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form is allowed.
Course Code:
Course Title:
CAM 205
PROJECT MANAGEMENT
Course Purpose
The course introduces the concept of project management, project support, leadership,
Monitoring and control and risk identification
Expected Learning Outcomes
At the end of the course, students should be able to:
1.
2.
3.
Course Contents
Introduction to Project Management: Definitions of a project, examples of typical projects,
project management, brief history of project management as a discipline, project manager,
qualities and responsibilities of a project manager and project team;
Project Life Cycle: General description of the project life cycle phases;
Initiation Phase: Project ideas and idea screening, project feasibility study, project proposal
format, project standards and procedures, capital project evaluation techniques (cost/benefit
analysis, accounting rate of return, payback period, net present value method, profitability index
and internal rate of return);
Planning and Organizing Phase: Detailed planning of the project, project scheduling and
sequencing, work breakdown structure, network diagrams, critical path method, program
evaluation and review technique, least cost scheduling(crashing), floats, Gantt charts, project
organization structures, organizing for resources and recruitment of project team;
Project Execution and Control Phase: Actual work on various tasks, reporting quality, cost,
schedule, technical and financial status of a project, comparing actual performance with planned
performance, investigation of variances, and Earned value performance measurements.
2.
3.
4.
Yeates, D & Cadles, J (1996). Project Management for Information Systems (2nd.ed.)
London: Pitman.
Table of Contents
About this STUDY MANUAL ......................................................................................... 2
How this STUDY MANUAL is structured ....................................................................... 2
Course Contents................................................................................................................. 4
Instructional Materials/Equipment
17
75
1.3
ii)
iii)
iv)
v)
Lecture Outline
1.3.1 Projects.
1.3.2
Project Management
b) Types of projects
Projects are usually categorized into one of three types below:
1.3.2
Project Management
a) Definitions of project Management:
Describes the processes concerned with the identifying, analyzing and responding to
project risk. It consists of risk identification, risk quantification, risk response and risk
response control.
ix) Project procurement Management
Describes the processes required to procurement planning, solicitation planning,
solicitation, source selection, contract administration and contract close out.
10
11
interest in the field. The basics of PM models were slowly introduced to smaller organizations
and governmental institutions with an aim to improve the work efficiency and reduce time and
cost of project realization
1.3.4
1.3.5 Project Team- Project team refer to a number of people who work closel together to
achieve shared common goals. It is vital to identify all the team members and clearly
define their roles and responsibilities. Team members can have various roles such as
engineers, technicians, planners, software specialists, etc. Projects pose particular
problems of building and managing project teams. Project managers should have good
team management skills
1.4 Activities
1.4.1
1.4.2
1.4.3
1.5 Summary
A project is made up of a defined beginning, multiple activities which are performed to a plan
and a Defined end.
All projects must be planned out in advance if they are to be successfully executed. The
execution of the project must be controlled to ensure that the desired results are achieved.
1.6 Self-assessment
You have been appointed the project manager of Gate pump water project. Describe the skills
required for such an appointment.
12
ii)
iii)
iv)
v)
2.2.2.
Project Ideas
2.2.3.
Feasibility study
2.2.4.
Project proposal
2.2.5.
13
established. The project manager is appointed and in turn, he selects the team members
based on their skills and experience.
2) Planning Phase
The second phase should include a detailed identification and assignment of each task until
the end of the project. Project schedules, resource requirements, cost budget , policies and
procedures are developed. It should also include a risk analysis and a definition of a criteria
for the successful completion of each deliverable. The governance process is defined, stake
holders identified and reporting frequency and channels agreed.
3) Execution Phase
the most important issue in this phase is to ensure project activities are properly executed
and controlled. Project manager coordinates his team to ensure that the project is executed
according to its scope, quality, time and cost. The planned solution is implemented to solve
the problem specified in the project's requirements.
4) Closure
In this last stage, the project manager must ensure that the project is brought to its proper
completion. The closure phase is characterized by a written formal project review report
containing the following components: a formal acceptance of the final product by the client,
Weighted Critical Measurements (matching the initial requirements specified by the client
with the final delivered product), rewarding the team, a list of lessons learned, releasing
project resources, and a formal project closure notification to higher management.
2.4. Project Ideas
Project idea screening is a process used to evaluate innovative product ideas, strategies and
marketing trends. New product ideas are seldom revolutionary, they are mostly evolutionary.
Many develop from the products of the past, making improvements in quality; convenience, cost
or variety .Idea screening criteria are used to determine compatibility with overall business
objectives and whether the idea would offer a viable return on investment. Whatever does not
meet these criteria is typically discarded. Idea screening helps to reduce the amount of ideas into
a manageable number.
14
Screening criteria:
a) Qualitative criteria:
Each person in the idea generation group receives a highlighter and chooses all
the ideas he/she believes have a potential based on consumer needs and potential
solutions
Give a red sticker to each participant and make them put it on the idea their heart/
gut feeling would like to realize
Ask them to put a yellow sticker on the idea they think will be the most successful
if realized
And finally put a blue sticker on the idea that is of greatest importance to the
company
Put specific names on the idea(s) you personally would like to take responsibility
for, and on the ideas you would like to support. Ideas without a person responsible
for them should be rejected. The coloured stickers should then decide which and
how many ideas to take further and which one to reject, and could also decide
which one to start with. Ideas with many hearts are more likely to succeed,
because someone in the company wants to take them further these ideas should be
chosen first.
b) Quantitative criteria
Important attributes for evaluating the ideas are defined
Option 1:
Option 2:
Give each idea a score on probability for the outcome and the importance if it
happens
15
16
Financial appraisal
Preliminary compliance
Organizational suitability
17
PROBLEM STATEMENT:
State the challenges identified, the rationale/need to address these challenges and the conditions
to be changed by the project
PROJECT OBJECTIVES:
The objectives should describe the intended outcome of the project and should be SMART
(Specific, Measurable, Accurate, Realistic and Time Bound) .
