PROJECT AND CONTRACT MANAGEMENT

TOPIC 4: PROJECT MANAGEMENT METHODS

Effective project management is absolutely essential in any organisation, regardless of the nature of the
business and the scale of the organisation.
From choosing a project, to right through to the end, it is important that the project is carefully and
closely managed. This is essentially the role of the project manager and his/her team of employees.
Managing and tracking the progress of a project is no easy task. Every project manager must know
(and communicate to his/her team) all the project goals, specifications and deadlines that need to be
met in order to be cost-effective, save time, and also to ensure that quality is maintained so that the
customer is completely satisfied.
The project plan and other documents are therefore very important right throughout the project.
Effective project management however, cannot simply be achieved without employing certain
techniques and methods.
Some of the techniques and methods used in project management are discussed in the following
sections.

1.0 Gantt Chart

1.1 Description of a Gantt Chart

Gantt Charts are a way to graphically show progress of a project. Management of a project is made
easier if it is viewed as small manageable items where the dependencies are visually illustrated,
parallel processes are discovered, the overall processing time determined and progress tracked. The
tasks of a project can be quite complex and dependent on each other. With a project management tool,
such as a Gantt chart, all subtasks of a task can be viewed graphically. A Gantt chart, commonly used
in project management, is one of the most popular and useful ways of showing activities (tasks or
events) displayed in sequential order against time.
By definition, A Gantt chart is a horizontal bar chart used to visually illustrate a project schedule,
including start and finish dates of the different required elements, activities and a summary of
activities of a project. These activities form what is usually called the work breakdown structure of
a specific project. Gantt charts serve as an excellent tool to show updated schedule status using actual
complete shadings and vertical line representing the actual date. Gantt charts sometimes are prepared
showing precedence activities and following activities and their relationships.
Gantt charts are useful in planning how long a project should take and helping to sequence the events
by laying them out in the order in which the tasks need to be completed.

1.2 Gantt Chart History

The first Gantt chart was devised in the mid 1890s by Karol Adamiecki, a Polish engineer who ran a
steelworks in southern Poland and had become interested in management ideas and techniques. Some
15 years after Adamiecki, Henry Laurence Gantt, an American engineer and management consultant,
devised his own version of the chart and it was this that became widely known and popular in western
countries. Consequently it was Henry Gantt whose name was to become associated with charts of this
type. Therefore, Henry Gantt, is recognised for developing the Gantt chart.

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Originally Gantt charts were prepared laboriously by hand; each time a project changed it was
necessary to amend or redraw the chart and this limited their usefulness, continual change being a
feature of most projects. Nowadays, however, with the advent of computers and project management
software, Gantt charts can be created, updated and printed easily. That is, today there are many
software applications available for creating Gantt charts, as well as functions in popular programs such
a Microsoft Excel.
Today, Gantt charts are most commonly used for tracking project schedules. For this it is useful to be
able to show additional information about the various tasks or phases of the project, for example how
the tasks relate to each other, how far each task has progressed, what resources are being used for each
task and so on.

1.3 Illustration of a Gantt Chart

Typically, tasks/activities are shown on the vertical axis (i.e. on the left of the chart), and the project
time span is represented on the horizontal axis (i.e. along the top of the chart is a suitable time scale).
Each task/ activity has (or is represented by) a corresponding bar that shows the time span
required/estimated to complete that task. The position and length of the bar reflects the start date,
duration and end date of the activity. The bar can be filled in to show the percentage of the task that
has been completed. Gantt charts also indicate dependencies, those tasks that are dependent upon
other tasks. A Gantt chart is illustrated in Figure 1.

Figure 1: A simple Gantt chart

In the above illustration, the subtasks of the relocation-process appear on the y-axis, and the time line
on the x-axis. The bars show when a task should start and when it will be finished.
The Gantt chart graphically depicts the time relationship of activities, tasks, milestones and resources
in a project. It is a flexible document and is regularly updated through the life of the project. It usually
includes (or allows one to see at a glance):
 the various (or major) activities and tasks of  the project milestones
the project  the interdependencies between
 when each activity begins and ends phases/activities/tasks
 how long each activity is scheduled to last  a unique identifier for each phase/activity/task
 where activities overlap with other activities,  a timeline
and by how much  the person or resource responsible for each
 the start and end date of the whole project item

To summarise, a Gantt chart shows one what has to be done (the activities) and when (the schedule).
Note on Dependencies between Project Activities:
A Gantt chart shows relationships between tasks, such as tasks that must be completed before a
particular task can be started. These relationships are called dependencies. There are four types of
dependencies:
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Finish-to-Start — where a task cannot finish until the linked task has started.
Illustrative example: Activity B cannot finish until Activity A has started.

Activity A

Activity B

Start-to-Start — where a task cannot start until the linked task has started.
Illustrative example: Activity B cannot start until Activity A has started.
Activity A

Activity B

Finish-to-Finish — where a task cannot finish until the linked task has finished
Illustrative example: Activity B cannot finish until Activity A has finished.
Activity A

Activity B

Start-to-Finish — where a task cannot start until the linked task has finished. This is the most
common type of dependency.
Illustrative example: Activity B cannot start until Activity A has been completed.
Activity A

Activity B

Some dependencies can also incorporate lag time, that is, time between the dependent events e.g. a task
cannot start until ten days after a task has finished (e.g. tender evaluation).

