Project Planning

UNIT 6 PROJECT SCHEDULING

Objectives

• Describe the types of project constraints.

• Understand the nature of resource constraints.
• To understand the time constraint situations.
• Explain the steps and issues involved in scheduling resources in a project
environment.
• To understand the heuristics for scheduling resources.
• Explain the benefits of resource scheduling.

Structure

6.1 Introduction
6.2 Defining the Schedule
6.3 Resource Scheduling Problem
6.3.1 Classification of a Scheduling Problem
6.3.2 Resource Allocation Methods

6.4 Time Constrained Projects: Smoothing Resource Demand

6.4.1 Steps Involved in Resource Smoothing

6.5 Resource – Constrained Projects

6.6 Let Us Sum Up
6.7 Self-Assessment Exercise
6.8 Further Readings

6.1 INTRODUCTION
Project scheduling is a process required to ensure the timely completion of a
project. Till now, we learned about activity on arrow (AOA) and activity on
node (AON) network representation, also calculated the cost and time
required for each activity. A real-life project involves hundreds of activities
for which it is important to evaluate early and late times at which the
activities start and finish. In addition, identifying the group of critical
activities so that they can be focused to reduce the cause for delay. All these
can be done by scheduling a project, which basically adds a time dimension
to the planning process. Project scheduling includes all the tools require to
ensure timely completion of the project. The project scheduling is sued for;

• Knowing the activities timing and the project completion time.

• Having resources available on site in the current time.
• Making corrective actions if schedule shows that the plan will result in
late completion.
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 Project Scheduling
• Assessing the value of penalties on project late completion.
• Determining the project cash flow.
• Evaluating the effect of change orders on the project completion time.
• Determining the value of project delay and the parties responsible for the
same.

But before creating a project schedule, one should typically have a work
breakdown structure (WBS), the time estimate for each task, and a resource
list with availabilities for each resource. A Schedule is created using a
consensus-driven estimation method, the reason for this is that a schedule
itself is an estimate, each date in the schedule is estimated, and if those dates
do not have the buy-in of the people (resource) who are going to do the work,
the schedule will be inaccurate. Setting overall completion dates must be
done by the project team and key stakeholders. The project manager assists
by assimilating information about scope, budget, resources, and estimating
times for completion of project tasks. Once an overall schedule is set, the
project manager is responsible for monitoring the progress of the project and
revising the schedule if needed. This must be done in consultation with
project team members who are doing the work. There will be typically give-
and-take as a project proceeds among budget, scope and schedule. It is
essential for the project manager to keep all participants informed as to
current schedule status.

The schedule development process should generate a project schedule that

meets the following criteria.

• Complete - the schedule must represent all the work to be done,

therefore, the quality and completeness of the WBS is very important.
• Realistic - the schedule must be realistic with respect to time
expectations and the availability of beneficiaries to participate.
• Accepted - the schedule must have ‘buy-in’ from team members and
stakeholders, especially the beneficiaries.

6.2 DEFINING THE SCHEDULE

The creation of the project schedule requires the team to define the conditions
that will lead to the development of the schedule. The first piece of
information needed for this step comes from the WBS that has all the
activities identified for the project. The quality and completeness of the WBS
will determine the quality of the schedule, and this is a good time for the
project team to review if all the project activities are accounted for. Building
the schedule is actually an easy part but once a project is published and issues
and changes start to creep, the schedule becomes difficult to manage since
it’s the resources with the less flexibility. The goal of defining the schedule is
for the project team to have a complete understanding of all the work that
needs they must accomplish, by defining the schedule the project also
develops an understanding of the constraints, dependencies and sequence of
the activities.
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6.3 RESOURCE SCHEDULING PROBLEM
After the assigning of staff and other resources have been taken place, a
project manager still needs to answer the following questions:

1. Will the assigned resource be adequate or available to deal with my

project?
2. Will there be need of outside contractors?
3. Do unforeseen resource dependencies exist? Is there a new critical path
4. The rate of flexibility available for using the resources
5. How realistic is the deadline?

Any project scheduling system should tend to facilitate easy answers to these
questions.

As of now, the start and sequence of activities were solely based on technical
or logical considerations. For, example, a project network for constructing a
home might show 3 activities in sequence: 1) Pour foundation, 2) Build
frame 3) Cover roof. In other words, you cannot perform activity 2 without
completing activity 1 and so on. The project network assumes that the
resources are available to perform the required work. But this is not often the
case! The absence of abundant amount resources can drastically affect the
timeline of a project.

The internal relationships and interactions among the time and resource
constraints are often complex for even smaller projects. Some efforts to
examine these interactions prior to starting the project frequently uncovers
surprising problems. Project managers who do nit look out for resource
availability in moderately complex projects usually learn when it’s too late
recover.

6.3.1 Classification of a Scheduling Problem

The scheduling of projects can be classified into either time constraint type or
resource constraint type. It is necessary for a project manager to consult their
priority matrix to determine which case fits their projects. One simple test to
check whether the project is time or resource constrained is to check, when
the critical path is delayed, will resource be added to get back to schedule? If
the answer is yes, the project is time constrained, of no, then the project is
resource constrained.

Time- Constrained: It means the project must be completed within the given
time period. It required, more resources can be added to make the process
faster and complete it on the given specific time zone. Although time is the
crucial factor, resources usage should be no more than is necessary and
sufficient.

Resource Constrained: It happens when the resources available are limited.