Indicate how the objectives will contribute to the achievement of the project, what difference the
project will make and the time frame during which this will happen.
PROJECT IMPLEMENTATION AND MANAGEMENT PLAN:
Describe the project activities indicating how the objectives will be accomplished, what will be
done, who will do it, who are the implementers, partners and beneficiaries and when it will be
done. Describe how the project will be sustainable after the funding period.
PROJECT MONITORING AND EVALUATION:
Describe how you are going to monitor and evaluate the project so as to assess progress during
implementation and improve the project efficiency as the project moves along.
DOCUMENTATION AND SHARING RESULTS:
Describe how you are going to document the progress of your project during and after
implementation. State how you will document and share your results and let others know of
your purpose, methods and achievements.
PROJECT BUDGET:
Indicate the total cost of the project and also provide a detailed budget for these costs.
2.5.2.
The project standards and procedures are typically documented in a Project Standards and
Procedures Manual. This manual consists of an introductory section followed by separate
sections for each aspect of the project activities, such as:
18
Standards and Procedures for Team Performance, including such general project
practices as the code of conduct and standard project terminology, meetings, change control
procedures (including the use of Change Requests and Decision Requests), and risk
management.
Standards and Procedures for Cost/Schedule Management, including organizing the
work, project monitoring, project accounting, and cost/schedule analysis.
Standards and Procedures for Data Management, including the project library,
document identification, document structure and style, and document preparation.
Standards and Procedures for Configuration Management, including identifying,
controlling , maintaining, and reporting on configuration items.
Standards and Procedures for Quality Management, including such things as: walkthroughs, reviews, audits and inspections, handling and storing, packaging and shipping,
and procedures for eliminating the cause of problems.
2.6 Activities
Describe the following feasibility areas:
i) Technology and system feasibility
ii) Legal feasibility
iii) Operational feasibility
iv) Economic feasibility
v) Schedule feasibility
2.7 Summary
Every unique project has unique activities in each project life cycle phase
2.8 Self-assessment
Write a project proposal for a project of your choice
19
Welcome to the third lecture in project management. A capital project is a long-term investment
which requires the use of huge amounts of capital, both financial and labour , to undertake and
complete. E.g. a new building , acquisition of land or property, lease of property, the
refurbishment of an existing building , purchase of an equipment, etc The commitment of funds
to capital projects gives rise to a management decision problem, the solution of which, if
incorrectly arrived at, may seriously impair company profitability and growth. The proper use of
evaluation techniques and criteria should enable management to make more effective decisions
which result in future success. The purpose of investment appraisal is to evaluate whether or not
the current sacrifice is worthwhile.
3.1. Specific objectives:
By the end of this lesson you should be able to:
i)
ii)
vii)
20
ARR
Average investment
Acceptance criterion
-
21
A project whose ARR is higher than the managements ARR should be accepted and vice
versa.
If the projects are mutually exclusive, chose the one with the highest ARR
Strengths of ARR
Uses returns from entire life of the project to determine project profitability.
Weaknesses of ARR
Uses accounting profits and not cash flows in appraising. Projects. Accounting
profits include non-cash items.
3.3.2.
Payback refers to the duration required for the project to recoup or recover the initial
investment cost. Initial investment cost is recovered from the future cash inflows expected
from the project. If the project generates a constant annual cash inflows, its payback period
is computed by dividing the initial investment cost by the annual constant cash inflows.
PBP
If the project undertaken is to yield un equal cash inflows, its PBP can be determined by
adding up the cash inflows until the total cash inflows are equal to the initial investment
cost. It is assumed that the cash inflows are evenly generated and that cash inflows for a
fraction of a year can be calculated proportionately.
Acceptance criteria
-
22
The management should fix the maximum acceptable PBP for its future projects
A project whose PBP is less than the managements PBP should be accepted and vice
versa.
If the projects are mutually exclusive, the one with the smallest PBP
It chooses ventures with the shortest pay back period and this minimizes the risks
associated with returns which will be generated some time in future and which may
be uncertain.
Choosing of the ventures with the shortest payback period improves the liquidity
position of the company
Payback period is realistic for those companies that which to re-invest intermediary
returns.
Its not consistent with the objectives of maximizing the market value of firms shares.
Shares values do not depend on payback period of investment projects.
When the project does not yield uniform returns payback period will not be accurate
as it will assume that cash flows occurs evenly throughout the year which is
unrealistic
3.3.3.
This technique recognises the fact that cash flows arising at different time period differ in
value and are comparable only where their present values are determined. NPV is the
difference between the present value of cash inflows and the present value of cash outflows.
Decision criterion
-
23
If the projects are mutually exclusive, chose the one with the highest positive NPV
Strengths of NPV
It takes into account cash flows over the entire life of the project to determine the
project viability.
It uses cash flows and not profits and therefore gives a reasonable assessment of the
investment viability.
It is consistent with the value additively principle. The NPVs of various projects
can be added together to determine the increase in the value of the firm.
Weaknesses of NPV
It use the firms cost of capital to discount the cash flows. It thus assumes that the
firms cost of capital is always available for use and is easy to calculate which is
not the case.
It ignores risks associated with an investment. All the firms future projects are
evaluated using the same discount rates irrespective of the differences in their
level of risk.
Use of the firms cost of capital as an investment discount rate to be applied to the
firms future project is based on the assumption that the firms future projects will
bear the same risks as the current projects which is unlikely.
3.3.4.
Profitability index is the ratio of cash inflows to the initial cost of the project.
PI of the above project
24
Decision criterion
-
If the projects are mutually exclusive, chose the one with the highest PI
Strengths of PI
Takes into account cash flows over the entire life of the project
Uses cash flows and not profits and therefore gives a reasonable assessment of the
investment viability.
Weaknesses of PI
Assumes that the firm cost of capital is always available for use and easy to calculate
which not the case is.
Ignores risks associated with an investment. All the firms future projects are evaluated
using the same discount rates irrespective of the difference in their level of risks.