1.4 Advantages and Disadvantages of Gantt Charts

Advantages of Gantt Charts

Using a Gantt chart offers the following advantages:
 it creates a picture of  it can be used to represent phases and activities of a project
complexity so they can be understood by general audience.
 it organises one’s thoughts  it can be useful in indicating the critical points on the chart
 it demonstrates that one knows with bold or colored outlines of the bars.
what he/she is doing  an updated Gantt chart helps manage the project and head
 it (should) help one to set off schedule problems.
realistic time frames  Computer software can simplify constructing and updating
 it can be highly visible a Gantt chart
Disadvantages of Gantt Charts
Gantt charts can also have the following setbacks/disadvantages:
 they need to be constantly updated  it does not represent the complexity of a project.
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 they can become extraordinarily  it has some limitations for large projects, or projects
complex having more than 30 activities.
 the length of the bar does not indicate  it is are not useful if it is intended to display
the amount of work information.
 it is difficult to see on one sheet of  its horizontal bars misrepresent the actual resource
paper requirements of a project.
 a Gantt chart is not recommended to  a Gantt chart with percent-complete shading may
define the work breakdown structure actually miscommunicate the true schedule
and the schedule activities at the same performance status.
time.

1.5 Why a Gantt Chart is Developed

A Gantt Chart is developed to:

 Assist in determining how long activities and tasks will take
 Assist in determining the relationship between items
 Identify the critical path — that is the shortest possible path from the first activity to the last. This
is useful for determining the minimum time to complete the project.
 Use as a baseline for reporting
 Assist with delegation and managing of team workloads
 Assist in determining how long the project will take, including in analysing the effect on the
overall timeframe of activities going overtime
 Assist with identification of project risks by showing areas of uncertainty
 Assist with the management of risks by showing the effect on the project timeline of a risk
occurring
 Confirm a common understanding of the project timeline among Project Sponsor, Steering
Committee/Senior Management and Project Team

1.6 Critical Path Analysis

The critical path is the chain of activities that link the start to the finish of the project, and for which
any delay will cause the project to be delayed by the same amount of time. Identifying task
dependencies is essential in identifying the critical path for the project.
As a guide, a task will be on the critical path if changing the duration of the tasks changes the duration
of the project by the same amount.
The critical path is, in effect, the shortest possible path from the first activity to the last and will show
the shortest amount of time that the project could be completed in. Identifying the tasks on the path can
assist in identifying which tasks should be given priority in order to keep the project on track.

2.0 Critical Path Method

2.1 Meaning of Critical Path and Critical Path Method

Critical path is the set of sequential activities from start to the end of a project. Although many
projects have only one critical path, some projects may have more than one critical path depending on
the flow logic used in the project.

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If there is a delay in any of the activities under the critical path, there will be a delay of the project
deliverables.
Most of the times, if such delay is occurred, project acceleration or re-sequencing is done in order to
achieve the deadlines.
Critical path method (CPM) is based on mathematical calculations and it is used for scheduling
project activities. This method was first introduced in 1950s as a joint venture between Remington
Rand Corporation and DuPont Corporation.
The initial critical path method was used for managing plant maintenance projects. Although the
original method was developed for construction work, this method can be used for any project where
there are interdependent activities.
In the critical path method, the critical activities of a program or a project are identified. These are the
activities that have a direct impact on the completion date of the project.
In the CPM network in Figure 2, the activities/paths represented by bold arrows make up the critical
path.

Figure 2: Critical Path Method Network

2.2 Key Steps in Critical Path Method

In practice, the process of using CPM in project planning phase has six steps.
Step 1: Activity specification
The Work Breakdown Structure (WBS) can be used to identify the activities involved in the project.
This is the main input for CPM. In activity specification, only the higher-level activities are selected
for CPM. When detailed activities are used, CPM may become too complex to manage and maintain.
Step 2: Activity sequence establishment
In this step, the correct activity sequence is established. For that, three questions need to be asked for
each task on the list:
 Which tasks should take place before this task happens.  Which tasks should happen
 Which tasks should be completed at the same time as this task. immediately after this task.

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Step 3: Network diagram
Once the activity sequence is correctly identified, the network diagram can be drawn (refer to the
sample diagram above in Figure 2).
Although the early diagrams were drawn on paper, there is a number of computer software, such as
Primavera, for this purpose nowadays.
Step 4: Estimates for each activity
This could be a direct input from the WBS based estimation sheet. Most of the companies use 3-point
estimation method or COCOMO based (function points based) estimation methods for tasks
estimation.
Such estimation information can be used for this step of the process.
Step 5: Identification of the critical path
For this, four parameters of each activity of the network need to be determined.
 Earliest start time (ES) — The earliest time an activity can start once the previous dependent
activities are over.
 Earliest finish time (EF) — ES + activity duration.
 Latest finish time (LF) — The latest time an activity can finish without delaying the project.
 Latest start time (LS) — LF - activity duration.
The float time for an activity is the time between the earliest (ES) and the latest (LS) start time or
between the earliest (EF) and latest (LF) finish times.
During the float time, an activity can be delayed without delaying the project finish date. The critical
path is the longest path of the network diagram. The activities in the critical path have an effect on the
deadline of the project. If an activity of this path is delayed, the project will be delayed. In case if the
project management needs to accelerate the project, the times for critical path activities should be
reduced.
Step 6: Critical path diagram to show project progresses
Critical path diagram is a live artefact. Therefore, this diagram should be updated with actual values
once the task is completed. This gives a more realistic figure for the deadline and the project manage-
ment can know whether they are on track regarding the deliverables.

