost Crash time Cash cost
time
A - 30 90,000 25 105,000
B - 25 180,000 20 190,000
C - 10 50,000 8 954,000
D C 10 7,500 7 9000

Page 7 of 13
 E B, D 10 4,200 10 4200
F A, E 20 20,000 16 30,000
G A, E 35 28,000 30 35000
H B, D 20 12,000 18 15000
I F 20 14,000 15 24000

Required;
a. Critical path and the normal completion time of the project.
b. The minimum project duration and the additional project cost

QUESTION SEVEN
Mrs. Onyango wants to open a cafeteria in Kisumu city. A small business enterprise adviser
whom she approached, listed for her six major activities to be carried out. The table below gives
a summary of the normal time estimates of each activity, crash time and the cost reduction per
week.
Activity Predecessor Normal time Crash time
(weeks) (weeks)
A: Procurement of - 3 3
B: materials A 6 4
C: Plumbing - 5 3
D: Masonry C 8 7
E: Electrical works C 6 4
F: Carpentry B,D,E 4
Finishing
Activity Cost slope (Sh.)
A -
B 45,000
C 30,000
D 60,000
E 22,500
F 75,000
Required:
a. The project network diagram
b. The normal completion time of the project and the critical activities
c. (i) The shortest time the project can be completed.
(ii) The additional cost to be incurred if the project is crashed.

Page 8 of 13
3. GANTT CHART AND RESOURCE SCHEDULING
It is the process of determining the amount of resources (man hours) required at any given time
over the project duration. It helps to smooth the distribution of the resources available over the
whole period of the project.
Resource balancing
This represents an attempt to have a more efficient usage of resources. If the project has to be
completed within critical path duration, then only activities which are not critical can be
rescheduled to achieve some level of balancing. Activities are rescheduled with the help of total
floats of the activities.
QUESTION SEVEN
Clifford is the project manager of Tumaini Construction Company. The Company is bidding on a
contract to build a go down for Unity importer ltd. It has identified the following activities along with
their predecessor restrictions expected times and worker requirements:

Activity Predecessors Duration Weeks Crew Size

Workers
A - 4 4
B - 7 2
C A 3 2
D A 3 4
E B 2 6
F B 2 3
G D, E 2 3
H F, G 3 4

Clifford has agreed with the client that the project should be completed in the shortest duration.
Required:
a. Draw a network for the project.
b. Determine the critical path and the shortest project duration
c. Clifford will assign a fixed number of workers to the project for its entire duration and so he
would like to ensure that the minimum number of workers. Draw a Gantt chart showing how
the project will be completed within the shortest project duration.

PROJECT ORGANIZATION
Organizing is the function of dividing and grouping the activities of the organization and
establishing the authority/responsibility relationship between them.
Organizational structure is concerned with the allocation of task and establishing of authority
relationship between the members of the organization.
Project Structures
There are three generic ways that organisations structure themselves to manage projects. They
are:
1. Projectised
2. Functional
3. Matrix

Page 9 of 13
No one form is inherently "right". Each has its advantages and disadvantages and each are more
suitable for certain project environments than others. Organisations tend to move from one to
another as situations change.
Projectised Organisation
In many ways the simplest and most obvious organisational form for managing projects is the
projectised organisation. In this, each project becomes a self-contained organisation with all
resources and functions within the project divisions. Top management see their role as that of a
"holding company" managing a portfolio of project businesses.
This form is often used by organisations carrying out major projects. Thus British Aerospace
uses this structure - project A might be the new Airbus, project B might be the Harrier
replacement etc.
The project is often initiated by top management and central support, then a project division is

formed with its own director. Each project is largely self-contained with its own budget, support
operations, staff, and facilities. Some major charities adopt this form - thus project A might be a
famine project in Ethiopia.
Advantages
i. It is simple and easily understood,
ii. focus and responsibilities are very clear,
iii. each project has its own dedicated resources, and
iv. Each project can build its own organisational ethos and identity.
Disadvantages
i. It can be expensive due to duplication of functions e.g. finance for each project.
ii. The project divisions can become overly competitive.
iii. The overall corporate identity can be lost. Project Divisions can go their own way -
developing their own practices and systems.
iv. It can be inflexible - setting up a new project is a significant act, in theory needing a new
division.
v. It is often best suited to large, long-lasting, stable projects.