3.3.5.
-
Decision criterion
-
If the projects are mutually exclusive, chose the one with the highest IRR
Strengths of IRR
Considers cash flows occurring over the entire life of the project.
Ranks projects according to their true profitability giving the same result as NPV
method.
25
Uses cash flows and not profits and therefore it gives a reasonable assessment of
the project profitability.
Weakness of IRR
May yield multiple and negative rates of return which may not have any meaning.
Not consistent with value addivity principle. IRR of various projects cannot be added
together to give the firms additional wealth from the projects.
Proper use of evaluation techniques and criteria should enable management to make
more effective decisions which result in future success
3.5 Self-assessment
The management of ABC Ltd anticipates purchasing one of the pump models
below. Each model has an initial cost outlay of Ksh 15,000 and a useful life of 5
years.
The corporation tax rate is 30% and the required rate of return is 10%. The
pumps are depreciated using straight line method. The before tax and
depreciation cash flows expected to be generated by the projects are as follows:
Year
Model I
8,000
8,000
6,000
5,000
4,000
Model II
6,000
6,000
6,000
6,000
6,000
Required:
a) Determine the cash flows after tax
b) Compute the AAR, PBP, NPV, PI and IRR for each project
c) Advice the management on the pump model to purchase
26
Project planning
4.2.2
4.2.3
Project scheduling
4.2.4
Network diagrams
4.2.5
27
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.
CIVIL
Foundati
on
4.3.2
28
Walls/R
oof
PLUMBING
Piping
Project scheduling
Sewerage
ELECTRICAL
Wiring
Appliances
Effort
Planned
Planned
Project Phase 1
Estimate in
Start
End Date
Days
Date
Resource
Initiate Project
1.1
1.1.1
Define Scope
4.00
06/01/05
06/08/05
1.1.2
Define Requirements
3.00
06/09/05
06/15/05
1.1.3
0.25
06/16/05
06/17/05
Name1
1.1.4
1.00
06/16/05
06/20/05
Name1
1.1.5
0.50
06/21/05
06/21/05
Name1
1.1.6
2.00
06/21/05
06/30/05
Name1
1.1.6.1
1.00
06/21/05
06/23/05
Name1
1.1.6.2
0.50
06/24/05
06/24/05
Name1
1.1.6.3
0.50
06/27/05
06/28/05
Name1
1.1.6.4
Gain approvals
0.50
06/29/05
06/30/05
Name1
Plan Project
2.1
2.1.1
2.00
07/01/05
07/06/05
Name1
2.1.2
2.00
07/07/05
07/11/05
Name1
2.1.3
3.00
07/12/05
07/14/05
Name1
2.1.4
3.00
07/15/05
07/20/05
Name1
2.2
2.2.1
1.50
07/15/05
07/17/05
Name1
2.2.2
1.50
07/17/05
07/21/05
Name1
2.3
07/22/05
07/29/05
Name1
Approvals
3
3.1
Design Framework
3.1.1
5.00
08/01/05
08/15/05
3.1.2
1.00
08/16/05
08/18/05
Name3, Name2
3.1.3
2.00
08/19/05
08/31/05
Name3
29
3.2
3.2.1
3.2.2
65.00
09/15/05
10/21/05
3.3
3.3.1
Name2
review team
Name3, web
20.00
08/19/05
08/31/05
developer
3.3.2
10/31/05
3.2.3
09/01/05
09/19/05
11/25/05
team
core team, review
4.00
10/19/05
11/25/05
team
5.00
11/18/05
11/30/05
Name2, Name3
environment
5.00
12/01/05
12/16/05
Name1
3.4.2
0.50
12/19/05
12/30/05
Name1
4.1
3.3.3
3.4
Implement Framework
3.4.1
4.2
01/03/06
01/10/06
Celebrate
review team
Name1, core team,
0.50
01/13/05
01/13/05
review team
A schedule is a listing of a project's milestones, activities, and deliverables, usually with intended
start and finish dates. Those items are often estimated in terms of resource allocation, budget and
duration, linked by dependencies and scheduled events. Elements on a schedule may be closely
related to the Work Breakdown Structure (WBS) terminal elements.
A schedule tells you when each activity should be done, what has already been completed, and
the sequence in which activities need to be finished.
Scheduling Tools
Here are some tools and techniques for combining these inputs to develop the schedule:
30
management software is typically used to create these analyses Gantt charts and PERT
Charts are common formats.
Critical Path Analysis This is the process of looking at all of the activities that must be
completed, and calculating the 'best line' or critical path.
Schedule Compression This tool helps shorten the total duration of a project by
decreasing the time allotted for certain activities. It's done so that you can meet time
constraints, and still keep the original scope of the project. You can use two methods
here:
Crashing This is where you assign more resources to an activity, thus
decreasing the time it takes to complete it. This is based on the assumption that
the time you save will offset the added resource costs.
Fast-Tracking This involves rearranging activities to allow more parallel work.
This means that things you would normally do one after another are now done at
the same time
Predecessors
Duration Weeks
D, E
F, G
4.3.3
Network diagrams
A network shows the various activities and their duration. It shows the sequence in which the
activities are to be carried out.
A project network diagram has the following features:
31
(a)
(b)
(c)
Activity duration
This is the time an activity is estimated to take to complete. It is indicated on the
activity arrow.
Both were developed in 1950s to help managers schedule, monitor and control large and
complex projects.
32
The critical path method (CPAM) places more emphasis on cost control rather than time
control.
Example:
Draw a network for the following set of activities:
Activity
Predecessors
Time (weeks)
B,D,E
F,G,I
Network diagram
33
3
6
12
17
A
6
0
J
3
G
5
10
17
10
B
3
2
H
5
10
10
D1
15
15
(b)
(ii)
Forwards Pass
Start at the beginning of network at time zero and progressively work through the
network to the finishing point adding the duration of activities cumulatively.
34
The sums so obtained are referred to as the Earliest Event Starting times (EST).
The last entry will be the earliest completion time of the project.