I such situation, it will be acceptable to delay the project, but as little as
110 possible.
 Project Scheduling
6.3.2 Resource Allocation Methods
Before demonstrating the allocation methods, there are certain assumptions
that must be followed through-out the procedure. The assumptions are as
follows:

1. Splitting activities is not allowed. i.e., if one activity is placed with the
schedule, it can’t be removed unfinished.
2. The level of resources used for an activity cannot be changed.

6.4 TIME CONSTRAINED PROJECTS:

SMOOTHING RESOURCE DEMAND
Time Constrained projects are scheduled based on resource utilization. When
the demand for specific resource is erratic, it is difficult to manage and the
utilization of the resource is poor. Many practitioners defend such problems
using resource leveling techniques that balance the demand for resources.
But, leveling techniques delay noncritical activities by using positive slack to
reduce peak demand and fill in the valleys for the resources.

If the duration of completion of project is the constraint, then resources

smoothing is applied without changing total project duration. The period of
minimum demand for resources are located and the activities are shifted
according to float availability and requirement of resources. Thus, intelligent
utilization of float can smoothen the demand of resources to the maximum
possible extent. This type of resources allocation is called as “Resource
Smoothing.”

6.4.1 Steps Involved in Resource Smoothing

1. List out the resources which will be required for execution of the various
activities and identify the ones which are considered important.
2. Resource profiles are prepared by carrying out the resource aggregation
exercise and cumulative resource requirement for each unit are plotted in
the form of histogram.
3. The periods of peak and low demands are identified and an attempt is
made to lower the peaks and fill up the troughs.
4. If there is no constraint on the availability of resources, make the demand
as uniform as possible. This can be achieved by altering the times of start
and finish of non-critical activities, to start with. These activities can
have certain amount of float. Therefore, available float can be used for
making adjustments in the start in start and finish of the activities
concerned and thus, lowering the peak demand by staggering of resource
requirements without delaying the project duration.

Now, let us look at an example and try to understand how resource

smoothing works in a project.
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Project Planning Consider a project with seven activities as shown in the table below. The
predecessors of each activity and the duration of the activities are given. The
number of compressors (consider it as a resource) required by each activity is
also listed. The organization has only 6 compressors available with them.
Look at the table 6.1

Table 6.1

Activity Predecessors Duration No. of Compressors Needed

(Days)
A - 3 6
B A 2 1
C B 5 5
D B 4 2
E C 9 4
F C, D 2 4
G E, F 1 1

Solution:

Step 1: Draw the schedule network diagram and determine the critical path.

5 1 10 1
C, 5 E, 9
5 1 1 1

0 0 3 3 5 1 2 20
Start A, 3 B, 2 G, End
0 0 3 3 5 1 1 20 20

TF=8 TF=7
5 9 10 1
D, 4 F, 2
1 17 17 1
FF=1 FF=7

Fig. 6.1: Show the schedule network and critical path

From the schedule network diagram, you can understand the critical path is
A-B-C-E-G and the total duration of the project is 20 days. The problem with
the critical path method is it does not consider the availability of resources.
So, now we need to check whether there are any resource conflicts in the
schedule created by the critical path method. It will be easier if we present the
schedule in the Gantt chart/ bar chart format to understand the resource usage
over time periods.
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 Project Scheduling
Chart. 6.1: Gant chart or bar chart

AC DU RE 1 1 1 1 1 1 1 1 1 1 2 2 2
T R S 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2

A 3 6

B 2 1

C 5 5

E 4 4

G 9 6

D 2 2

F 1 1
ACT: Activity DUR: Duration (Days) RES: Resources (No. of Compressors Needed)

With the bar chart representation, it is easier for us to calculate the

compressors needed on each day. For example, we know that from day 1 to
3, only activity A is in progress; so, we need 6 compressors on each of these
days. However, from day 6 to 9, activity C and activity D are running in
parallel. So, you need 7 compressors (5 for activity C and 2 for activity D) on
each of these days.

Let us plot the resources required as a histogram in fig. 6.2 below.

Fig. 6.2:

By drawing a line to show the resource limit, we can clearly see the days on
which the resource conflict occurs. You can see that the schedule requires
more compressors than available on six days; Day 6, 7, 8, 9, 11 and 12.
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Project Planning Now, let us see how the application of resource smoothing helps to remove
the resource conflicts on these six days. Resource smoothing looks at
removing as much resource conflicts as possible without delaying the total
project duration.

Let us again start to adjust the original CPM schedule to avoid resource
peaks.

Chart. 6.2

AC DU RE 1 1 1 1 1 1 1 1 1 1 2 2 2
T R S 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2

A 3 6

B 2 1

C 5 5

E 4 4

G 9 6

D 2 2

F 1 1

Available no. of
compressors

Fig. 6.3:

Activity D is shifted from day 6 to day 11. This removes the resource peaks
from day 6 to 9. However, there is still resource conflicts on day 15 and day
16. This conflict cannot be removed without delaying the total project
114 duration. So, resource smoothing will stop here. Out of the six days of
 Project Scheduling
conflict, resource smoothing managed to remove 4 days of conflict.
However, if the organization wants to stick to the original schedule, they
should bring additional resources on day 15 & day 16.

6.5 RESOURCE – CONSTRAINED PROJECTS

Solving the resource scheduling problem for optimal solutions is extremely
complex, particularly for large project networks with many different resource
types. However, several heuristics are available to solve such problems.
These heuristics allocate resources to activities to minimize project delay
based on certain priority rules. The two most commonly used heuristics are
the serial and the parallel methods. In the serial method of resource
allocation, activities are sorted into a list and resources are allocated to each
of these activities one at a time until resources are allocated to all activities.
In the parallel method, however, resources are allocated on a period-by-
period basis rather than each activity. In this method only those activities
whose preceding activities have been completed will be considered. If two or
more activities compete for the same resources, then allocation of resources
is based on certain prescribed priority rules. Compared to the serial method,
the parallel method has been the most widely used heuristic. The following
priority rules, in the order presented, have been found to be the most effective
in minimizing project delay.

