Project Management and Finance (19ES7HSPMF) Dr Poornima G

UNIT-4
The monitoring and controlling system provides the following benefits to the
project:
 Ability to check project progress and make necessary amendments as and
when needed in the project environment
 Keeping all key stakeholders informed about the implementation of the
project • The project manager is able to make better trade off decisions
especially with respect to scope, schedule, budget and quality of the
project.
 Ability of the project manager and team to learn from previous mistakes
 Proper assessment of project performance with respect to cost and schedule
constraints
 Put the project manager and team in pole position to address risks arising
during the implementation of the project

We know Project implementation involves major activities:

1. Organization of project team.
2. Allocation of work to each member.
3. Resources assessment, procurement and allocation to the team.
4. Continuous monitoring of the project performance with respect to cost, value
of work and time.
5. Effective control while taking action to minimize mistakes, wastage of
resources, time and manpower, also it takes care of minimizing the time and
controlling the overhead especially with respect to the cost.
6. Effective co-ordination with top management, client and vendors etc. at every
stage.

The success of the project implementation depends on the leadership and team
work and organization. Project management is one of the high-responsibility
tasks.

Project management is used in many types of projects ranging from software

development to developing the next generation fighter aircrafts. In order to
execute a project successfully, the project manager or the project management
team should be supported by a set of tools. These tools can be specifically
designed tools or regular productivity tools that can be adopted for project
management work. The use of such tools usually makes the project managers
work easy as well as it standardizes the work and the routine of a project manager.

There are some of the tools used by project management in all domains:

a. Project Plan

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

All the projects managed by a project manager has project plan. The project plan
covers all the details of many aspects of the project to be executed. It covers
important details like scope of the project, the approach or strategy used for
addressing the project scope and project objectives. The strategy in project is the
core of the project plan. The strategy varies depending on the project purpose and
specific project requirements. The resource allocation and delivery schedule are
other two important components of the project plan. It covers details of each
activity involved in the project and an information such as who executes them
and when. This is important information for the project manager as well as all the
other stakeholders of the project.

Working of Systems

 System: Men, Materials, Machine, and Paper

 Procedure: Planned Sequence of operations for carrying out a recurring
work involved in a system uniformly and consistently.

System Characteristics

 It is a set of elements
 The elements are organized systematically
 The elements are interrelated
 A system refers to a self- sufficient organic whole
 A system has a behavioral characteristic of its own
 A system has hierarchy

Class of Systems

 Natural System
 Artificial System
 Self-Regulating System
 Controlled System
 Information Bound System

Information Bound System (PMIS is current System Example)

A PMIS is typically one or more software applications and a methodical process

for collecting and using project information.

PMIS is the comprehensible collection of the information needed by the

organization in order to ensure smooth project implementation process.
However, the PMIS which is a software application varies in design and structure
based on the functioning requirements of the organization.

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

• However, the PMIS focuses on the following:

• Ensures the proper management of the project throughout the lifecycle.
• Enables the use of automated system to support the delivery of project
management tasks.
• Provides project manager and team with adequate tools and techniques
needed to meet project objectives within schedule.
• A multi-user application that can be cloud based or hosted on premises?
designed to support project management implementation.

The benefits of using computer systems in project management are:

• Improved project communication and information sharing: There are several

stakeholders and staff involved in a project. In order for these parties to be
comfortable with the implementation process, there must be an efficient mode
of communication. With a computerized system, project managers are able
to design a better and effective means of communicating project progress
and status with team members as well as key project stakeholders. There
is a popular adage which states that “Information is power”; because of the
advanced tools and techniques provided by computerized system it’s
absolutely clear that such will significantly reduce the level of
misunderstanding and possible confusion that usually emerges in projects.
The communication plan developed in the planning phase of the project, will
be easily executed with such computerized system in place.

• Helps in the management of project resources such as costs, scope and time: A
good project manager is one that has the capacity to manage project
appropriately. The management of project is so involving that project
managers must be disciplined enough to ensure quality output. The project
manager should ensure that staff are well paid and motivated to work in the
interest of the project, sufficient budget is allocated for the successful
completion of each task, budget is well managed in order to prevent issues such
as underbudgeting; that can lead to significant project delay and changes to the
scope of the project are seriously handled. Such change requests are bound
to come up especially towards the end of the project. The project manager
should be smart enough to address such request so as to minimize delays.
Project delays can have negative impact on project schedule, budgets and scope.
In fact, the more delays you encounter during the project, the more cost incurred
and less likely for the project to meet its deadline.With the computerized
system, most of these challenges arising during project implementation can be
easily resolved. Project managers will have a system to track project spending
and other resource usage that were difficult to manage using manual system.