2.3 Advantages of Critical Path Method

Following are advantages of CPM:

 Offers a visual representation of the project activities.  Offers tracking of critical
 Presents the time to complete the tasks and the overall project. activities.
Critical path identification is required for any project-planning phase. This gives the project manage-
ment the correct completion date of the overall project and the flexibility to float activities. A critical
path diagram should be constantly updated with actual information when the project progresses in
order to refine the activity length/project duration predictions.

3.0 Project Evaluation and Review Technique

The Program (or Project) Evaluation and Review Technique (PERT) is a statistical tool, used in
project management, that is designed to analyse and represent the tasks involved in completing a given
project. First developed by the United States Navy in the 1950s, it is commonly used in conjunction
with the CPM.
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3.1 History

The Navy's Special Projects Office, charged with developing the Polaris-Submarine weapon system
and the Fleet Ballistic Missile capability, developed a statistical technique for measuring and fore-
casting progress in research and development programs. This Program Evaluation and Review
Technique (code-named PERT) is applied as a decision-making tool designed to save time in
achieving end-objectives, and is of particular interest to those engaged in research and development
programs for which time is a critical factor.
The new technique takes recognition of three factors that influence successful achievement of research
and development program objectives: time, resources, and technical performance specifications.
PERT employs time as the variable that reflects planned resource-applications and performance
specifications. With units of time as a common denominator, PERT quantifies knowledge about the
uncertainties involved in developmental programs requiring effort at the edge of, or beyond, current
knowledge of the subject — effort for which little or no previous experience exists.
Through an electronic computer, the PERT technique processes data representing the major, finite
accomplishments (events) essential to achieve end-objectives; the inter-dependence of those events;
and estimates of time and range of time necessary to complete each activity between two successive
events. Such time expectations include estimates of most likely time, optimistic time, and pessimistic
time for each activity. The technique is a management control tool that sizes up the outlook for
meeting objectives on time; highlights danger signals requiring management decisions; reveals and
defines both criticalness and slack in the flow plan or the network of sequential activities that must be
performed to meet objectives; compares current expectations with scheduled completion dates and
computes the probability for meeting scheduled dates; and simulates the effects of options for decision
— before decision.
The concept of PERT was developed by an operations research team staffed with representatives from
the Operations Research Department of Booz, Allen and Hamilton; the Evaluation Office of the
Lockheed Missile Systems Division; and the Program Evaluation Branch, Special Projects Office, of
the Department of the Navy.

3.2 Overview

PERT is a method used to analyse the involved tasks in completing a given project, especially the time
needed to complete each task, and to identify the minimum time needed to complete the total project.
PERT was developed primarily to simplify the planning and scheduling of large and complex projects.
It was developed for the U.S. Navy Special Projects Office in 1957 to support the US Navy's Polaris
nuclear submarine project. It was able to incorporate uncertainty by making it possible to schedule a
project while not knowing precisely the details and durations of all the activities. It is more of an
event-oriented technique rather than start-oriented and completion-oriented, and is used more in
projects where time, rather than cost, is the major factor. It is applied to very large-scale, one-time,
complex, non-routine infrastructure and Research and Development projects. An example of this was
for the 1968 Winter Olympics in Grenoble which applied PERT from 1965 until the opening of the
1968 Games.
This project model was the first of its kind, a revival for scientific management, founded by Frederick
Taylor (Taylorism) and later refined by Henry Ford (Fordism). DuPont's critical path model was
invented at roughly the same time as PERT.

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3.3 Conventions

The conventions of PERT are as follows:

 A PERT chart is a tool that facilitates decision making. The first draft of a PERT chart will
number its events sequentially in 10s (10, 20, 30, etc.) to allow the later insertion of additional
events.
 Two consecutive events in a PERT chart are linked by activities, which are conventionally
represented as arrows (see the diagram in Figure 3).
 The events are presented in a logical sequence and no activity can commence until its immediately
preceding event is completed.
 The planner decides which milestones should be PERT events and also decides their proper
sequence.
 A PERT chart may have multiple pages with many sub-tasks.
PERT is valuable in managing where multiple tasks are occurring simultaneously to reduce
redundancy.