• Minimum slack
• Smallest duration
• Lowest activity identification number

The Parallel method

3 2 8

3 2P 3
5 5 10
6 5 8
2 1P 2

0 1 2 3 1 6 8 2 10
10 7 12
0 2P 0 0 2P 0
0 1P 0
0 3 2 2 3 6
10 2 12
6 6 10

0 1P 0

3 4 4 6 4 10

6 1P 6
8 2 10 ES ID EF

SL RES SL
LS DUR LF

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Project Planning Regardless of the scheduling heuristic used, the primary impact of resource
constrained scheduling is the loss of flexibility due to the reduction in slack.
Furthermore, the reduction in slack also increases the number of critical or
near-critical activities.

ID RES DUR ES LF SL 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1 2P 3 0 2 0 2 2 2
2 2P 5 3 10 3 2 2 2 2 2
3 2P 3 3 6 0 2 2 2
4 1P 2 3 10 6 1 1
5 1P 2 6 10 2 1 1
6 1P 4 6 10 0 1 1 1 1
7 1P 2 10 12 0 1 1

Fig.6.4:

Period Action
0-1 Only activity 1 is eligible. It required 2 programmers.
1-2 No activities are eligible to be scheduled
2-3 No activities are eligible to be scheduled
3-4 Activities 2, 3, 4 are eligible to be scheduled. Activity 3 has least slack (0) –
apply rule 1.
Load Activity 3 into schedule.
Activity 2 is next with the slack of 2 but activity 2 requires 2 programmers and
only 1 is available.
Delay activity 2. Update: ES = 3, Slack = 2.
The next eligible activity is activity 4, since it only requires 1 programmer.
Load activity 4 into schedule.

Resource-constrained schedule through period 2-3

Chart. 6.3:

id RES DUR ES LF SL 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1 2P 3 0 2 0 2 2 2
2 2P 5 3 10 3 x
3 2P 3 3 6 0 2 2 2
4 1P 2 3 10 6 1 1
5 1P 2 6 10 2
6 1P 4 6 10 0
7 1P 2 10 12 0
Total resource load 2P 2P 2P 3P 3P 2P
Resource available 3P 3P 3P 3P 3P 3P 3P 3P 3P 3P 3P 3P
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 Project Scheduling
Period Action
4-5 Activity 2 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 2. Update: ES = 4, slack = 1.
5-6 Activity 2 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 2. Update: ES = 5, slack = 0.
6-7 Activities 2, 5 and 6 are eligible with slack of 0, 2 and 0
respectively.
Activity 2 and 6 have slack (0) – rule 1 becomes inactive.
But since, Activity 6 requires 1 programmer and activity 2 requires
2 programmers, both are loaded at the same time.
Delay activity 5. Update: ES = 6, slack = 1.
7-8 Activity 5 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 5. Update: ES = 6, slack = 0.
8-9 Activity 5 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 5. Update: ES = 6, slack = -1.
9-10 Activity 5 is eligible but exceeds limit of 3 programmers in the
pool.
Delay activity 5. Update: ES = 6, slack = -2.
10-11 Activities 5 and 7 are eligible with slack of -2 and 0 respectively.
Activity 5 with slack (-2) and activity 6 have slack (0) – rule 1
Load Activity 5 into schedule.
Delay activity 7. Update: ES = 10, slack = -1.

Chart. 6.4:
i RE DU L 1 1 1 1 1
d S R ES F SL 1 2 3 4 5 6 7 8 9 0 1 2 3 4
1 2P 3 0 2 0 2 2 2
1 0
2 2P 5 3 6 0 3 x x x 2 2 2 2 2
3 2P 3 3 6 0 2 2 2
1
4 1P 2 3 0 6 1 1
1 2
5 1P 2 6 0 -2
-1 x x x x
1
6 1P 4 6 0 0 1 1 1 1
1
7 1P 2 10 2 0
2 2 3 3 2 3 3 3 3
Total resource load 2P P P P P P P P P P
3 3 3 3 3 3 3 3 3 3 3
Resource available 3P P P P P P P P P P P P
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 Project Planning

Chart. 6.4:

RE DU E 1 1 1 1 1
ID S R S LF SL 1 2 3 4 5 6 7 8 9 0 1 2 3 4
1 2P 3 0 2 0 2 2 2
2 2P 5 3 6 10 3 0 x x x 2 2 2 2 2
3 2P 3 3 6 0 2 2 2
2
S
4 1P 2 3 10 6 -2 1 1 L
5 1P 2 6 10 2 x x x x 1 1
6 1P 4 6 10 0 1 1 1 1
1
7 1P 2 0 12 0 -1 x 1 1
2 2 2 3 3 2 3 3 3 3 3 2 1
Total resource load P P P P P P P P P P P P P
3 3 3 3 3 3 3 3 3 3 3 3
Resource available P P P P P P P P P P P P

New network schedule network;

6 2 11

0 2P 0

5 5 11
10 5 12

0 1P 0

0 1 2 3 1 6 10 2 12
11 7 13
0 2P 0 0 2P 0
0 1P 0
0 3 2 2 3 6
11 2 13
6 6 10

0 1P 0

3 4 4 6 4 10

2 1P 2

4 2 6 ES ID EF

SL RES SL

LS DUR LF

Fig.6.5

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 Project Scheduling
6.6 LET US SUM UP
The use of resources and their availability are very difficult issues for project
managers to deal with. By paying attention to these things when making a
project schedule, resource bottlenecks can be found before the project even
starts. Project managers should know what will happen if they don't schedule
their resources.