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

• Better project risks approaches: Risk is unavoidable in project management, but

with a computerized system; its identification and accurate analysis is
guaranteed. Such system enables the project manager to easily identify risk
and predict it likelihood of occurrence and possible impact when it occurs.
This knowledge guides the project manager as to which intervention
strategies should be employed to tackle the most probable risk. Some
software can flag up warnings or alerts; that are useful for the proper
management of the project.

• Accurate and timely project reporting: Report plays a pivotal role in the
management of project. In fact, it is incumbent on project personnel to
periodically report on the status of the project. Such reports are needed by
key project stakeholders such as project manager, senior management and even
team members to enable them keep track of the project. Sometimes, project
tends to divert from the client’s requirements; in such instance, the project
manager should direct it towards accomplishing client’s requirements.

• Computerized system helps to provide better project planning techniques.

• Improved ways of handling project problems than the manual system.

• It minimizes project errors emanating from human mistakes.

The challenges of using computer systems in project management are:

• Computer systems can be expensive and difficult to maintain: Most

software is costly to purchase especially when the cost is not commensurate
with the project benefits. For large and complex projects, having such
system is justifiable because such projects are tough to manage. In addition,
maintaining the system is another challenge faced by project managers. Every
software has a lifespan, and project managers must understand that in order to
avoid errors and possible malfunctioning of the system. When the system
malfunctions; it produces wrong information that misleads project managers
and team into making the wrong decision. Thus, making the maintenance of this
system as important as buying it.

• The use of some systems requires additional training for project personnel.
This provides project managers and team with the requisite knowledge
needed to use such system effectively and efficiently to accomplish project
objectives.

• All computerized systems are prone to possible failure. Such failure can cause
significant damage to the project especially when the project manager is over
reliant on the system for the management of the project.

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

Significant reduction in project progress which arises when there is an issue

with the system. Software systems are prone to errors due to malware infection;
and as such, the project will delay because the system is unable to deliver in time.
• Having a computerized system to manage project can lead to possible laziness
on the part of project team especially when they depend on the system for every
bit of the process. Such dependency can prevent project manager and team from
paying attention to minute project details that are pertinent to the success of the
project.

• The use of computer system in the design of project can make simple and easy
project looks difficult and complex. Even though, it helps in the neat presentation
of such project but yet brings in additional features that will not be included under
normal circumstances. In situations, where the system isused improperly, it
makes the work more difficult for project stakeholders.

PMIS and the project lifecycle PMIS provides the tools and techniques required
to deliver information in a project. It is used in every stage of the project from
initiation, planning, execution and closure.

In initiation, the PMIS support in information gathering, integration and

dissemination for management decisions. In planning, PMIS provides the
following:

• Development of appropriate work breakdown structure

• Concise budget framework used in cost estimation

• Assigning and scheduling of tasks for efficient management

• Supports the development of the various project management plans such

as communication plan, financial plan, procurement plan etc.

• Defining scope baseline

In execution, PMIS:

• Helps in managing project resources such as materials, equipments, facilities

in order to accomplish the project

• Enables the project manager to keep track of project tasks that are implemented
by assigned personnel

• It creates the relationship that exists among project tasks during the execution
process
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Project Management and Finance (19ES7HSPMF) Dr Poornima G

• Compares project baseline with the actual accomplishment of each tasks

• Keeping project data and records for reporting purposes

In closure, PMIS:

• Review of project tasks to ensure project goal is met

• Helps in preparing project final report

• Support in closing down the various project activities In essence, PMIS serves
as the hub in the efficient management of project

b. The next one is Milestone Checklist

This is one of the best tools the project manager can use to determine whether he
or she is on track in terms of the project progress. The project manager uses
developed software to track or use a simple Excel template. The milestone
checklist is a live document. This document is updated once or twice a week.

c. The next one is Gantt chart

Gantt chart illustrates the project schedule and shows the project manager the
interdependencies of each activity. Gantt charts are universally used for any type
of project from construction to software development. Gantt chart looks quite
easy; however it is one of the most complex tasks when the project is involved in
hundreds of activities. Manager can create a Gantt chart. If the project is small
and simple in nature, Gantt chart can be prepared in Excel. Readymade template
of Gantt charts are also available on the internet which you can download. In case
of the project, which has a high financial value or high-risk exposure, then the
project manager uses software tools and which is very popular i.e. MS Project.