Figure 3: PERT Chart

3.4 Terminology

The PERT terminology is as follows:

 PERT event: a point that marks the start or completion of one or more activities. It consumes no
time and uses no resources. When it marks the completion of one or more tasks, it is not reached
(does not occur) until all of the activities leading to that event have been completed.
 Predecessor event: an event that immediately precedes some other event without any other events
intervening. An event can have multiple predecessor events and can be the predecessor of multiple
events.
 Successor event: an event that immediately follows some other event without any other
intervening events. An event can have multiple successor events and can be the successor of
multiple events.
 PERT activity: the actual performance of a task which consumes time and requires resources
(such as labour, materials, space, machinery). It can be understood as representing the time, effort,
and resources required to move from one event to another. A PERT activity cannot be performed
until the predecessor event has occurred.
 Optimistic time (O): the minimum possible time required to accomplish a task, assuming every-
thing proceeds better than is normally expected
 Pessimistic time (P): the maximum possible time required to accomplish a task, assuming
everything goes wrong (but excluding major catastrophes).

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 Most likely time (M): the best estimate of the time required to accomplish a task, assuming
everything proceeds as normal.
 Expected time (TE): the best estimate of the time required to accomplish a task, accounting for the
fact that things do not always proceed as normal (the implication being that the expected time is the
average time the task would require if the task were repeated on a number of occasions over an
extended period of time).
TE = (O + 4M + P) ÷ 6
 Float or Slack: a measure of the excess time and resources available to complete a task. It is the
amount of time that a project task can be delayed without causing a delay in any subsequent tasks
(free float) or the whole project (total float). Positive slack would indicate ahead of schedule;
negative slack would indicate behind schedule; and zero slack would indicate on schedule.
 Critical path: the longest possible continuous pathway taken from the initial event to the terminal
event. It determines the total calendar time required for the project; and, therefore, any time delays
along the critical path will delay the reaching of the terminal event by at least the same amount.
 Critical activity: An activity that has total float equal to zero. An activity with zero float is not
necessarily on the critical path since its path may not be the longest.
 Lead time: the time by which a predecessor event must be completed in order to allow sufficient
time for the activities that must elapse before a specific PERT event reaches completion.
 Lag time: the earliest time by which a successor event can follow a specific PERT event.
 Fast tracking: performing more critical activities in parallel.
 Crashing critical path: Shortening duration of critical activities.
3.5 Implementation
The first step to scheduling the project is to determine the tasks that the project requires and the order
in which they must be completed. The order may be easy to record for some tasks (e.g. When building
a house, the land must be graded before the foundation can be laid) while difficult for others (There are
two areas that need to be graded, but there are only enough bulldozers to do one). Additionally, the
time estimates usually reflect the normal, non-rushed time. Many times, the time required to execute
the task can be reduced for an additional cost or a reduction in the quality.
In the following example there are seven tasks, labelled A through G. Some tasks can be done
concurrently (A and B) while others cannot be done until their predecessor task is complete (C cannot
begin until A is complete). Additionally, each task has three time estimates: the optimistic time
estimate (O), the most likely or normal time estimate (M), and the pessimistic time estimate (P). The
expected time (TE) is computed using the formula (O + 4M + P) ÷ 6.
Time estimates
Activity Predecessor Expected time
Optimistic (O) Normal (M) Pessimistic (P)
A — 2 4 6 4.00
B — 3 5 9 5.33
C A 4 5 7 5.17
D A 4 6 10 6.33
E B, C 4 5 7 5.17
F D 3 4 8 4.50
G E 3 5 8 5.17

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Once this step is complete, one can draw a Gantt chart or a network diagram.
Gantt chart

Critical Path
Activities

A Gantt chart created using Microsoft Project (MSP). Note (1) the critical path is in red, (2) the slack
is the black lines connected to non-critical activities, (3) since Saturday and Sunday are not work days
and are thus excluded from the schedule, some bars on the Gantt chart are longer if they cut through a
weekend.
Network Diagram
A network diagram can be created by hand or by using diagram software. There are two types of net-
work diagrams: activity on arrow (AOA) and activity on node (AON). Activity on node diagrams are
generally easier to create and interpret. To create an AON diagram, it is recommended (but not
required) to start with a node named Start. This activity has a duration of zero (0). Then you draw
each activity that does not have a predecessor activity (A and B in this example) and connect them with
an arrow from start to each node. Next, since both C and D list A as a predecessor activity, their nodes
are drawn with arrows coming from A. Activity E is listed with B and C as predecessor activities, so
node E is drawn with arrows coming from both B and C, signifying that E cannot begin until both B
and C have been completed. Activity F has D as a predecessor activity, so an arrow is drawn connect-
ing the activities. Likewise, an arrow is drawn from E to G. Since there are no activities that come
after F or G, it is recommended (but again not required) to connect them to a node labelled Finish.

Critical Path Activities

A network diagram created using Microsoft Project (MSP). Note the critical path is in red.

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 A node like this one (from Microsoft Visio) can be used to display
the activity name, duration, ES, EF, LS, LF, and slack.