When you schedule resources, the results are often very different from what
you'd get with the standard CPM method. With how quickly technology
changes and how important it is to get products to market quickly, catching
problems with resource use and availability before a project starts can save
the cost of crashing project activities later. Any resource changes that don't
conform to the plan and schedule can be quickly recorded, and their effects
can be noted as the project is being carried out. If there was no quick way to
receive updates, the true negative effects of a change might not be known
until they occurred.

Connecting the availability of resources to a system with multiple projects

and multiple resources helps a project priority process that chooses projects
based on how much they contribute to the organization's goals and strategic
plan. Some people may need to be a better fit for the projects given to them
by computer software routines. The best course of action in these
circumstances is almost always to find a workaround that suits each person's
individual needs and abilities. The project resource schedule is important
because it gives you a time baseline that you can use to figure out how much
time is different between what you planned and what actually happened.
Your time-phased project cost budget baseline will be built around the
resource schedule.

The baseline (planned value, or PV) is the total of the cost accounts, and the
total of the work packages in each cost account is the total of that cost
account. Remember that if your budgeted costs aren't spread out over time,
you don't have a good way to measure how well things are going. The cost
baseline typically only includes the direct costs that the project manager can
control, such as labor, materials, and equipment, despite the fact that there are
many different types of project costs. Other indirect costs can be added to the
project costs separately.

6.7 SELF ASSESSMENT EXCERCISES

1. How does resource scheduling tie to project priority?
2. How does resource scheduling reduce flexibility in managing projects?
3. Present six reasons scheduling resources is an important task.
4. Why is it critical to develop a time-phased baseline?
5. You have prepared the following schedule for a project in which the key
resources is a tractor. There are three tractors available to the project.
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Project Planning Activities A and D require 1 tractor to complete while activities B, C, E
and F require 2 tractors.

4 C 8

2 2 2

6 4 10
0 A 4

1 1 1

1 4 5
5 D 10 10 F 12

0 1 0 0 2 0

5 5 10 10 2 12
0 B 5

0 2 0

0 5 5 ES ID EF
5 E 8

2 2 2 SL RES SL

7 3 10 LS DUR LF

6.8 FURTHER READINGS

1. Clifford F.Gray, Erik W. Larson, Gautam V.Desai, Project Management:
The Managerial Process, 2010, Tata McGraw – Hill 6th Edition.
2. Jack R. Meredith & Samuel J.Mantel, 2010, Project Management: A
Managerial Approach, 7th edition, Wiley India Edition.
3. Rory Burke, Project Management: Planning and control Techniques, 4th
edition 2010, John Wiley & Sons.
4. Pinto Jeffrey K, Project Management-Achieving Competitive
Advantage, Indian edition, Pearson
5. Jhon M.Nicholas, Herman Steyn. Project Management for Business,
engineering, and Technology, 3rd edition, 2010, Elsevier

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 Project Crashing
UNIT 7 PROJECT CRASHING

Objectives:

• How to reduce the project timelines when you’re forced to complete the
project before time?
• How to optimize the time and resources when there is time constraint?
• To find out the optimum time and resources required in case of reducing
the project timeline / crashing the project timelines.

Structure

7.1 Introduction
7.2 What is Project Crashing?
7.3 Time-Cost Relationship
7.4 Project Crashing Example
7.5 Let Us Sum Up
7.6 Self-Assessment Exercise
7.7 Further Readings

7.1 INTRODUCTION
Time is a very precious resource when it comes to project management.
Schedules for each job or activity must be very carefully developed to ensure
on-time completion of a project. But under certain circumstances and
challenges, which may occur along a new project, it is necessary to adopt
certain methods to overcome these challenges. As a project manager, you
need to reassess and adjust a plan in response to arising needs. For this, there
are several methods such as critical thinking, risk analysis and project
crashing are used.

Crashing in project management relates to cost-evaluation of reducing those

activities which are on the critical path. After which, the activities that
correspond to the lowest cost for crashing should worked on. In this chapter,
the underlying premise behind project crashing is explained and typical risks
involved in a schedule crashing effort are described. Combined, the project
crashing assessment and the risks can be brought to executive management
when you advise them about how best to proceed with your project.

7.2 WHAT IS PROJECT CRASHING?

Crashing is a method used in project management that assists in boosting up
the project timeline by employing additional resources in cases where the
scope and deadline of the project cannot be changed instead, you’re force to
complete the project before time without compromising the scope. Although
it will increase the cost of the project but in some cases, it is a good project
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Project Planning strategy to be exercised when you’re forced to complete the project before
time. There are several situations where one can think of crashing the project
timelines, for example;

• When there is an emergency to complete the project before time

• When project is delayed due to unforeseen circumstances
• To avoid a delay in an upcoming phase of another project which is lined-
up
• Availability of free resources

Since crashing a project entails a large budget increase for employing

additional resources, it should only be used as a last resort when;

• It’s impossible to delay the project deadline.

• It’s impossible to reduce the scope of the project.
• When the cost of missing the deadline is greater than the cost of crashing
the project.