20
20
Where there is more than one activity leading to an event there will be two or more
possible cumulative sums. In such a case, the bigger of the sums obtained is taken i.e the
longer path is taken.
Backward Pass
Start at the end of the network and work through the network back to the starting point
cumulatively subtracting the duration of the activities.
The figures so obtained are referred to as the latest event starting times (LST)
Whenever there are more than one possible paths to an event, the smaller of the
difference obtained is used.
Critical activities:
The combination of the backward and forward passes enables us to identify those activities that
are critical. A critical activity has the following characteristics:
(i)
The earliest starting time (EST) and the latest starting time (LST) is the same at the tail
event.
(ii)
The earliest finishing time (EFT) and the latest finishing time (LFT) is the same at the
head event.
(iii)
The difference between the head time and tail time is equivalent to the duration of the
activity
Critical activities in a network form the critical path. Critical path is the longest path
through the network. Any interference with an activity on this path will result in a
similar interference in the overall project.
4.3.4
Critical path method assumes that activity completion time is known with certainty.
This is an unlikely situation in practice. The completion time of an activity is better treated as a
random variable described by a probability distribution rather than by a single estimate.
PERT recognizes the uncertainty involved in estimating the duration of an activity that is yet to
take place. The best probability distribution that describes activity completion time is the Betadistribution. For Beta distribution, 3 times estimates are required:
35
t p 4tm t0
6
Pessimistic time Optimistic time]2
6
2a [
t p t0
6
]2
The distribution of activities in a pert network follows a Beta distribution. Beta distribution is
very similar to the normal distribution except that it has a slight skew. Provided the number of
activities in the project is sufficiently large ( n > 4), normal distribution can be used to describe
project completion time. Once the expected completion time and variance have been
determined, the probability that a project will be completed by a specific time can be assessed.
The assumption is usually made that the distribution of completion time follows that of a normal
distribution curve.
Assumption of using this method
1.
Non critical and critical activities maintain their status i.e the critical path does not
change.
2.
The activity completion times are statistically independent i.e they do not influence one
another.
Illustration
A construction project consists of the activities shown below:
36
Activities
Optimistic
Most
Pessimistic Expected
Variance
(t0)
likely
(tp)
time =
(t0+4tm+tp)
t p t0 2
(tm)
1-2
10
6.3
1.00
1-3
5.3
1.00
2-4
12
20
12.5
4.69
2-5
5.2
0.69
3-4
11
15
10.8
2.25
4-5
11
6.5
1.36
4-6
14
8.8
3.36
5-6
4.3
1.00
6-7
5.3
1.00
Required:
(a)
(6 marks)
(b)
(6 marks)
(c)
(2 marks)
(d)
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.
Solution
a) In the table above
b) Project network for the activities
37
(6 marks)
6.3
6.3
25.3
25.3
0
0
18.8
29.6
18.8
34.9
29.6
34.9
5.3
8.0
(c)
(d)
30
34.9
35
t te
Z1
30 34.9
1.63
3.008
Area = 0.4484
Z2
35 34.9
0.03
3.008
Area = 0.0120
P(t < 30) = 0.5 0.4484 = 0.0516, P(30 < t < 35) = 0.4494 + 0.0120 = 0.4604
P(35 < t) = 0.5 0.0120 = 0.488
38
4.4 Activities
4.4.1
Differentiate between Critical path method and program evaluation & review
technique
4.4.2
4.5 Summary
A project plan is a formal, approved document used to guide both project execution and
project control. The primary uses of the project plan are to document planning assumptions
and decisions, facilitate communication among stakeholders, and document approved scope,
cost, and schedule baselines. If you plan and organise a job well, it should be a productive
and positive experience for everyone.
4.6 Self-assessment
A project has the following activities, precedence relationships, and time estimates in
Activity
Immediate
Optimistic
Most Likely Time
Predecessors
Time
A
15
20
B
8
10
C
A
25
30
D
B
15
15
E
B
22
25
F
E
15
20
G
D
20
20
a) Calculate the expected time or duration and the variance for each activity.
Pessimistic Time
What is the probability that the project will take longer than 57 weeks to complete?
39
weeks:
25
12
40
15
27
22
22
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.
40
Total float
(ii)
Free float
(iii)
Independent float
Duration
(weeks)
FLOATS
EST
LST
EFT
LFT
Total (TF)
Free (FF)
Independent (IF)
=LFT-EST-D
=EFT-EST-D
=EFT-EST-D
10
10
12
10
10
10
10
12
17
17
10
10
17
17
10
10
15
15
15
15
17
17
17
17
20
20
41
NB: TF . FF > IF
5.2.7 Project crashing (least cost scheduling)
Least cost scheduling (or crashing) 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.
Definitions:
1.
Normal cost The cost incurred when an activity is completed within the normal time.
2.
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.
3.
Crash time This refers to the shortest possible time it would take to complete an
activity if additional resources were employed.
4.
5.
Cost slope This refers to the additional cost incurred in crashing an activity by a unit
time.
Cost slope = Crash cost Normal cost
Normal time 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.
42
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
every
Activity
A:
B:
C:
D:
E:
F:
Predecessor
Procurement of materials
Plumbing
Masonry
Electrical works
Carpentry
Finishing
A
C
C
B,D,E
43
Normal time
(weeks)
3
6
5
8
6
4
Crash time
(weeks)
3
4
3
7
4
2
Activity
A
B
C
D
E
F
Required:
(4 marks)
(b) The normal completion time of the project and the critical activities.