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

d. Project Management Software

With the introduction of computer technology, there has been a number of
software tools specifically developed for project management purpose. MS
Project is one such tool which is popular in project managers across the world.
MS Project can be used as a standalone tool for tracking project progress. It can
be used for tracking complex projects distributed in many geographical areas and
managed by a number of project managers. There are many other software
packages for project management in addition to MS Project. Most of these new
additions are online portals for project management activities where the project
managers (members) have access to project details and progress from anywhere.

a. Delivery Reviews

Delivery reviews make sure that the deliveries made by the project team meet the
customer requirements and adhere to the general guidelines of quality. Third
party team or supervisors, who come from internal organisation, conduct the
delivery review. Main stakeholders of the project delivery also participate. The
delivery review may decide to reject the delivery due to the quality standards and
non-compliances if any.

b. Score Cards
This is the tool used when it comes to performance of the project team. A
scorecard is the way of tracking the activities. Every project manager is
responsible for accessing the performance of the team members and reporting it
to top management and Human Resource department. Because, this performance
information is used for promotion purpose and in human resource development
for training and succession planning etc, This is a comprehensive score card and
performance assessment tool which help team leader and team member to place
themselves in correct position.

Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore

Project Management and Finance (19ES7HSPMF) Dr Poornima G

While the first step in planning and scheduling a project is to develop the work
break down structure.

Work Breakdown Structure :

“A deliverable-oriented hierarchical decomposition of the work to be

executed by the project team to accomplish the project objectives and create
the required deliverables”

&

“A work breakdown structure defines all the things a project needs to

accomplish, organized into multiple levels, and displayed graphically.”

A work breakdown structure (WBS) is a visual, hierarchical and deliverable-

oriented deconstruction of a project. It is a helpful diagram for project managers
because it allows them to work backwards from the final deliverable of a project
and identify all the activities needed to achieve a successful project.

All the steps of a project are outlined in the organizational chart of a work
breakdown structure, which makes it an essential project management tool for
planning and scheduling. The final deliverable rests on top of the diagram, and
the levels below subdivide the project scope to indicate the phases, deliverables
and tasks that are needed to complete the project.

How to create a Work breakdown structure

 Step one: Determine the major deliverable to be produced.

 Step two: Identify the most important pieces of scope.
 Step three: Divide each of these work pieces into its component parts.
 Step Four: Identify the known attributes for each activity.

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

The rules to follow for a correct WBS structure:

Project decomposition should be in the logic of defining various sub-levels of
disaggregation, such as:

• In stages: the breakdown takes place on the basis of the various phases
leading to the realization of an objective (eg: planning, procurement,
construction, etc.)
• For processes: the decomposition is based on the processes that lead to the
realization of deliverables. It is generally used in high standardization
works (eg. Foundations, walls, roof, etc.)
• By location: decomposition is carried out according to the place of
construction (eg: building site london, building site paris, etc.).

Benefits of WBS

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

 Identify responsibilities for each phase of the project

 Describe activities to be carried out in a clear and complete manner,
avoiding any ambiguities
 Assign a task to a specific person or resource avoiding duplication in the
assignment of tasks
 Facilitate communication between the different professional roles involved
in project execution
 Improve understanding of the project by all the subjects involved
 Improve understanding of the project by external subjects

Difference:

The difference between the work breakdown structure, project schedule, and
project plan is a common confusion.

 Work breakdown structure describes the “what” of the project. It

doesn’t include timelines or resources.
 A project schedule is the “what”, “when”, and “who” of the project
includes the project’s deliverables as well as their deadlines and resource
requirements.
 A project plan includes details on how the project will be executed,
managed, and controlled covering every aspect of the project.