By itself, the network diagram pictured above does not give much more information than a Gantt chart;
however, it can be expanded to display more information. The most common information shown is:
1. The activity name 4. The early finish time (EF) 6. The late finish time (LF)
2. The normal duration time 5. The late start time (LS) 7. The slack
8. The early start time (ES)

In order to determine this information it is assumed that the activities and normal duration times are
given. The first step is to determine the ES and EF. The ES is defined as the maximum EF of all
predecessor activities, unless the activity in question is the first activity, for which the ES is zero (0).
The EF is the ES plus the task duration (i.e. EF = ES + duration).
 The ES for start is zero since it is the first activity. Since the duration is zero, the EF is also zero.
This EF is used as the ES for a and b.
 The ES for a is zero. The duration (4 work days) is added to the ES to get an EF of four. This EF
is used as the ES for c and d.
 The ES for b is zero. The duration (5.33 work days) is added to the ES to get an EF of 5.33.
 The ES for c is four. The duration (5.17 work days) is added to the ES to get an EF of 9.17.
 The ES for d is four. The duration (6.33 work days) is added to the ES to get an EF of 10.33. This
EF is used as the ES for f.
 The ES for e is the greatest EF of its predecessor activities (b and c). Since b has an EF of 5.33 and
c has an EF of 9.17, the ES of e is 9.17. The duration (5.17 work days) is added to the ES to get an
EF of 14.34. This EF is used as the ES for g.
 The ES for f is 10.33. The duration (4.5 work days) is added to the ES to get an EF of 14.83.
 The ES for g is 14.34. The duration (5.17 work days) is added to the ES to get an EF of 19.51.
 The ES for finish is the greatest EF of its predecessor activities (f and g). Since f has an EF of
14.83 and g has an EF of 19.51, the ES of finish is 19.51. Finish is a milestone (and therefore has a
duration of zero), so the EF is also 19.51.
Barring any unforeseen events, the project should take 19.51 work days to complete. The next step is
to determine the late start (LS) and late finish (LF) of each activity. This will eventually show if there
are activities that have slack. The LF is defined as the minimum LS of all successor activities, unless
the activity is the last activity, for which the LF equals the EF. The LS is the LF minus the task
duration (i.e. LS = LF - duration).
 The LF for finish is equal to the EF (19.51 work days) since it is the last activity in the project.
Since the duration is zero, the LS is also 19.51 work days. This will be used as the LF for f and g.
 The LF for g is 19.51 work days. The duration (5.17 work days) is subtracted from the LF to get
an LS of 14.34 work days. This will be used as the LF for e.
 The LF for f is 19.51 work days. The duration (4.5 work days) is subtracted from the LF to get an
LS of 15.01 work days. This will be used as the LF for d.
 The LF for e is 14.34 work days. The duration (5.17 work days) is subtracted from the LF to get an
LS of 9.17 work days. This will be used as the LF for b and c.
 The LF for d is 15.01 work days. The duration (6.33 work days) is subtracted from the LF to get
an LS of 8.68 work days.

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 The LF for c is 9.17 work days. The duration (5.17 work days) is subtracted from the LF to get an
LS of 4 work days.
 The LF for b is 9.17 work days. The duration (5.33 work days) is subtracted from the LF to get an
LS of 3.84 work days.
 The LF for a is the minimum LS of its successor activities. Since c has an LS of 4 work days and d
has an LS of 8.68 work days, the LF for a is 4 work days. The duration (4 work days) is subtracted
from the LF to get an LS of 0 work days.
 The LF for start is the minimum LS of its successor activities. Since a has an LS of 0 work days
and b has an LS of 3.84 work days, the LS is 0 work days.
The next step is to determine the critical path and if any activities have slack. The critical path is the
path that takes the longest to complete. To determine the path times, add the task durations for all
available paths. Activities that have slack can be delayed without changing the overall time of the
project. Slack is computed in one of two ways, slack = LF - EF or slack = LS - ES. Activities that are
on the critical path have a slack of zero (0).
 The duration of path adf is 14.83 work days.
 The duration of path aceg is 19.51 work days.
 The duration of path beg is 15.67 work days.
The critical path is aceg and the critical time is 19.51 work days. It is important to note that there can
be more than one critical path (in a project more complex than this example) or that the critical path
can change. For example, let us say that activities d and f take their pessimistic (b) times to complete
instead of their expected (TE) times. The critical path is now adf and the critical time is 22 work days.
On the other hand, if activity c can be reduced to one work day, the path time for aceg is reduced to
15.34 work days, which is slightly less than the time of the new critical path, beg (15.67 work days).
Assuming these scenarios do not happen, the slack for each activity can now be determined.
 Start and finish are milestones and by definition have no duration, therefore they can have no slack
(0 work days).
 The activities on the critical path by definition have a slack of zero; however, it is always a good
idea to check the math anyway when drawing by hand.
 LFa - EFa = 4 - 4 = 0
 LFc - EFc = 9.17 - 9.17 = 0
 LFe - EFe = 14.34 - 14.34 = 0
 LFg - EFg = 19.51 - 19.51 = 0
 Activity b has an LF of 9.17 and an EF of 5.33, so the slack is 3.84 work days.
 Activity d has an LF of 15.01 and an EF of 10.33, so the slack is 4.68 work days.
 Activity f has an LF of 19.51 and an EF of 14.83, so the slack is 4.68 work days.
Therefore, activity b can be delayed almost 4 work days without delaying the project. Likewise,
activity d or activity f can be delayed 4.68 work days without delaying the project (alternatively, d and
f can be delayed 2.34 work days each).