Page 10 of 13
For projects to be managed effectively:
 The central operations need to be very capable both strategically at identifying new
projects, and from a control and support point of view - a good balance of "tight-loose".
 The Project Managers need sufficient delegation and empowerment.

Functional Organisation
In this, the most common form of organisational structure in general use, staff are grouped into
teams or sections or divisions according to some particular basic function.
Most common ones are:
 Business function/skill (as in the chart below)
 Product/service (an electronics company organised by TV, Radio, Computers, etc)
 Geographic (in the UK organised by North, South, Midlands, etc)

In the functional organisation most projects are initiated by the top and divisional management,
and a project manager is then appointed who must form a team from people in the various
sections. The people are only on the project on a part-time basis and the project may not have a
dedicated budget.
Advantages
i. It is cost effective since there is little duplication compared to the Projectised form.
ii. It can be flexible - setting up a new project is simple.
iii. Expertise is kept together in groups.
iv. Corporate identity can be maintained, and there can be standard systems across
organisation.
Disadvantages
i. Projects can be very difficult to manage.
ii. It is often very difficult for project managers to gain commitment from the people
selected - they have no dedicated resources.
iii. Project funding can be difficult - budgets usually lie with the functions rather than the
projects. Often project sponsorship is unclear or even absent.

Page 11 of 13
 iv. Projects can get lost or disappear from view.
v. There can be conflicts between project team member's own day to day work and their
project work.
For projects to be managed effectively:
 The management needs to identify projects effectively and then select capable project
managers.
 Project managers need to be capable at gaining the commitment of their team members.
 There needs to be a climate of co-operation in the organisation.
 Someone in senior management must take on and fulfil the role of Project Sponsor well
for each project.

Matrix Organisation
The matrix organisation attempts to combine the advantages of the Functional organisation (cost
effectiveness and specialist groupings) with the advantages of the Projectised organisation (focus
and clear responsibilities and delivery)
It is often used where people need to be grouped into specialisms for management purposes, but
brought together on particular projects of multi-disciplined teams.
Staff are organised into functional groupings (specialisms, geography, business) and then
brought into projects to work on them when needed. Each project would have a project manager
leading a team of seconded specialists. In some organisations, the project managers would be full
time professionals located in a separate group under a Director of Projects. Hi-tech companies
like Microsoft and Hewlett Packard use this, as does the BBC (a new TV programme).
GM/
CEO

Manager Manager Manager Manager Manager

Finance Production HR Marketing R&D

Project
Manager
A
Project
Responsibility
Project
Manager Authority
B

Project
Manager
C

Advantages
i. It maintains cost effectiveness and specialised groupings of the Functional organisation
but introduces a stronger project chain of command as per the Projectised organisation

Page 12 of 13
 ii. Post of Director of Projects ensures that sponsorship of projects exists at senior level and
can ensure management of the project portfolio.
iii. Very flexible - projects can be started and stopped quite quickly.
iv. Project managers become skilled and experienced at managing projects.
v. Projects often have dedicated budgets.
Disadvantages
i. Often requires a lot of communication, negotiation, and meetings.
ii. There can be some competition between projects - particularly if they need the same
people as team members. It can become complicated. For example, the person in
Finance might be working on three projects - who decides their priorities?
Performance appraisal needs to take account of project work - who should be
involved in the annual appraisal?
iii. There may be dual reporting since personal are under the dual control of project
manager & functional manager.
iv. There are chances of duplication of efforts since every project operates
independently.
v. Managers and employees are made more susceptible to role ambiguity hence more
discussions than actions.
vi. it is an expensive form of organization since many people have to be employed
For projects to be managed effectively:
 The Director of Projects needs to be very able
 The project managers need to be capable and seen by others as so.
 Projects require their own budgets.
 There needs to be a climate of co-operation in the organisation.
 

Page 13 of 13