(2 marks)
(c)
(i)
(8 marks)
(ii)
(2 marks)
(d)
(2 marks)
(e)
(2 marks)
(Total: 20 marks)
a) Network diagram
13
7
13
B
6
A
3
F
4
8
C
17
d1 0
5
5
6
E
11
13
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Cashable time
Cost slope
17
A
B
C
D
E
F
Path
3-3 = 0
6-4 = 2
5-3 = 2
8-7 = 1
6-4 = 2
4-2 = 2
45,000
30,000
60,000
22,500
75,000
Time
Crash C by 2
Cash D by 1
Crash F by 2
C-D-F
17
15
14
12
A-B-F
13
13
13
11
C-E-F
15
13
13
11
2 x 30
60 + 60 x 1
120 + 75 x 2
= 60
= 120
= 270
Additional
Cost Sh.000
Cost slope is the additional cost that is incurred when an activity time is reduced by one
unit.
Cost slope = Crash cost Normal cost
Normal time Crash time
(e)
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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.
Illustration
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
D, E
F, G
Clifford has agreed with the client that the project should be completed in the shortest
duration.
Required:
(i)
(6 marks)
(ii)
(4 marks)
(iii)
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. (8 marks)
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iv)
(2 marks)
Solution
i) Network diagram for the project
A
1
C
3
7
13
14
3
H
2
E
2
F
7
11
11
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14
Time (weeks) 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Workers 6 6 6 6 8 8 8 9 9 3
Reschedule F by 2 weeks 5 5 5 5 8 8 8 6 6 6
Reschedule C by 7 weeks 6 6 6 6 6 6 6 6 6 6
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49
Activities
Distinguish between Total float and free float
State the advantages of organizing projects with a matrix arrangement
Summary
Organizing is the management function that usually follows after planning. It involves the
assignment of tasks, the grouping of tasks into departments and the assignment of authority
and allocation of resources across the organization.
Self-assessment
James Mutiso is a computer engineer in an information technology firm. The firm has decided to
install a new computer system to be used by the firms help desk. James Mutiso has identified
nine activities required to complete the installation.
The table below provides a summary of the activities durations and the required number of
technicians:
Activity
Duration (weeks)
Required number of
technicians
12
13
24
25
34
36
45
56
67
Required:
i) Draw a gantt chart for the project.
ii) Mr. Mutiso would like to reschedule the activities so that not more than 6 technicians are
required each week. Determine if this is possible and how it can be achieved by
rescheduling the activities.
50
ii.
iii.
iv.
v.
vi.
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During the project execution the execution team utilizes all the schedules, procedures and
templates that were prepared and anticipated during prior phases. Unanticipated events and
situations will inevitably be encountered, and the Project Manager and Project Team will
have to deal with them as they come up.
The main elements of project execution are:
Conduct Project Execution Kick-off event, where the Project Manager conducts a
meeting to formally begin the Project Execution and Control phase, orient new Project
Team members, and review the documentation and current status of the project.
Manage Project Execution, where the Project Manager must manage every aspect of the
Project Plan to ensure that all the work of the project is being performed correctly and on
time.
Manage CSSQ (Cost, Scope, Schedule, and Quality), where the Project Manager must
manage changes to the Project Scope and Project Schedule, implement Quality Assurance
and Quality Control processes, control and manage costs as established in the Project
Budget.
Monitor and Control Risks, where the project develops and applies new response and
resolution strategies to unexpected eventualities.
Gain Project Acceptance where the project manager acknowledge that all outputs
delivered have been tested, accepted and approved, and that the products/services of the
project has been successfully transitioned to the expected beneficiaries.
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is responsible for performance measurement which includes finding variances between planned
and actual work, cost and schedule, Project manager is responsible for providing Project Status
Report to all key stakeholders, All Project Key stakeholders are responsible for the review of the
metrics and variances, All Project Key stakeholders are responsible for taking necessary action
of the variances thus determined so as to complete the project within time and budget.
The basic processes of the Project Execution and Control can be: Project Plan Execution, Review
of Metrics and Status Reports, Change Control Process. This defines the procedures to handle the
changes that are introduced during Project Execution and Control.
The facilitating processes during Project Execution and Control can be: Quality Assurance and
Quality Control, Performance Monitoring, Information Distribution or Status Reporting, Project
Administration, Risk Monitoring and Control, Scope Control, Schedule and Cost Control,
Contract Administration.
6.2.9 Project Schedule and cost control
The schedule and budget baselines, along with other baselines, are developed in the planning
phase of the project. The project plan is approved prior to execution by the project sponsor or an
appropriate senior level manager. The project plan includes the budget and schedule. Schedule
determines when work elements (activities) are to be completed, milestones achieved, and when
the project should be completed. The budget determines how much each work element should
cost, the cost of each level of the work breakdown schedule (WBS), and how much the total
project should cost. Actual performance can be compared to these plans to determine how well
the project is progressing or finished. The project schedule is also the tool that links the project
elements of work to the resources needed to accomplish that work.
As a minimum, the project schedule includes the following components:
All activities, A planned start date for the project, Planned start dates for each activity, Planned
finish dates for each activity, Planned finish date for the project, Resource assignments, Calendar
based, Activity durations, The flow (sequence) of the various activities, The relationships of
activities, An identified critical path(s), Total and free float
Project cost control may be broken down into these categories :
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54
A Change Control System is a documented process by which the scope can officially be
changed
The Variance Analysis determines the causes of variances relative to the scope baseline
Re planning can be evoked by the approved change requests and may be realized by
modifications of the WBS .
Activities
Outline the importance project schedule and cost control
How does Quality assurance differ from Quality control
Summary
Producing reports, schedules and budget plans help in controlling the project
throughout its life.
Self-assessment
Controlling cost is much more difficult than monitoring costs. Discuss
55
Estimate at Completion
56
What is the current status of the project in terms of schedule and cost?
What and where are the causes for cost and schedule overruns?
Because plans seldom materialize as expected, it becomes imperative to measure deviations from
plan to determine if action is necessary. Periodic monitoring and measuring the status of the
project allow for comparisons of actual versus expected plans. It is crucial that the timing of the
status reports be frequent enough to allow for early detection of variations from the plan and
early correction of causes. If deviations from plans are significant, corrective action will be
needed to bring the project back in line with the original or revised plan. In some cases,
conditions or scope change, which in turn, will require a change in the baseline plan to
recognize new information.