Project managers make use of project management software to lay out and
execute a work breakdown structure. When used in combination with a Gantt
chart that incorporates WBS hierarchies, project management software can be
especially effective for planning, scheduling and executing projects.

A WBS in project management takes large, complex projects and breaks down
the project scope into more manageable pieces to make it easier to plan, schedule
and deliver. Tiers of project deliverables and tasks are created to support the
planning, execution, and monitoring of projects. There are four main levels of a
WBS, which are outlined below:

 The Top Level: The project title or final deliverable.

 Controls Account: The main project phases and deliverables.
 Work Packages: The group of tasks that lead to the controls account level.
 Activities: The tasks needed to complete the work package.

Project management requires the appropriate management of a large scale project.

For eg. If a highway is being constructed from city A to city B. this would be a
Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore
Project Management and Finance (19ES7HSPMF) Dr Poornima G

mega project and this project would be completed in various phases and there will
be large no. of activities as a part of this project will also be huge financial
resources. Some of the projects planning related activities are required to be done
before the project while some of the projects controlling related activities are
required when the project is underway during the project. So those activities
related to project planning involved:

Also Take decision about the project scheduling, So than the project scheduling
will require there here again three steps are needed:
a) Time resources to specific activities so that we can allocate the resources
available for specific activates.
b) Relating activities to each other because we know very well that in every
project there are the proceedings relationships, some of the activities cannot be
started until and unless some of the proceedings activities have been completed.
c) Similarly the third aspects relate to updating and revising on regular basis,
nothing is permanent when the project has started than due to certain
contingencies we may require to revise some of the inputs information.
This project controlling will be done as a part of monitoring when the project has
been started and the work on the project is going on.

Project Execution Plan

The project execution plan (PEP) is a critical part of any industrial project. The
PEP describes the methods, processes, and procedures that will be used on the
project. It provides the road map for the design development and strategies that
the team will implement to achieve the project objectives.
 Scope of Work and Deliverables List
 Resource Allocation and Scheduling
 Feedback Loops
 Materials Management
 Key Performance Indicators
 Recruitment & HR Planning
 Lessons Learned

Scope of Work and Deliverables List

 Traditional Approach
 Rushed estimate preparation
 Varying template formats across disciplines
 Unclear documentation of assumptions
 Estimate inconsistencies
 Coordination challenges with cross-discipline deliverables

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

 Risk of missing scope details

 Digital Approach
 Real-time estimate collaboration with all contributors sharing a clearly
defined format
 Clearly defined assumptions, roles, and responsibilities within the estimate
 Limited “best-guessing” or assuming responsibilities or requirements
 Inputs and assumptions defined by each discipline
 Each activity defined on a deliverable basis
 Defined relationships between deliverables
 Highly reliable estimate
 Clearly identified project execution philosophy

Resource Allocation and Scheduling

 Traditional Approach
 Enterprise resource allocation based on planning of individual discipline
leads or managers
 Insufficient communication between projects, clients, and organizational
needs
 Inefficient resource management (hiring, firing, resources not fit-for-
purpose)
 Common misalignment between ongoing project demands and discipline
resource supply
 Digital Approach
 Project managers use web-based tools to outline project-by-project
discipline requirements (demand) on an ongoing basis
 Discipline leads review project demands and ensure sufficient fit-for-
purpose resource supply
 Dashboard reports allow users to easily identify supply gaps
 Corrective measures easily implemented to avoid project scheduling
disruption
 Clear lines of sight ensure a one-team approach

Feedback Loops

 Traditional Approach
 Individual input gathered and evaluated sequentially
 Cyclical review process
 Disciplines capture and store data in silos
 Limited client feedback during early development phases
 Client reviews held until the design is polished
 Digital Approach
 Design development is conducted in a shared database environment

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

 All project stakeholders have access to information from the project onset
 Concurrent design development process is conducted in parallel across
disciplines
 Clients invited to collaborate throughout the design development process

Materials Management

A PEP defines how the project design will shape the staging for the purchase of
materials and equipment. The PEP explains how items will be sourced and
ensures systems are in place to track buying processes.
 Traditional Approach
 Teams of people required to manage materials and vast MTO lists in
spreadsheets
 Manual entry processes for updating and tracking
 Data entry prone errors
 Digital Approach
 Material tracking systems upload information directly from design models
 Central database stores multiple data versions for seamless comparison
 System performs algorithmic verification to ensure data integrity
 Fuzzy algorithms sort data to eliminate repetition

