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01/2011
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Uncertainty
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Questions
Given the uncertainties in accurately estimating project durations, what is the probability of completing the project by the deadline (47 weeks)?
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Beta distribution
Elapsed time
is the average of the various activity durations and is the standard deviation that measures the variability of the durations about the mean.
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Note that the mean and the most likely estimate is not the same, because the possibility of much higher durations pushes the mean up.
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H
I J K
5
3 3 4
8
7.5 9 4
17
9 9 4
9
7 8 4
4
1 1 0
L
M
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1
1 5
5.5
2 5.5
7
3
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2 6
1
7
StartABCEFJKNFinish
StartABCEFJLNFinish StartABCIJKNFinish StartABCIjLNFinish
66
69 60 63
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The mean critical path is the path through the project network that would be the critical path if the duration of each activity were equal to its mean. Thus the mean critical path is the same as before:
StartABCEFJLNFinish = 44 weeks
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Approximation 2: Assume that the duration of the activities on the mean critical path are statistically independent. This would not be true if the same cause produces deviations in the durations of two or more activities.
p2 = Sum of the variances of the durations for the activities on the mean critical path.
Approximation 3: Assume that the form of the distribution of the project duration is the normal distribution (one form of the centrallimit theorem). This is justified if the number of activities for the mean critical path is, say, 5.
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L
N Project Duration
5
6 p = 44
1
p = 3
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44 (Mean)
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In Summary
From project definition
Project Rules
PLANNING
PREPLANNING
Risk management
STEP 1
Develop a work breakdown structure
STEP 2
Sequence the tasks
STEP 3
Estimate the work packages
STEP 4
Calculate an initial schedule
Resource constraints
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STEP 5
Assign and level resources
STEP 6
Develop budget
Time-Cost Trade-off
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Questions
If extra money is spent to expedite the project, what is the least expensive way of attempting to meet the target completion date (40 weeks)?
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Crashing
The normal point on the time-cost graph shows the time (duration) of an activity when it is performed in the normal way. The crash point shows the time and cost when the activity is fully crashed; i.e., it is fully expedited with no cost spared to reduce its duration as much as possible. The options for each activity are to be at its crash point, its normal point, or somewhere on the line segment between these two points.
Crash
Crash cost
Normal cost
Normal
Crash time
Normal time
Activity duration
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H
I J K L M N 01/2011
9
7 8 4 5 2 6
6
5 6 3 3 1 3
200,000
210,000 430,000 160,000 250,000 100,000 330,000
380,000
270,000 490,000 200,000 350,000 200,000
sudhir510,000 chadha
3
2 2 1 2 1 3
60,000
30,000 30,000 40,000 50,000 100,000 60,00020
Marginal cost analysis (MCA) finds the least expensive way to reduce project duration one week at a time. MCA becomes unwieldy for large networks. Linear programming (LP) provides a more efficient alternative to marginal cost analysis, for large projects.
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ABCEFJLN
ABCEHM
ABCIJKN
ABCIJLN
Activity to Crash
Crash Cost
40 Weeks J $30,000 40
31 31
43 42
44 43
41 40
42 41
J
F F
30,000
40,000 40,000
40
40 40
31
31 31
41
40 39
42
41 40
39
39 39
40
40 40
Linear Programming
Restatement of the problem:
Consider the total cost of the project, including the extra cost of crashing activities. The problem then is to minimize the total cost, subject to the constraint that the project duration is less than or equal to the time desired by the project manager.
its immediate predecessors have finished. Although the start-time constraints allow a delay in starting an activity, an optimal solution would not allow this to happen for any activity on the critical path.
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Mr Pertys Conclusions
The CPM method of time-cost trade-offs ignores the considerable uncertainty in activity times, so the predicted project duration under any crashing plan may miss the actual duration by a considerable amount. Conclusion 1. The plan for crashing the project only provides a 50% chance of actually finishing the project within 40 weeks, so the extra cost of the plan ($140000) is not justified. Therefore Mr Perty rejects any crashing at this stage. It is sometimes useful to postpone a decision on crashing an activity until near its start time. Information on how well the project schedule is progressing can then influence this decision. Conclusion 2. The extra cost of the crashing plan can be justified if it almost certainly would earn the bonus of $150000 for finishing the project within 40 weeks. Therefore Mr Perty will hold the plan in reserve to be implemented if the project is running well ahead of schedule before reaching activity F. Conclusion 3. The extra cost of part or all of the crashing plan can be easily justified if it likely would make the difference in avoiding the penalty of $300000 for not finishing the project within 47 weeks.. Therefore Mr Perty will hold the crashing plan in reserve to be partially or wholly implemented if the project is running far behind schedule before reaching activity F or activity J.