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Over/Under or Favorable/Unfavorable?
Microsoft Office Performance Point 2007 Management Reporter provides two templates for
variance reporting: Over/Under and Favourable/Unfavourable
An Over/Under report is the simpler of the two, both in its purpose and how it is created.
One amount is deducted from another. If the difference is positive, the account is considered
over. If the difference is negative, the account is considered under.
A Favourable/Unfavourable report not only shows whether an account is over or under. It
also considers the kind of account and its effect on the business. If revenue numbers are
more than what was budgeted, the variance is shown as favorable. However, if actual
expenses are more than what was budgeted for, that variance is shown as unfavorable.
How are Variance Reports used?
Once a Variance report is prepared, company executives can analyze the state of the enterprise.
One way to do this is to evaluate the financial risk to the company should those trends continue.
Another is to address the reasons behind the variances identified in the report. A follow up to
both of those steps may be to create new targets for improvement. Investigating variances is a
key step in using variance analysis as part of performance management.
When should a variance be investigated - factors to consider
i) Size- A standard is an average expected cost and therefore small variations between the actual
and the standard are bound to occur. These are uncontrollable variances and should not be
investigated. In addition, a business may decide to only investigate variances above a certain
amount. The following techniques could be used:
Fixed percentage rule, e.g. investigate all variances over 10% of the budget
Statistical decision rule, e.g. investigate all variances of which there is a likelihood of less
than 5% that it could have arisen randomly.
ii) Favourable or adverse- Firms often treat adverse variances as more important than
favourable and therefore any investigation may concentrate on these adverse variances.
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iii) Cost - For investigation to be worthwhile, the cost of investigation must be less than the
benefits of correcting the cause of the variance.
iv) Past pattern- Variances should be monitored for a number of periods in order to identify any
trends in the variances. A firm would focus its investigation on any steadily worsening trends.
v) The budget- The budget may be unreliable or unrealistic. Therefore, the variances would be
uncontrollable and call for a change in the budget or an improvement in the budgeting process,
not an investigation of the variance.
vi) Reliability of figures- The system for measuring and recording the figures may be
unreliable. If this is the case, the variances will be meaningless and should not be investigated.
59
Variance Analyses:
Cost Variance (CV) is the difference between the earned value of work performed and the
actual cost. CV tells you the earned value of work performed for each shillings worth of
work scheduled.
Cost Variance (CV) = Earned Value (EV) Actual Cost (AC)
If the result is POSITIVE, project is experiencing an Underrun
If the result is NEGATIVE, project is experiencing an Overrun
Potential Causes of Unfavorable (-) Cost Performance
Work more complex than anticipated Design review comments extensive ReworkUnclear
Requirements Scope Creep Unfavorable Market Fluctuations in the Cost Labor or
Material Overhead Rate Increases
Potential Causes of Favorable (+) Cost Performance
Efficiencies being realized Work less complex than anticipated Fewer revisions and
rework Favorable Market Fluctuations in the Cost of Labor or Material Overhead Rate
Decreases
Schedule Variance (SV) is the difference between the earned value of work performed and
the work scheduled. SV tells you the value of work performed less value of work scheduled
Schedule Variance (SV) = Earned Value (EV) Planned Value (PV)
If the result is POSITIVE, project is on schedule or exceeding the schedule
If the result is NEGATIVE, project is behind schedule
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Performance Indices:
Cost Performance Index (CPI) is a measure of Cost Efficiency. The CPI measures the value of
work performed against the actual cost.
Cost Performance Index = Earned Value (EV)/Actual Cost (AC)
If the result is less than 1.0, cost is GREATER than budgeted
If the result is greater than 1.0, cost is LESS than budgeted
Schedule Performance Index (SPI) is a measure of Schedule Efficiency. The SPI measures the
value of work performed against the work scheduled.
Schedule Performance Index = Earned Value (EV)/Planned Value (PV)
If result is less than 1.0, project is BEHIND schedule
If the result greater than 1.0, project is AHEAD of schedule
Reporting Variances
The size and complexity of the project determines the reporting needed. Different industries and
government agencies will set variance thresholds at different levels, but most set the variance
level between + or - 7% to 10%. This means that a SPI or CPI of .90 to 1.1 will require an
official variance analysis to explain what is happening on the project. Note that you need to
explain positive variances as well as negative variances.
61
of all budgets allocated to a project scope. The Project BAC must always equal the Project Total
PV. If they are not equal, your earned value calculations and analysis will be inaccurate.
The chart on the following page lists the parameters of the BAC and EAC along with the other
EVM items we have covered
Item
Questions
Another term you may hear is Latest Revised Estimate (LRE). The LRE is equal to the EAC.
Estimate At Completion = Latest Revised Estimate
For the remainder of the Modules, we will refer to Estimate at Completion as
EAC.
The EAC is the best estimate of the total cost at the completion of the project.
The EAC is a periodic evaluation of the project status, usually on a monthly
basis or when a significant change happens to the project. EACs are developed with varying
degrees of detail and supporting documents.
A comprehensive EAC is usually prepared annually or if there are any major changes in the
project. The EAC should be reviewed on a monthly basis by the Control Account Manager
(CAM) or those responsible. The EAC is developed for projects as well as control Accounts and
Work Packages.
There are multiple ways to develop an EAC. The technique selected is based upon the shilling
value of the project, the risk, accounting system available and the accuracy of the estimates.
62
63
This calculation uses the Actual cost, Earned value, the value of work completed and in process
and the cost of work not yet begun. This formula assumes that the work not yet begun will be
completed as planned.
1.1 Summary
Performance measurement defines how success or failure is determined on a project. In
the case of Earned Value Management, performance measurements focus on cost and
schedule management.
1.2 Self assessment- Outline the importance of variance analysis in project management
64
65
situation or event that has a potential to have a favourable impact on the project outcome
or objectives.
Risk management is the identification, assessment, and prioritization of risks followed by
coordinated and economical application of resources to minimize, monitor, and control
the probability and/or impact of unfortunate events or to maximize the realization of
opportunities.