Key Performance Indicators

A PEP describes how the team will capture the information required to track the
project’s KPIs. Considering the client’s priorities, the execution plan outlines the
reporting targets that project managers use to make important decisions.
 Traditional Approach
 Cumbersome, time-consuming reporting cycles
 Completed for one set of boundary conditions
 Manual manipulation of reporting parameters
 Digital Approach
 Automated format standardization and progress tracking (compare plan vs.
actual)
 Data-centric environment allows easy manipulation of reporting
parameters
 Robust reporting available in many role-specific perspectives

Recruitment & HR Resource Planning

It’s important for the PEP to identify the right people for each job function on the
project. Depending on resource availability and team composition, the right
person might be someone new or a subject matter expert within the organization.

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

 Traditional Approach
 HR systems often inaccessible to individuals outside of HR
 Project managers unaware of SMEs within the organization
 Inefficient or unrequired hiring or outsourcing
 Difficult to maintain an organization-wide capabilities matrix as a
company grows and team members complete professional development
 Potential for non-standardized hiring practices
 Digital Approach
 HR system provides customized user-access levels to ensure only pertinent
personnel information is available
 Proposal teams have access to HR database with personnel education,
training courses, resumes and accomplishments
 Managers have access to team members’ employment status, role, org chart
position, and performance management details
 Combined HR system and recruitment portal streamlines the hiring process
 Digital workflow fosters a collaborative hiring process with recruiters and
hiring managers coordinating resume reviews, interviews, and offer letters
 Comprehensive screening process includes customized technical aptitude
testing
 Highly standardized hiring practices

Lessons Learned

A PEP provides the process to evaluate the project’s successes and failures so
that they can be leveraged in future scopes. The PEP should include a process to
identify outstanding vendors and subcontractors and carry forward the associated
best practices.
 Traditional Approach
 Lessons learned reviews not always conducted
 Records captured in inconsistent formats
 Information is not easily accessible
 Formal vendor and subcontractor evaluation is inconsistent or not always
completed
 Future projects select vendors without considering past performance
records
 Digital Approach
 Simple database systems make all information accessible via a web
interface
 Teams provide performance feedback across all project metrics

Planning and Scheduling

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Project Management and Finance (19ES7HSPMF) Dr Poornima G

Good planning depends largely on project manager’s intuition and

experience!
• Split project into tasks.
• Tasks into subtasks etc.
• For each task, estimate the time.
• Define tasks small enough for reliable estimation.
• Significant tasks should end with a milestone.
• Milestone = A verifiable goal that must be met after task
completion
• Clear unambiguous milestones are a necessity!
(“80% coding finished” is a meaningless statement)
• Monitor progress via milestones
• Define dependencies between project tasks
• Total time depends on longest (= critical) path in activity graph
• Minimize task dependencies to avoid delays
• Organize tasks concurrently to make optimal use of workforce
Planning is iterative
• monitor and revise schedules during the project!

Deliverables and Milestones

Project deliverables are results that are delivered to the customer.
• E.g.:
• initial requirements document
• UI prototype
• architecture specification
• Milestones and deliverables help to monitor progress
• Should be scheduled roughly every 2-3 weeks
NB: Deliverables must evolve as the project progresses!

Project Schedule — Purpose

 Determine if requested completion date is possible.
 Identify start and completion dates of all work.
 Determine the controlling sequence of activities.
 Provide data for resource allocation.
 Track progress by providing a baseline.

Scheduling

Step 1: Estimate Activity Durations

Step 2: Determine Activity Sequence By Creating a Network Diagram
Step 3: Calculate the Schedule Using Critical Path Method (CPM) Procedures
Step 4: Show the Schedule by Drawing Gantt and/or Milestone Charts

Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore

Project Management and Finance (19ES7HSPMF) Dr Poornima G

A Gantt chart, commonly used in project management, is one of the most popular
and useful ways of showing activities (tasks or events) displayed against time. On
the left of the chart is a list of the activities and along the top is a suitable time
scale. Each activity is represented by a bar; the position and length of the bar
reflects the start date, duration and end date of the activity.