That said, the best, and most effective time to begin crashing a project is as
soon as the need for it is identified. But to be successful, project crashing
should be calibrated, decided upon, and applied at the very start of a project
for effective results.

Let’s consider this simple project crashing example. Your team is tasked with
launching a magazine to celebrate your company’s 50th anniversary, but
delays in approving the lead feature have caused the project to fall behind. In
order to ensure the magazine is in hand by the anniversary party, an element
of the project’s scope that can’t be changed, you choose to pay a rush fee for
the printer. This project crashing step helped you meet the immovable
deadline, but it also increased your project budget.

7.3 TIME-COST RELATIONSHIP

Estimation of time required for the performance of an activity depends upon
the quantity of resources. Except some fixed duration activities such as a
gestation, crop duration etc. for which it is possible to manage the duration of
an activity by varying the quantity of resources. For an instance, if cost is not
a constraint, adding more resources to the project might reduce the time
duration i.e., time is inversely proportional to cost. The relation can be better
understood from the figure below. The time for the activity at minimum cost
is called normal time and the minimum time for the activity is called crash
time. The costs associated with these times are called respectively the normal
cost and the crash cost. Although it is possible to estimate the time and cost
associated with the normal and crash conditions for each activity it is difficult
to estimate the time and cost at any intermediate stage between these two
points. To overcome this difficulty, it is assumed that the relationship
between the time and cost as linear in the range between normal and crash
situations.
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 Project Crashing

Figure 7.1: Time cost relationship

There is a possibility that when a project is crashed another non-critical

activity may become critical and in next iteration this has to be considered for
further crashing.

Steps involved in project crashing as follows;

1. Identify critical path and critical activity

2. Compute crash cost slope i.e. [(Crash cost – Normal cost) / (Normal
Time – Crash Time)]
3. Select the activity with the least cost slope i.e., minimum crash cost per
unit time.
4. Check for the critical path.

As the project shortening (crashing) continues, a point is reached at which no

further crashing is possible. At this point, some activities might not have
reached their crash points. If these activities are crashed further, costs are
increased with no saving in project duration.

7.4 PROJECT CRASHING EXAMPLE

Example 1: The network and durations given in the following figure shows
the normal schedule for a project. You can crash (decrease) the durations at
an additional cost. The Table 7.1 given below summarizes the time-cost
information for the activities. The owner wants you to complete the project in
110 days. Find the minimum possible cost for the project if you want to
complete it in 110 days. Assume that for each activity there is a single linear,
continuous function between the crash duration and normal duration points.
Cost is given in dollars ($) and time duration in days.

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Project Planning A
120

B C D E
1 2 3 4 5
20 40 30 50

F
60

Figure. 7.2:

Table 7.1:

Activity Normal Duration Crash Duration Normal Cost Crash Cost

A 120 100 13000 15000
B 20 15 1500 2500
C 40 30 18000 22500
D 30 20 1300 2000
E 50 40 3200 4200
F 60 55 12000 13050

Solution:

Assume that the duration-cost relationship for each activity is a single linear,
continuous function between the crash duration and normal duration points.
Using the normal duration (ND), crash duration (CD), normal cost (NC), and
crash cost (CC), the crash cost slope for each activity can be determined as
follows;
CC NC
SA =
ND CD
15000 13000
SA = = $ 100/day
120 100

SB = $200/day
SC = $450/day
SD = $70/day
SE = $100/day
SF = $250/day

The normal cost for the project is the sum of a normal cost for each activity.
The normal cost for the project is $49000 and the normal duration is 320
days. The activity which should be crashed is the one on the critical path
which will add the least amount to the overall project cost. This will be the
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 Project Crashing
activity with the flattest or least-cost slope. The duration can be reduced as
long as the critical path is not changed, or a new critical path is created. In
addition, the activity duration cannot be less than the crash duration.

SD = $70/day (least-cost slope) Maximum of 10 days can be cut from this

schedule by reducing the duration of activity D to the crash duration of 20
days.

A
120

B C D E
1 2 3 4 5
20 40 30 50
20

F
60

Figure.7.3

Overall duration is 130 days and there are multiple critical paths (B-F-E and
B-C-D-E). Total project cost at this duration is the normal cost of $49000
plus the cost of crashing the activity D by 10 days (70 * 10 = $700) for a total
of $49700.

The next activity to be crashed would be the activity E, since it has the least-
cost slope ($100 per day) of any of the activities on the critical path. Activity
E can be crashed by a total of 10 days. Crashing the activity E by 10 days
will cost an additional $100 per day or $1000.

A
120

B C D E
1 2 3 4 5
20 40 30 50
20 40

F
60

Figure. 7.4

The project duration is now 120 days and the total project cost is $50700.
There are now three critical paths (A, B-C-D-E, and B-F-E). The next stage
of crashing requires a more thorough analysis since it is impossible to crash
one activity alone and achieve a reduction in the overall project duration.
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Project Planning Activity A is paired with each of the other activities to determine which has
the least overall cost slope for those activities which have remaining days to
be crashed. Activity A ($100) + activity B ($200)

Activity A ($100) + activity C ($450) + activity F ($250)

The least-cost slope will be activity A + activity B for a cost increase of $300
per day. Reducing the project duration by 5 days will add 5*300 = $1500
dollar crashing cost and the total project cost would be $52200. Activity B
cannot be crashed any more.