Use a category or categories to start the creativity flowing; Do not judge or analyze
during this effort; and
Focus on getting the universe of risks and opportunities for the project.
66
Use flip-chat paper or a white board the collect the information for the team;
Request that each person write about three (3) to five (5) risk events for each area.
Participants should not share lists;
Request that the first person provide the first item on his/ her list then proceed to the next
person and repeat the request for his/ her first item; and
This helps to avoid duplicate listings of the same risk(s) and also saves time taken to perform this
task.
3. Mind Mapping
The steps involved are as follows:
Represent major risks for that category with lines connecting with the circle;
For each major risk, identify smaller risks that are part of that risk;
At the end of this activity, there should be a fish bone diagram that shows the different
relationships for each risk.
4. Delphi Technique
The steps involved are as follows:
The facilitator then conducts a factor analysis on the data to identify common themes;
67
The list of themes is refined and again shared with the panel; and
Review the lessons learned documents for a list actual risk events that occurred,
response(s) to the risk event, effectiveness of the risk event and any new risks identified
during the project.
Expected monetary value, EMV=PiXi where Xi is the risk event value (expected
gain or loss that will be incurred if the risk event occurred) and Pi is the risk event
probility. The higher the EMV the higher the risk
68
ii.
Statistical sums- Used to calculate a range of total project costs from cost
estimates and a range of project completion time.
iii.
iv.
Decision trees- Diagrams that depicts key interactions among decisions and
associated chance events as they are understood by the decision maker. The
branches of the tree represent either decision or chance events. Using the roll back
method EMVs of various decision alternatives are evaluated.
b) The qualitative approach (Expert judgment) - uses subjective values such as High Risk,
Medium Risk or Low Risk. It requires common understanding of the team's preferred
ordinal ranking system and is less precise than the quantitative approach. It relies more
on experience and is an effective way of prioritizing risk.
8.2.11 Project risk response strategies
The project team should begin in defining the steps for responses to opportunities and threats. A
risk response is performed whenever, a new risk is identified, an existing risk changes,
influential factors change or new information about the project surfaces. When developing a
project's risk response, it should be approached it from a project-wide perspective. Relationships
between risk events are extremely important. The project team should develop risk responses for
each risk event within the sphere of project influence and control.
The following documents can be used to assist in developing the project's risk response plan:
Project Contract;
Schedule;
69
1. Risk avoidance. Risk can be eliminated usually by eliminating the cause. An example of
this is using a less complicated or less sophisticated programming language.
2. Risk mitigation. This is done by reducing the risk event probability, risk event value or
both. An example of this is using a proven technology.
3. Risk acceptance. The project team could just decide to accept the consequences and take
it from there. An example of this is changing the relationships on a schedule, thereby
making one or more of the tasks in the sequence late. If the late task(s) are not critical, the
project team will just let it be.
4. Risk transfer. This is done by removing the impact or consequences of the risk event. It
is important to make this distinction from mitigation. An example of transference is
gathering information through user groups and not the project team, insuring some risks,
etc
8.2.12 Project risk monitoring and control
Monitoring risk means to review it and update it continuously.
Look for other risks that might be reduced or eliminated and no longer need coverage
Check operating volumes - they change so that coverage levels need to change
Risk control is the process of implementing measures to reduce the risk associated with a
hazard. The control process must follow the control hierarchy, in order, as prescribed in some
health and safety legislation. It is important that control measures do not introduce new hazards,
and that the ongoing effectiveness of the controls is monitored.
"Risk control hierarchy": ranks risk control measures in decreasing order of effectiveness:
70
elimination of hazard;
engineering controls;
The risk control measures implemented for the hazards identified should always aim to be as
high in the list as practicable
Risk monitoring and control is a continuous process until the project ends
The monitoring and control of risks in project ensures that the resources of a company put aside
for a project is operating properly. Risk monitoring and control therefore helps to ensure that the
project stays on the track or on course. Risks are monitored because projects are usually dynamic
due to constantly changing variables. Its imperative therefore to keep these variables and their
associated risk stay within the acceptable limits for the project. Risk monitoring control is
performed at the concept phase of the project and ends at the close-our phase. It should be
included in the regular communication process of the project.In particular, risk control is also
performed prior and the during the risk event. It is performed whenever there are changes to the
project scope and on a regularly scheduled basis.
Tools Available for Risk Control
Risk Metrics are appropriate metrics that will aid in monitoring risks on the project. These
include risk events, probability, value and impact. Timeframe, type, priority and status are also
part of this list.
Monitoring and control tools include:
Project schedule;
Risk triggers are actions, events or circumstances that, if ignored, will cause the occurrence of a
risk event. The project manager needs to identify potential triggers that would indicate that a risk
71
event will occur and to ensure that these triggers are visible to the project team. He/ she will need
to monitor these triggers frequently.
8.3 Activity
Explain the importance of a project risk quantification exercise
8.4 Summary
When we discuss project risk management, there are two main schools of thoughts.
The first school of thoughts view risks as threats; always. Human nature lead
people to think of a risk event as threat, danger, hazard, or any other word
that reflect negative or bad situation. Another school of thoughts; mostly reflecting
a business perspective, view risk events as uncertain events that could have
negative or positive consequences on the objective of the task, project, or mission
that we are undertaking. Regardless of which school one follows, we need to shift
our paradigm to think of positive and negative consequences to events on our
projects and our lives. If you subscribe to the second school of thought, then you
already understand or accept that risks could be a threat or an opportunity. On
the other hand, if you are from the first school, then you can continue to think of
risk as bad but you also need to think of opportunities.
A risk can be assessed using two factors: impact and probability. If the probability is
1, it is an issue. This means that risk is already materialized. If the probability is
zero, this means that risk will not happen and should be removed from the risk
register.
72
Release of the resources, both staff and non-staff, and their redistribution and reallocation
to other projects, if needed.