PERT & CPM

PERT and CPM are helpful in project planning, controlling and scheduling. The
important project management models for project planning and controlling.
PERT stands for programme evaluation and review technique, CPM critical path
method, Decision Network and GERT Network. Both PERT and CPM are two
popular quantitative analysis technique to help us plan schedule monitor and
control projects. They were developed because there was a critical need for a
better way to manage. We know that the project is very large and very complex
also in its management and so these two techniques come as boom to manage the
project in a very effective manner.

Originally these approaches differed in how they estimated activity times. While
PERT is probabilistic in nature CPM is deterministic in nature. What do we mean
by probabilistic that in PERT we are not able to assign deterministic time
estimates so in PERT we use 3 time estimate to develop a probabilistic estimates
of competition time. Therefore PERT is useful for new projects where we do not
have the past data regarding the activity competition time.
On the other hand CPM is a more deterministic model or technique, here CPM
has been used for relative kind of projects, where the activities are known to have
a deterministic time for completion. They have become so similar and so
intertwine. Because PERT also uses the terminology which is the similar to the
one which is used in CPM. So the two techniques have become so similar to each

Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore

Project Management and Finance (19ES7HSPMF) Dr Poornima G

other that they are now commonly considered as one technique i.e. of
PERT/CPM. But still as I said there are certain dissimilarities also here. Now
these are six steps which are used in
PERT/CPM.
The First stage refers to defining the project all of its significant activities are
tossed, meaning thereby that a project is defined divided into phases and phases
divided into activities are tossed. In second step we talk about developing the
relationship among the activities and we also decided which activities must
proceed others. Here the technology has a say. it a technology says, if a
technology says that activity A &B should be completed then only activity C can
be started so that will be the precedence relationship govern by the technological
consideration.

Third step requires drawing a network connecting all of the activities. While
fourth step is to assign time and cost estimates, in case of CPM to each activity,
in case of PERT we will only be talking about the time estimate. Fifth step is to
compute the longest time path through the network this is called the critical path.

So first the activities are identified then their time estimates are given their
precedence relationship are identified, network is drawn, and then from among
the networks that path which is having the longest time is chosen as the critical
path. Sixth and final step here is that we use the network drawn in such a manner
to help plan schedule monitor and control the project that is basically the essence
of both PERT and CPM. The critical path is very important since any delay in
these activities can delay the completion of the project.

A real life project is very large and complex and complicated having large no. of
activities are task in the project and so we have to see that these questions become
very important every project manager needs the answers to these questions. The
first question is when the entire project will be completed Let us say by 30th
June then the penalty may be imposed on the agency which is involved in the
project. So this is the first and crucial question that when will the entire project
Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore
Project Management and Finance (19ES7HSPMF) Dr Poornima G

will be complicated the second aspect is what are the critical activities are task in
the project that is the once that will delay the entire project if they are late as if
have said that the network is drawn, critical path having the longest length is
identified. Now all those activities which are on the critical path are called critical
activities. Why they are called critical activities because any delay even a small
amount of delay in any of these critical activities will actually delay the whole
project. Than third aspect is which are the non-critical activities. It is not that we
are concerns only with critical activities. We need to have information about what
are the non-critical activities also these are the ones that can run late without
delaying the entire project completion. In other words, we have a crucial period
available for these non-critical activities. So that these activities can be delayed
up to certain extend up-to the extent of the crucial time available for each non
critical activity without actually delaying the entire projects completion. Fourth
question involved here is of three are 3-time estimate.