A
120
115

B C D E
1 2 3 4 5
20 40 30 50
15 20 40

F
60

Figure. 7.5

Final step in crashing the project to 110 days would be accomplished by

reducing the duration of activity A by 5 days to 110 days, reducing activity C
by 5 days to 35 days, and reducing activity F by 5 days to 55 days. The
combined cost slope for the simultaneous reduction of activity A, activity C,
and activity F would be $800 per day. For 5 days of reduction this would be
an additional $4000 in total project cost. The total project cost for the crashed
schedule to 110 days of duration would be $56200.

A
120
115
110

B C D E
1 2 3 4 5
20 40 30 50
15 35 20 40

F
60
55

Figure. 7.6

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 Project Crashing
7.5 LET US SUM UP
There are many things that can make it necessary to shorten the length of a
project, such as time-to-market concerns, incentive contracts, the need for
key resources, high overhead costs, or just delays that come up out of the
blue. These are called cost-time trade-off decisions, and they happen all the
time in real life.

This unit showed a formal, step-by-step way to figure out what will happen if
the project is finished earlier than planned. Rushing through a project makes
it more likely that it will run late. Depending on how sensitive the project
network is, the amount of time that needs to be cut from the normal time to
the best time varies. If a network has several critical or nearly-critical paths, it
is considered sensitive.

When shortening sensitive networks, it is important to be careful so that

project risks don't go up. On the other hand, insensitive networks offer the
chance to save a lot of money on a project by getting rid of some overhead
costs without much risk.

7.6 SELF ASSESSMENT EXCERCISE

1. How often do projects crash, and what are the top five causes?
2. What are the benefits and drawbacks of decreasing a project's scope in
order to move it along more quickly?
3. Why is putting projects on overtime a common strategy for rescheduling
work? What potential drawbacks could this choice have?
4. How can a project manager use a cost-duration graph? Explain.
5. Shortening the project's duration raises the possibility of being late.
Explain.
6. The critical path can be shortened in order to save money. Describe how
7. A project has activities with the following normal and crash times and
cost in dollars ($).
Table 7.2:
Activity Predecessor Normal Crash Normal Crash
Activity Duration Duration Cost Cost
(Weeks) (Weeks)
A - 6 4 18000 30000
B A 7 5 14000 1000
C A 4 3 19000 15000
D B 8 6 34000 30000
E C 2 1 3000 1500
F D 7 5 12000 10000
G E 4 2 15000 12000

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Project Planning Determine a crashing scheme for the above project so that the total project
time is reduced by 3 weeks.

7.7 FURTHER READINGS

1. Clifford F.Gray, Erik W. Larson, Gautam V.Desai, Project Management:
The Managerial Process, 2010, Tata McGraw – Hill 6th Edition.
2. Jack R. Meredith & Samuel J.Mantel, 2010, Project Management: A
Managerial Approach, 7th edition, Wiley India Edition.
3. Rory Burke, Project Management: Planning and control Techniques, 4th
edition 2010, John Wiley & Sons.
4. Pinto Jeffrey K, Project Management-Achieving Competitive
Advantage, Indian edition, Pearson
5. Jhon M.Nicholas, Herman Steyn. Project Management for Business,
engineering, and Technology, 3rd edition, 2010, Elsevier.

128
 Earned Value
UNIT 8 EARNED VALUE ANALYSIS Analysis

Objectives

After studying this unit, you will be able to:

• Define Earned value analysis.
• Able to measure and control the performance and progress of a project

Structure

8.1 Introduction
8.2 Define Earned Value Analysis
8.3 Earned value Analysis Terms
8.4 Earned value – Performance metrics
8.5 Let Us Sum Up
8.6 Key Words
8.7 Self-Assessment Exercise
8.8 Further Readings

8.1 INTRODUCTION
In 1966, the United States Air Force mandated earned value management
(USAF EVMS) in addition to the other planning and controlling requirements
on Air Force programs, turning the idea of earned value management into a
basic approach to program management (EVM project management). The
Cost/Schedule Planning Control Specification (C/SPCS) was the name of the
demand. The idea and the necessary conditions have essentially not altered
over the years. Cost/Schedule Control System Criteria (C/SCSC), Earned
Value Management Systems Criteria (EVMSC), and the present 32
guidelines in the EIA-748 Standard for Earned Value Management Systems
have all undergone frequent modifications (EVMS).

Project managers use the Earned Value Management (EVM) approach to

monitor how their projects are performing in comparison to project baselines.
It’s common to think of a project’s progress as being ahead of schedule,
behind schedule, or over budget. In this global era of highly competitive
conditions, all the business practices operating in the public, as well as
private sectors are made to operate faster than ever before. As a result, it is
observed that industries are working on multiple projects simultaneously. To
make these projects work, regardless of the scope, companies need skilled
project managers. Project control is the activities conducted by the project
managers within the horizon of monitoring and updating the project, which
examines the current situation of the project and differentiates it from the
initial project plan to develop a current plan suiting the actual situation. If
there is a further delay in the project after updating, the manager may take
129
Project Planning necessary steps to prevent the delay. Deviations happening in a project can be
minimised by making a healthy decision using the proper tools. In addition to
that, with the moving time, sustainable measures related to quality and cost
should also need to be monitored. In this context, Earned Value Analysis
(EVA) is a very much useful and efficient tool used widely. For the
management of successful projects, project management presents several
tools and techniques, of which, Earned Value Analysis is the most regarded
one. It is a method used for measuring the performance project at any given
point in time. A technique, that uses “work in progress” status to predict the
future performance of the project.