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Questions
How should ongoing costs be monitored to try to keep the project within budget?
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Project Costs
The following terminology is used for project costs:
Baseline costs. The original planned task, resource, or assignment costs saved as part of a baseline plan; Current (or scheduled) tasks. The calculated costs of tasks, resources, and assignments in a project plan. As adjustments are made to the baseline plan (such as assigning or removing resources) , the recalculated costs are the current costs. The current cost equals the actual cost plus the remaining cost per task, resource, or assignment. Actual costs. The costs that have been incurred for tasks, resources or assignments. After the project incurs actual costs (typically by tracking actual work), the current cost equals the actual cost plus the remaining cost per task, resource, or assignment. Remaining costs. The difference between the current or scheduled costs and the actual costs for tasks, resources, or assignments.
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D
E F G H I J K L M
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6
4 5 7 9 7 8 4 5 2 6
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260,000
410,000 180,000 900,000 200,000 210,000 430,000 160,000 250,000 100,000 330,000
43,333
102,5000 36,000 128,571 22,222 30,000 53,750 40,000 50,000 50,000 55,000
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Reliable Construction
Excavate Lay the foundation Put up the rough wall Put up the roof Install the exterior plumbing Install the interior plumbing Put up the exterior siding Do the exterior painting Do the electrical work Put up the wallboard Install the flooring Do the interior painting Install the exterior fixtures Install the interior fixtures
0
180,000 320,000 620,000 260,000 410,000 180,000 900,000 200,000 210,000 430,000 160,000 250,000 100,000 330,000
Prorated Cost
Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost
109,333 1,932,667 180,000 320,000 620,000 43,333 216,667 410,000 36,000 36,000
109,333 2,042,000 180,000 320,000 620,000 43,333 260,000 410,000 36,000 72,000
194,571 2,236,571 180,000 320,000 620,000 260,000 410,000 36,000 108,000 128,571 128,571
164,571 2,401,143 180,000 320,000 620,000 260,000 410,000 36,000 144,000 128,571 257,143
164,571 2,565,714 180,000 320,000 620,000 260,000 410,000 36,000 180,000 128,571 385,714
30,000 30,000
30,000 60,000
30,000 90,000
30,000 120,000
30,000 150,000
30,000 180,000
30,000 210,000
210,000
210,000
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Reliable Construction
Excavate Lay the foundation Put up the rough wall Put up the roof Install the exterior plumbing Install the interior plumbing Put up the exterior siding Do the exterior painting Do the electrical work Put up the wallboard Install the flooring Do the interior painting Install the exterior fixtures Install the interior fixtures
0
180,000 320,000 620,000 260,000 410,000 180,000 900,000 200,000 210,000 430,000 160,000 250,000 100,000 330,000
Prorated Cost
Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost Prorated Cost Cum. Cost
109,333 1,699,333 180,000 320,000 620,000 43,333 43,333 410,000 36,000 36,000
109,333 1,808,667 180,000 320,000 620,000 43,333 86,667 410,000 36,000 72,000
109,333 1,918,000 180,000 320,000 620,000 43,333 130,000 410,000 36,000 108,000
109,333 2,027,333 180,000 320,000 620,000 43,333 173,333 410,000 36,000 144,000
109,333 2,136,667 180,000 320,000 620,000 43,333 216,667 410,000 36,000 180,000
102,500 102,500
102,500 205,000
102,500 307,500
102,500 410,000
30,000 30,000
30,000 60,000
30,000 90,000
30,000 120,000
30,000 150,000
30,000 180,000
30,000 210,000
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Feasible region for project costs ET project cost schedule LT project cost schedule
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