In PERT we will be using probabilistic time estimates. so when we are using in

PERT 3 time estimates than what is the probability that the project will be
completed by specific date because when we are using probabilistic time
estimates than we cannot be certain about the project completion date in that case
we may be requiring to calculate the probability of completing the project by
certain specific date. Now 5th is at any particular date now this is about
monitoring when the project has been started at any particular date is the project
on schedule, behind schedule or ahead of schedule and so a project manager will
come to know that if the project is going on per schedule then he did not bother
much about it, but if the project is behind schedule then he will have to speed-up.
Some of the activities so that it gains the lost time and also the project manager
must know if the project is going ahead of schedule. While ahead of schedule
may not be much of a problem but still the project manager has to be sure that
whether any quality is not been compromised in order to speed ahead in the
project. so these three aspects of the step number 5 refers to the project monitoring
when the project is already under way. Sixth aspect is on any given date is the
money spend equal to, less than or a greater than the budgeted amount as I said
that you will have the time budget and you will have the cost budget and cost
budget is more use full in CPM. In PERT we are primarily concerns with the time
budget so this point no.6 is referring to the CPM which says that on any given
day is the money spend equal to, less than or greater than the budgeted amount.
Seventh is that are there enough resources available to finish the project on time.
Meaning thereby that the total resources which had been made available to you
whether these resources are adequate to complete the project on time. Then 8 is
that if the project is to be finish in a shorter amount of time. What is the best way
to complete this at the least cost this again is a issue related to the CPM model.

Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore

Project Management and Finance (19ES7HSPMF) Dr Poornima G

In CPM activities are shown as a network of precedence relationships using

activity-onnode network construction
– Single estimate of activity time
– Deterministic activity times

USED IN: Production management - for the jobs of repetitive in nature where the
activity time estimates can be predicted with considerable certainty due to the
existence of past experience.

In PERT activities are shown as a network of precedence relationships using

activity-on-arrow network construction
– Multiple time estimates
– Probabilistic activity times

USED IN: Project management - for non-repetitive jobs (research and

development work), where the time and cost estimates tend to be quite uncertain.

This technique uses probabilistic time estimates. Benefits of PERT/CPM

1. Useful at many stages of project management
2. Mathematically simple
3. Give critical path and slack time
4. Provide project documentation
5. Useful in monitoring costs Limitations of PERT/CPM
6. Clearly defined, independent and stable activities
7. Specified precedence relationships
8. Over emphasis on critical path

Applications of CPM / PERT

These methods have been applied to a wide variety of problems in industries and
have found acceptance even in government organizations.

These include
Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore
Project Management and Finance (19ES7HSPMF) Dr Poornima G

1. Construction of a dam or a canal system in a region

2. Construction of a building or highway
3. Maintenance or overhaul of airplanes or oil refinery
4. Space flight
5. Cost control of a project using PERT / COST
6. Designing a prototype of a machine
7. Development of supersonic planes

Advantages and Disadvantages

PERT/CPM has the following advantages

1. A PERT/CPM chart explicitly defines and makes visible dependencies
(precedence relationships) between the elements,
2. PERT/CPM facilitates identification of the critical path and makes this
visible,  PERT/CPM facilitates identification of early start, late start, and
slack for each activity,
3. PERT/CPM provides for potentially reduced project duration due to better
understanding of dependencies leading to improved overlapping of
activities and tasks where feasible.

PERT/CPM has the following disadvantages:

1. There can be potentially hundreds or thousands of activities and individual

dependency relationships,
2. The network charts tend to be large and unwieldy requiring several pages
to print and requiring special size paper,
3. 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)

Project Evaluation and Review Technique (PERT) The main objective in the
analysis through PERT is to find out the completion for a particular event within
specified date. The PERT approach takes into account the uncertainties.

The three time values are associated with each activity

1. Optimistic time – It is the shortest possible time in which the activity can
be finished. It assumes that everything goes very well. This is denoted by
t0.
2. Most likely time – It is the estimate of the normal time the activity would
take. This assumes normal delays. If a graph is plotted in the time of
completion and the frequency of completion in that time period, then most

Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore

Project Management and Finance (19ES7HSPMF) Dr Poornima G

likely time will represent the highest frequency of occurrence. This is

denoted by tm.
3. Pessimistic time – It represents the longest time the activity could take if
everything goes wrong. As in optimistic estimate, this value may be such
that only one in hundred or one in twenty will take time longer than this
value. This is denoted by tp.

In PERT calculation, all values are used to obtain the percent expected
value.

1. Expected time – It is the average time an activity will take if it were to

be repeated on large number of times and is based on the assumption
that the activity time follows Beta distribution, this is given by

t e = ( t 0 + 4 t m + tp ) / 6

2. The variance for the activity is given by σ 2 = [(tp – to) / 6] 2

Construct the network diagram

Department of Electronics and Communication Engg, BMS College of Engineering, Bangalore