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 Critical Path Activities

A completed network diagram created using Microsoft Visio. Note the critical path is in red.

3.6 Advantages and Disadvantages of PERT

Advantages of PERT
 PERT chart explicitly defines and makes visible dependencies (precedence relationships) between
the WBS elements
 PERT facilitates identification of the critical path and makes this visible
 PERT facilitates identification of early start, late start, and slack for each activity,
 PERT provides for potentially reduced project duration due to better understanding of
dependencies leading to improved overlapping of activities and tasks where feasible.
 The large amount of project data can be organised and presented in diagram for use in decision
making.

Disadvantages of PERT
 There can be potentially hundreds or thousands of activities and individual dependency
relationships
 The network charts tend to be large and unwieldy requiring several pages to print and requiring
special size paper
 The lack of a timeframe on most PERT/CPM charts makes it harder to show status although
colours can help (e.g., specific colour for completed nodes)
 When the PERT/CPM charts become unwieldy, they are no longer used to manage the project.
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3.7 Uncertainty in Project Scheduling

During project execution, however, a real-life project will never execute exactly as it was planned due
to uncertainty. It can be ambiguity resulting from subjective estimates that are prone to human errors
or it can be variability arising from unexpected events or risks. The main reason that the Program
Evaluation and Review Technique (PERT) may provide inaccurate information about the project
completion time is due to this schedule uncertainty. This inaccuracy is large enough to render such
estimates as not helpful.
One possibility to maximise solution robustness is to include safety in the baseline schedule in order to
absorb the anticipated disruptions. This is called proactive scheduling. A pure proactive scheduling is
a utopia, incorporating safety in a baseline schedule that allows to cope with every possible disruption
would lead to a baseline schedule with a very large make-span. A second approach, reactive
scheduling, consists of defining a procedure to react to disruptions that cannot be absorbed by the
baseline schedule.

4.0 PRINCE2 Project Management

4.1 Description of the PRINCE2 Methodology

PRINCE stands for Projects in Controlled Environments. Dealing with a bit of history, this method
was first established by the Central Computer and Telecommunications Agency of the UK (It is now
referred to as the Office of Government Commerce).
It has since become a very commonly used project management method in all parts of the world and
has therefore proven to be highly effective in various respects.
The method also helps the project manager to identify and thereafter assign roles to the different
members of the team based on expertise. Over the years, there have been a number of positive case
studies of projects that have used the PRINCE2 project management methodology.
This method deals with the various aspects that need to be managed in any given project. The diagram
in Figure 4 below illustrates the idea.

Figure 4: Aspects to be Managed in any Given Project

In the diagram given in Figure 4:

 The seven principles shown in the above diagram must be applied if the project is to be called a

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 PRINCE2 project. These principles will show one whether and how well the project is being
carried out using this particular project management method.
 Similarly, the themes of PRINCE2 refer to the seven principles that need to be referred to at all
times during the project, if the project is to indeed be effective. If adherence to these principles is
not carefully tracked from the inception of the project through to the end, there is a high chance
that the project will fail entirely.
 The processes refer to the steps that need to be followed. This is why this method is known as a
process-based method.
 Finally, with regard to the project environment, it is important to know that this project manage-
ment method is not rigid. Changes can be made based on how big the project is, and the require-
ments and objectives of each organisation. PRINCE2 offers this flexibility for the project and this
is one of the reasons why PRINCE2 is quite popular among the project managers.

4.2 The Advantages and Disadvantages of the PRINCE2 Methodology

Advantages of the PRINCE2 Methodology

The advantages of PRINCE2 are as follows:
 It is product-based and it also divides the project into different stages making it easy to manage.
This is sure to help the project team to remain focused and deliver a quality outcome at the end of
the day.
 It improves communication between all members of the team and also between the team and other
external stakeholders, thereby giving the team more control of the project.
 It gives the stakeholder a chance to have a say when it comes to decision-making as they are
always kept informed by the issuance of reports at regular intervals.
 It ensures that improvements can be made in the organisation. This is because one would be able
to identify any flaws that he/she makes in projects and correct them, which of course would help
one to a great extent in the long run.
 Its flexibility allows changes to be made at run-time. Although there can be some implications and
issues to the project schedule when certain changes are done at run-time, PRINCE2 offers some of
the best practices to minimise the impact.
 PRINCE2 guidelines can be selectively applied to certain projects that do not last long. This
makes the method even more flexible and thereby more appealing to dynamic organizations and
projects.
 The project team will learn to save a lot of time and be more economical when it comes to the use
of assets and various other resources, thereby ensuring that one is also able to cut down on costs a
great deal.
Disadvantages of the PRINCE2 Methodology
The advantages of PRINCE2 are as follows:
 It does not offer the level of flexibility offered by some of the modern project management
methodologies. Since project management, especially in software industry, has grown to a
different level, PRINCE2 may find difficulties in catering for some of the modern project
management needs.
 It is a very complex method and cannot be carried out without special training. Failure to
understand precisely how it works, could lead to a lot of problems and difficulties whilst carrying
out the project.
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5.0 Managing Project Performance using Earned Value Management