To understand it better, let us consider you are a project manager working for
a client that contracted with your firm to produce 5 software. You developed
a plan to produce the five software during this year. In fact, the plan calls for
100 hours to be spent on each software. Finally, the ear ended, and five
software were produced. At year-end, you check with the finance department
to inquire about the total number of hours spent while developing the
software. The finance team informs you that 400 total hours were expended
to create the five software. At first, you are filled with a sense of
accomplishment, in fact, dazzling accomplishment as you finished the
planned five-hundred-hour production of software in 400 hundred hours,
saving the company 100 hours that may be applied to other projects in need.
Then, a sense of less-than-great feeling is recognized from deep within; why?
What’s wrong with this picture?

Maybe it is the fear of the unknown that gives Earned Value a less-than-
stellar review by many in the field. Information, which is power, can help
hold project fear at bay. Therefore, this unit sets out with the fundamental
expectation of providing the learner with basic information about Earned
Value Management.

8.2 DEFINE EARNED VALUE ANALYSIS

Earned Value Analysis is a method that allows measuring the amount of
work actually carried out on a project rather than the basic review of cost and
schedule reports. EVA provides a method that combines a project’s domain,
and schedule, under a bound together situated metrics to monitor and forecast
the project’s performance. The project manager is then able to use the
progress measured, to forecast a project’s total cost and date of completion,
based on trend analysis or application of the project’s “burn rate”. This
method relies on a key measure known as the project’s earned value. Often,
earned value is defined as the budgeted cost of worked performed. This
basically, enables the project manager to compute performance indices or
burn rates for cost and schedule performance, providing information on how
well the project is doing or performing relative to its original plans. These
parameters, when applied to future work, forecast how the project will do in
the future, assuming the burn rates will not fluctuate, which oftentimes is a
130 large assumption.
 Earned Value
Analysis

Figure 8.1: Risk management using EVA

8.3 EARNED VALUE ANALYSIS TERMS

As already discussed, Earned Value Analysis allows the project manager to
answer the following three questions, as they relate to the project:

1. Where have we been?

2. Where are we now?
3. Where are we going?

In Earned Value Analysis, unlike in traditional management, there are three

data sources:

• The budget (or planned) value of work scheduled (PV)

• The actual cost/value of work completed (AC)
• The earned value of the physical work completed (EV)

Planned Value (PV): It is the planned cost that has been estimated for the
following project. PV explains how much the project work is supposed to be
at any given point in the project schedule and cost estimate. Cost and
Schedule baseline refers to the physical work scheduled and the approved
budget to accomplish the scheduled work. PV can be looked at in two ways:
cumulative and current. Cumulative PV is the sum of the approved budget for
activities scheduled to be performed to date. Current PV is the approved
budget for activities scheduled to be performed during a given period. This
period could represent days, weeks, months, etc. PV, also known as Budget
Cost of Work Scheduled (BCWS).

Actual Cost (AC): It is the total cost incurred directly or indirectly in

completing a work on a particular project during a given period. This
numbers tells what amount has been spent and, as with Planned Value, can be
looked at in terms of cumulative and current. Cumulative AC is the sum of
the actual cost for activities performed to date. Current AC is the actual costs
of activities performed during a given period. This period could represent
days, weeks, months, etc. AC is also called Actual Cost of Work Performed
(ACWP).
131
Project Planning Earned Value (EV): It is the estimated value of the work that has been
actually completed. To understand the accomplishments of the project, EV is
applied to the numbers and calculations in the project. EV basically
quantifies the worth of the work done to date. EV can be presented in a
Cumulative and Current fashion as well. Cumulative EV is the sum of the
budget for the activities accomplished to date. Current EV is the sum of the
budget for the activities accomplished in a given period. Earned Value is also
called Budgeted Cost of Work Performed (BCWP).

2/3 Time – ¾ Progress

Progress

1/3 Time – ¼ Progress

Time

Figure 8.2: Earned value – The standard Curve

Progress

No ramp up – no learning time

Time

Figure 8.3: Earned value – The Aggressive Curve

132
 Earned Value
Analysis

Progress
About 30% of the
work done

70% to 80% of
the time gone

Time

Figure 8.4: Earned value – The Curve to avoid

8.4 EARNED VALUE- PERFORMANCE METRICS

Cost Variance (CV): It is the difference between earned value and actual
costs. (CV = EV – AC). Sometimes it is also expressed as the difference
between budgeted cost of work performed and actual cost work performed. If
the variance is equal to 0, the project is on budget. If a negative variance is
determined, the project is over budget and if the variance is positive the
project is under budget.

Schedule Variance (SV): It expresses the difference between work that is

ahead or behind the plan and reflects a given measurement method. The
formula utilized to express schedule variance is project earned value minus
the project planned value as of the date of examination. (SV = EV – PV) If
the variance is equal to 0, the project is on schedule. If a negative variance is
determined, the project is behind schedule and if the variance is positive the
project is ahead of schedule.

Schedule Performance Index (SPI): It is the measure of schedule efficiency

on a project. It is the ratio of earned value (EV) to planned value (PV). The
SPI is equal to earned value divided by planned value, (SPI = EV/PV). An
SPI equal to or greater than one indicates a favourable condition and a value
of less than one indicates an unfavourable condition.

Example: Calculation show a SPI of 1.4, that means project recognizing Rs.
1.40 for every Rs.1.00 spent to date on project. Assuming SPI efficiency
remains throughout the reminder of work, project will finish ahead of
schedule.