Documenting the Issues faced in the Project and their resolution. This helps other projects
to plan for such type of issues in the Project Initiation Phase itself.
73
Recording Lessons Learned and conducting a session with the Project Team on the same.
This helps in the productivity improvement of the team and helps identify the dos and
donts of the Project.
Project Sign-Off
Schedule Management
Cost Management
Quality Management
Configuration Management
74
Did the delivered product / solution meet the project requirements and objectives?
t information
ct Phases and for each phase list exit criteria, i.e. those deliverables that must be accepted and those tasks that
must be completed before the project team can move to the next project phase. Sample information is included in
he form below:
Project Phase
Initiation
Exit Criteria
75
Planning
Execution
Closer
(Test &deployment)
76
Role
Signature
Date
The signatures above indicate an understanding of the purpose and content of this document
by those signing it. By signing this document, they agree to this as the formal Project Phase
Exit Plan document.
1.3 Activity
What is the importance of discussing the lessons learnt a the project closure phase
Summary
The outputs from Project Closure Phase provides as a stepping stone to execute the
next projects with much more efficiency and control.
77
LECTURE TEN:
10.1Introduction
For those involved with a project, project success is normally thought of as the achievement of
some pre-determined project goals; while the general public has different views, commonly
based on user satisfaction.
10.2
Specific objectives:
Lecture Outline
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79
1.3 Activities
1.3.1 Why do projects go wrong?
1.3.2 Discuss the hard and soft success criteria of a project
1.4 Summary
It is critical for a project manager to understand what the stakeholders consider
as a successful project. In order to avoid any surprises at the end of the project,
there is an urgent need to identify the different perspectives of what success
means before the project goes live. It is also vital to remember that success
criteria are the standards by which a project will be judged, while success
factors are the facts that shape the result of projects.
80
TIME 2 HOURS
Critical path
(2 marks)
ii)
(2 marks )
iii)
Configuration management
( 2 marks)
iv)
Feasibility studies
( 2 marks)
v)
Dummy activity
(2 marks )
b) Mrs. Otieno wants to open a cafeteria in Nakuru. 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 day.
Activity
A:
B:
C:
D:
E:
F:
Predecessor
Procurement of materials
Plumbing
Masonry
Electrical works
Carpentry
Finishing
Activity
A
B
C
D
E
A
C
C
B,D,E
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Normal time
(weeks)
3
6
5
8
6
4
Crash time
(weeks)
3
4
3
7
4
2
75,000
Required:
(I)
The normal completion time of the project and the critical activities.( 6 marks)
(II)
(i)
(ii)
( 2 marks)
(III)
( 2 marks)
(IV)
( 2 marks)
(Total: 30 marks)
QUESTION Two
a) Discuss the responsibilities of a project manager
(10 marks )
( 4 marks)
c) For a project that is already underway in your organization, Identify the key areas
requiring monitoring and suggest the kind of information and procedures that would be
involved.
(6 marks)
QUESTION Three
(a) Outline the important stages which makes up the project life cycle
(10 marks)
(b) Explain the importance of procedural handling of exits and phase-out from one stage of the
project to the other
(10 marks)
QUESTION Four
The management of the project is an activity which does not only focus on the project
management tools and procedures but also extends it self to management of risks in the project
environment. As a project manager, describe the plan you will follow in managing risk.
(20 marks)
QUESTION Five
a) Describe the main responsibilities of a Project Support Office. (10 marks)
b) Briefly explain the various phases of Change management in an organization.
(10marks)
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TIME 2 HOURS
(6 marks)
(8 marks)
c) Outline the common problems faced by Project Managers during the Initiation Phase.
(4 marks)
d) Explain the Factors that Affect Individual and Organizational Perceptions of project
Risks
(4 marks)
(4 marks)
Configuration management
( 2 marks)
vii)
Feasibility studies
( 2 marks)
QUESTION Two
d) For a project that is already underway in your organization, Identify the key areas
requiring monitoring and suggest the kind of information and procedures that would be
involved.
(6 marks)
e) Ujenzi Company ltd has been awarded a construction project. The chief Engineer of the
company has established the following cost and time information relating to the contract:
83
Activity
Predecessor(s) Normal
Normal
Crash time
Crash cost
time
cost
(Days)
(sh)
(Days)
(sh)
30
90,000
25
105,000
25
180,000
20
190,000
10
50,000
54,000
10
7,500
9,000
B,D
10
4,200
10
4,200
A,E
20
20,000
16
30,000
A,E
35
28,000
30
35,000
B,D
20
12,000
18
15,000
20
14,000
15
24,000
Required
(i) The critical path and the normal completion time of the project (6 marks)
(ii) The minimum project duration and the additional project cost for that duration.
(8 marks)
QUESTION THREE
a) Research with hundreds of project teams has shown that a one-size-fits-all approach
change management is not sufficient. To be effective at leading change,
to customize and scale their change management efforts, based
of the change and the attributes of the impacted
to
(16 marks)
(b) Explain the importance of procedural handling of exits and phase-out from one stage
the project to the other
QUESTION Four
a)
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of
(4 marks)
(b)
(i)
Crash time,
(2 marks)
(ii)
Optimistic time,
(2 marks)
(iii)
Forward pass,
(2 marks)
(iv)
Dummy activity,
(2 marks)
(v)
Slack.
(2 marks)
James Mutiso is a computer engineer in an information technology firm. The firm has
decided to install a new computer system to be used by the firms help desk. James
Mutiso has identified nine activities required to complete the installation.
The table below provides a summary of the activities durations and the required number
of technicians:
Activity
Duration (weeks)
Required number of
technicians
12
13
24
25
34
36
45
56
67
Required:
(i)
(6 marks)
(ii)
Mr. Mutiso would like to reschedule the activities so that not more than 6
technicians are required each week. Determine if this is possible and how it can
be achieved by rescheduling the activities.
(4 marks)
QUESTION Five
Discuss the contents of the project Standards and Procedures Manual.
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(20 marks)