5.1 Description of Earned Value Management

Earned Value Management (EVM) is a project management technique that objectively tracks physical
accomplishment of work by:
 Relating resource planning to schedules and to technical performance requirements.
 Integrating project cost, schedule, technical effort, and risk in a realistic and executable plan called
the Performance Measurement Baseline (PMB). This:
 Tracks performance and progress to the plan.
 Provides early warning of developing problems and opportunities.
 Enables early corrective action when deviating from the plan.
 Representing a repeatable process. This:
 Provides standard and consistent methods for progress measurement.
 Facillitates consistent use of performance metrics on all projects.
 Enables management to easily assess health of the enterprise.
 Provides project past-performance data and lessons learned, which are useful for improving
performance and preparing future estimates for similar work.
 Providing an early warning of performance problems while there is time for corrective action.
In addition, EVM improves the definition of project scope, prevents scope creep, communicates
objective progress to stakeholders, and keeps the project team focused on achieving progress.
EVM encompasses a great deal of project management functionality.
Therefore, EVM helps project managers to measure and manage project performance. It is one of the
most effective performance measurement and feedback tools for managing projects. It provides
organisations with the methodology needed to integrate the management of project scope, schedule and
cost. EVM is a systematic project management process used to find variances in projects based on the
comparison of work performed and work planned. EVM is a methodology for comparing the progress
of work in relation to the PMB. EVM measures project performance in terms of the budget (cost) and
the schedule (time) and can be very useful in project forecasting.
In summary, the EVM technique is a valuable tool for managing all kinds of projects. EVM lets the
project manager combine schedule performance and cost performance to answer the question: What
did we get for the money we spent? EVM compares the PLANNED amount of work with what has
actually been COMPLETED, to determine if cost, schedule and work accomplished are progressing as
planned.

5.2 Basic Principles of Earned Value Management

EVM originated in industry as a best practice and was turned into a requirement by the US Depart-
ment of Defence. The concept spread throughout the US Government, industry, and other countries
because this management concept embodies fundamentally sound principles for managing perform-
ance of projects and programs. These principles are:
 All project work is defined and planned.
 The work is broken down into finite product-oriented components and assigned to a single
organisation.
 The scope, schedule, and cost objectives are integrated into a plan by which progress can be
measured.

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 Actual costs are recorded at the same level where the work is planned, but may be collected at a
lower level.
 Performance is objectively measured on a regular basis.
 Variances and deviations are analyzed, impacts are forecasted, and estimates at completion are
based on the actual performance to date and the remaining effort.
 Changes to the performance measurement baseline are controlled.
 Earned Value information is employed in the organisation’s management processes.

5.3 Earned Value Terms and Methodology

The Earned Value terms and methodology are represented on the diagram in Figure 5.

Figure 5: Earned Value Terms and Methodology

The above graphic is a simplified version of the classic representation of everything one needs to know
about Earned Value. As one can see, there are a few abbreviations to get to grips with.

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5.4 EVM Measures

EVM consists of primary data elements and derived data elements. Each data point value is based on
the time or date an EVM measure is performed on the project.

5.2.1 Primary Data Elements

Unlike traditional approaches to budgeting which compare the budget to actual costs, EVM will use
four primary performance parameters to measure project performance: budget at completion, planned
value, earned value and actual cost. These are explained below.
1. Budget At Completion (BAC)
BAC is the total budgeted cost of the project over its whole life cycle. That is, BAC is the original
budget of the whole project.
2. Planned Value (PV)
PV describes how far along the project work is supposed to be at any given point in the project
schedule. It is the amount expressed in Shillings (or hours) of work to be performed as per the
schedule plan. In summary, it is the budget, broken out over the life cycle of the project PV is also
known as Budgeted Cost of Work Scheduled (BCWS). PV is calculated by multiplying Budget At
Completion (BAC) by percentage of planned work. That is,
Planned Value (PV) = Budget At completion (BAC) x % of planned work
PV is the total budgeted cost and it answers two questions:
 How much do we plan to spend?
 How much work should have been completed by this date?
3. Earned Value (EV)
EV is a snapshot of work progress at a given point in time. It reflects the amount of work in Shillings
(or hours) that has actually been accomplished/performed to date (or in a given time period), expressed
as the planned value for that work. In other words, it is the planned or budget value that has been
earned at different points in time, measured by looking at how much work has been completed. EV is
also called Budgeted Cost of Work Performed (BCWP). EV is calculated by multiplying Budget At
Completion (BAC) by percentage of actual work. That is,
Earned Value (EV) = Budget At completion (BAC) x % of actual work
EV is the cost originally budgeted to accomplish the work that has been completed and it answers the
question:
 How much work has been actually completed?
4. Actual Cost (AC)
AC is an indicator of the level of resources that have been expended to achieve the actual work
performed to date (or in a given time period). In other words, it is the sum of all the actual costs (in
Shillings) incurred/accrued to date for the actual work performed. AC is also called Actual Cost of
Work Performed (ACWP).
AC is the cost to accomplish all the work that was performed by a specific date and it answers the
question:
 How much did we actually spend to deliver the Earned Value?
All four of these performance parameters (BAC, PV, EV, and AC) are captured at the lowest control
levels, namely control accounts. And it is important to create a PMB. This is the backbone for making
EVM work; i.e. EVM is only as good as the PMB.