Cost Performance Index (CPI): It is as a measure of cost efficiency on a

project. It is the ratio of earned value (EV) to actual costs (AC). The CPI is
equal to the earned value divided by the actual costs, (CPI = EV – AC). A
CPI equal to or greater than one indicates a favourable condition and a value
of less than one indicates an unfavourable condition. 133
Project Planning Example: Calculation show a CPI of Rs. 0.50, that means project
recognizing Rs. 0.50 for every ₹ 1.00 spent to date on project. Assuming CPI
efficiency remains the same throughout the reminder of work, project will be
over budget.

Figure 8.5: Earned value performance metrics

Index values

<1: Over budget or behind schedule

>1: Under budget or ahead of schedule

CV
Progress SV

Update date

Time

Figure 8.6: Earned value analysis curve

Example 1:

1. You are the project manager on a project that has Rs. 900,000 in the
product development effort. There are two teams of workers that will
work for six months for a total of 12,000 hours. According to the project
schedule, your team should be done with 34% of the work. As of today,
the project is 37% complete, while 48% budget has been used. Calculate
and share your conclusion.
134
 Earned Value
Solution: Analysis
Budget at Completion (BAC) = Rs. 900,000 (given)
AC = Rs. 432,000 (48% budget used)
PV = BAC × Planned % Complete
= 900,000 × 0.34 = Rs. 306,000
EV = BAC × Actual % Complete
= 900,000 × 0.37 = Rs. 333,000
CV = EV – AC
= 333,000 – 432,000 = -99,000
CPI = EV / AC
= 333,000 / 432,000 = 0.77
SV = EV – PV
= 333,000 – 306,000 = 27,000
SPI = EV / PV
= 333,000 / 306,000 = 1.08
Since CPI is less than 1, the project is over budget
And since SPI is more than 1, the project is ahead of schedule.

Check Your Progress 1:

For the following project, calculate SV, CV, SPI and CPI at the end of the
second month.
Month 1 2 3 4
Planned Rs. 11,10,000 Rs. 6,00,000 Rs. 25,00,000 Rs. 8,00,000
Value
Earned Rs. 10,00,000 Rs. 7,50,000
Value
Actual Cost Rs. 12,50,000 Rs. 5,00,000

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
Check Your Progress 2:
You are managing a software project which is into eight months of its
execution. You are now reviewing the project status, and you have
ascertained that the project is behind schedule. The actual cost of Activity A
is Rs. 4,00,000 and that of Activity B is Rs. 2,00,000. The planned value of
these activities is Rs. 2,80,000 and Rs. 80,000, respectively. The Activity A
is 100% complete. However, Activity B is only 82% complete. Calculate the
schedule performance index and cost performance index of the project on the
review date.
135
Project Planning …………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

8.5 LET US SUM UP

In short, the project manager and the project team should make an effort to
make sure that the realized value of their project is always more than the
projected value and the actual cost booked on the project. Proper data
collection and computation of the project’s completion percentage are
essential to the success of earned value analysis. Each person interprets the
percentage of work completed in their own unique way. Because of this, The
Practice Standard on Earned Value Management outlines the procedures to
be used for calculating the percent of work completed for various project
activity types and scenarios.

8.6 KEYWORDS
Planned Value (PV): The budgeted cost for the planned work is the planned
value (BCWS). PV fluctuates depending on the size of the project under
consideration and where you are in the overall timetable.

Actual Cost (AC): The cost expended for carrying out work on a project is
known as the actual cost (AC), also known as actual expenditures.

Earned Value (EV): EV measures the “value” of the job completed so far.
In other words, EV explains the project’s accomplishments in concrete terms.
EV can be expressed in a Cumulative and Current manner, just as PV and
AC.

Cost Variance (CV): It is defined as the discrepancy between the actual cost
incurred while carrying out the scheduled activity and the anticipated cost of
work accomplished (earned value).

Schedule Variance (SV): It is a measure of the schedule performance of the

project. It can be expressed as the difference between the budgeted cost of
work scheduled (planned value) and work performed (earned value).

Schedule Performance Index (SPI): SPI is a measure of the schedule

efficiency of the project and indices if the project is ahead of the baseline
schedule. SPI can be expressed mathematically as Earned Value divided by
Planned Value. Schedule Performance Index (SPI) = Earned Value (EV) /
Planned Value (PV)

Cost Performance Index (CPI): CPI is the measure of how efficiently the
budgeted resources are being utilized on a project. It is mathematically
expressed as Earned Value divided by Actual Cost. Cost Performance
Index (CPI) = Earned Value (EV) / Actual Cost (AC).
136
 Earned Value
8.7 SELF-ASSESSMENT EXERCISE Analysis

1. What do you mean by the term ‘earned value? Explain.

2. What is Earned Value Management (EVM)? Discuss the roles of EVM
in Project Management.
3. What are the top three 3 EVM performance measures? Discuss.

8.8 FURTHER READINGS

Project Management Institute. (2004) A Guide to the Project Management
Body of Knowledge (PMBOK® Guide). (Third ed.) Newtown Square, PA:
Project Management Institute
Project Management Institute. (2005) Practice standard for earned value
management (PMI Global Standard) (2005 ed.) Newtown Square, PA:
Project Management Institute
Government Electronics and Information Association. (2002) Earned value
management systems Approved: May 19, 1998. Reaffirmed: August 28,
2002. ANSI/EIA-748-A-1998
United States Department of Energy (2005) Earned value management
application guide, version 1.6. January 1, 2005. Office of Engineering and
Construction Management.
Reichel, C. W. (2006). Earned value management systems (EVMS): "you too
can do earned value management" Paper presented at PMI® Global Congress
2006—North America, Seattle, WA. Newtown Square, PA: Project
Management Institute.

137
Project Planning

138