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5.2.2 Derived Data Elements

5.2.2.1 Variances

Using three of the performance parameters (PV, EV and AC), two variances will be calculated for
expressing project performance: cost variance and schedule variance. These are explained below.
1. Cost Variance (CV)
The Cost Variance (CV) shows whether a project is under or over budget and by how much. It is
calculated by subtracting Actual Cost (AC) from Earned Value (EV). That is,
Cost Variance (CV) = Earned Value (EV) – Actual Costs (AC)
A positive value indicates a favourable condition (i.e. under budget) and a negative value indicates an
unfavourable condition (i.e. over budget).
2. Schedule Variance (SV)
The Schedule variance (SV) determines whether a project is ahead of or behind schedule and by
how much. It is calculated by subtracting Planned Value (PV) from Earned Value (EV). That is,
Schedule Variance (SV) = Earned Value (EV) – Planned Value (PV)
A positive value indicates a favourable condition i.e. ahead of schedule) and a negative value indicates
an unfavourable condition (i.e. behind schedule)

Interpretation of Variances
Variance Cost Analysis (CPI) Schedule Analysis (SPI)
>0 Under Budget Ahead of Schedule
=0 On Budget On Schedule
<0 Over Budget Behind Schedule

5.2.2.2 Performance Indices

This information can also be expressed in the form of an index: cost performance index and schedule
performance index. These are explained below.
1. Cost Performance Index (CPI)
The Cost Performance Index (CPI) indicates how efficiently the project team is using its resources. It
is calculated by dividing Earned Value (EV) by Actual Cost (AC). That is,
Cost Performance Index (CPI) = Earned Value (EV) / Actual Cost (AC)
A value greater than one indicates a favourable condition (i.e. under budget) and a value less than one
indicates an unfavourable condition (i.e. over budget).
2. Schedule Performance Index (SPI)
The Schedule Performance Index (SPI) indicates how efficiently the project team is using its time. It is
calculated by dividing Earned Value (EV) by Planned Value (PV). That is,
Schedule Performance Index (SPI) = Earned Value (EV) / Planned Value (PV)
A value greater than one indicates a favourable condition (i.e. ahead of schedule) and a value less than
one indicates an unfavourable condition (i.e. behind schedule).

Interpretation of Indices
Index Cost Analysis (CPI) Schedule Analysis (SPI)
> 1.0 Under Budget Ahead of Schedule
= 1.0 On Budget On Schedule
< 1.0 Over Budget Behind Schedule
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5.2.2.3 Cost and Schedule Forecasting

The indices can be used to predict/forecast the budget outturn and timescale of the project as follows:
estimate at completion (or predicted budget outturn), estimate to complete, and predicted timescale.
1. Estimate At Completion (EAC)
EAC is the expected TOTAL cost required to finish the whole project work. It is calculated by
dividing Budget At Completion (BAC) by Cost Performance Index (CPI). That is,
Estimate At Completion (EAC)
= Budget At Completion (BAC) / Cost Performance Index (CPI)
= Original budget / CPI
2. Estimate To Complete (ETC)
ETC is the expected cost required to finish all the REMAINING project work. It is calculated by
subtracting Actual Cost (AC) from Estimate At Completion (EAC). That is,
Estimate To Completion (EAC) = Estimate At Completion (EAC) – Actual Cost (AC)
But as already seen, EAC = BAC / CPI and CPI = EV / AC (or AC = EV / CPI).
Then, EAC = (BAC / CPI) – (EV / CPI) = (BAC – EV) / CPI
3. Predicted Timescale
Predicted Timescale is the expected TOTAL time required to finish the whole work. It is calculated
by dividing the Original Timescale by Schedule Performance Index (SPI). That is,
Predicted Timescale = Original Timescale / SPI

5.3 Benefits of Earned Value Management

EVM is the best way to determine the real status of a project. As well as telling one how much he/she
has spent, it shows him/her how much he/she has achieved. Further, it tells him/her how much he/she
still needs to do and provides a good indication of final costs and expected completion dates.
In this regard, the benefits of EVM are as follows:
 EVM builds on, and therefore enforces, good project management practice and underpins good
corporate governance. Its introduction can drive the cultural and organisational change key to
supporting these objectives.
 EVM provides an objective measurement of what has been achieved on a project.
 EVM enables accurate forecasting.
 EVM provides project management information in a format that is easy for all stakeholders to
understand and act upon.
 EVM is an Early Warning System that allows the timely identification and analysis of progress
and cost issues and corrective actions to be identified.
 EVM shows stakeholders whether they are getting Value for Money.
 EVM enables detailed project comparisons across programmes.
 EVM can be used on a wide range of project sizes and complexity.
In particular, EVM contributes to:
 Preventing scope creep  Profitability analysis
 Improving communication and visibility with  Project forecasting
stakeholders  Better accountability
 Reducing risk  Performance tracking

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