FY MBA SEM-II
(Batch 2024-26)
Course: Project Management
Module 03:
Planning Projects
Dr. Rahul V. Dandage
Associate Professor & Program Director
Ramcharan School of Leadership,
Dr. Vishwanath Karad MIT World Peace University, Pune
Contents
3.1 Work Breakdown structure (WBS) and linear responsibility
chart,
3.2 Project cost estimation and budgeting, Top down and
bottoms up budgeting,
3.3 Networking and Scheduling techniques. PERT, CPM,
3.4 GANTT chart
Dr. Rahul V. Dandage
Work Breakdown structure (WBS)
WBS is an important document and can be tailored for use in a number of different ways.
It may illustrate how each piece of the project contributes to the whole in terms of
performance, responsibility, budget, and schedule.
It may list the vendors or subcontractors associated with specific tasks.
It may be used to document that all parties have signed off on their various commitments to
the project.
It may note detailed specifications for any work package, establish account numbers, specify
hardware/software to be used, and identify resource needs.
It may serve as the basis for making cost estimates or estimates of task duration.
Its uses are limited only by the needs of the project and the imagination of the PM.
No one version of the WBS will suit all needs, so the WBS is not a document, but any given
WBS is simply one of many possible documents.
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage
Work Breakdown structure (WBS)
Dr. Rahul V. Dandage
Cascading
Style Sheets
Dr. Rahul V. Dandage
Work Breakdown structure (WBS)
Dr. Rahul V. Dandage
Work Breakdown structure (WBS)
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage
Work Breakdown structure (WBS)
WBS may be useful to create an Organizational Breakdown Structure (OBS) that
displays the organizational units responsible for each of the various work elements in
the WBS, or who must approve or be notified of progress or changes in its scope, since
the WBS and OBS may well not be identical.
That is, some major section of the WBS may be the responsibility of two or more
departments, while other sections of the WBS, two or more, say, may all be the
responsibility of one department.
Such a document can be useful for department managers to see their total
responsibilities for a particular project. The OBS is similar to the Linear Responsibility
Chart
Dr. Rahul V. Dandage
Linear Responsibility Chart
Dr. Rahul V. Dandage
Linear Responsibility Chart
In WBS, list the task breakdown in successively finer levels of detail. Continue until all
meaningful tasks or work packages have been identified and each task or package can be
individually planned, budgeted, scheduled, monitored, and controlled.
It should be obvious that if the set of work package descriptions is not complete and
properly arranged, it is highly unlikely the project can be completed on time, on budget, and to
specification.
For each such work package, identify the data relevant to the WBS (e.g., vendors, durations,
equipment, materials, special specifications).
List the personnel and organizations responsible for each task. It is helpful to construct a
linear responsibility chart (sometimes called a responsibility matrix) to show who is responsible
for what.
This chart also shows critical interfaces between units that may require special managerial
coordination. With it, the PM can keep track of who must approve what and who must report to
whom.
Dr. Rahul V. Dandage
Project Cost Estimation & Budgeting
People use budgeting and project cost estimating interchangeably all the time –
people have the same thought in mind when thinking of one or the other. However, the
two are really each a different side of the same coin. They are very related, but there are
subtle differences between a project budget and a project cost estimate.
Cost estimating is the process of quantifying every resource that is going to be
required to complete a project. Resources means everything – labor, materials, land (in
the case of construction), and everything else that needs to be paid for in terms of the
project. The cost estimate is a list and quantification of all of those with a monetary
amount attached to it. At the end of the process you have a single amount that represents
the roll up of everything that you’ve qualified.
Budgeting relies on that estimate. You have to have an idea of what the cost will be
before you set out to do your budgeting. Budgeting is the process of identifying not the
amounts, but the sources of the funds to be used to cover the cost estimate.
Dr. Rahul V. Dandage
Project Cost Estimation
Cost estimation in project management is the process of forecasting the financial
and other resources needed to complete a project within a defined scope.
Cost estimation accounts for each element required for the project—from materials
to labor—and calculates a total amount that determines a project’s budget.
An initial cost estimate can determine whether an organization green lights a project,
and if the project moves forward, the estimate can be a factor in defining the project’s
scope. If the cost estimation comes in too high, an organization may decide to pare
down the project to fit what they can afford.
Once the project is in motion, the cost estimate is used to manage all of its affiliated
costs in order to keep the project on budget.
Dr. Rahul V. Dandage
Project Cost Estimation
There are two key types of costs addressed by the cost estimation process:
Direct costs: These are the costs associated with a single area, such as a department or this
particular project itself. Examples of direct costs include fixed labor, materials and equipment.
Indirect costs: These are costs incurred by the organization at large, such as utilities and
quality control.
Within these two categories, some typical elements that a cost estimation will take into
account include:
Labor: the cost of project team members working on the project, both in terms of wages and
time.
Materials and equipment: The cost of resources required for the project, from physical tools
to software to legal permits.
Facilities: the cost of using any working spaces not owned by the organization.
Vendors: the cost of hiring third-party vendors or contractors.
Risk: the cost of any contingency plans implemented to reduce risk.
Dr. Rahul V. Dandage
Top Down Budgeting
This strategy is based on collecting the judgments and experiences of top and
middle managers, and available past data concerning similar activities. These
managers estimate overall project cost as well as the costs of the major subprojects that
comprise it. These cost estimates are then given to lower-level managers, who are
expected to continue the breakdown into budget estimates for the specific tasks and
work packages that comprise the subprojects. This process continues to the lowest
level.
The budget, like the project, is broken down into successively finer detail, starting
from the top, or most aggregated level following the WBS. It is presumed that lower-
level managers will argue for more funds if the budget allocation they have been
granted is, in their judgment, insufficient for the tasks assigned. This presumption is,
however, often incorrect. When senior managers insist on maintaining their budgetary
positions—based on “considerable past experience”—junior managers feel forced to
accept what they perceive to be insufficient allocations to achieve the objectives to
which they must commit. Dr. Rahul V. Dandage
Bottom Up Budgeting
In this method, elemental tasks, their schedules, and their individual budgets are
constructed, again following the WBS. The people doing the work are consulted
regarding times and budgets for the tasks to ensure the best level of accuracy. Initially,
estimates are made in terms of resources, such as labor hours and materials. These are
later converted to monetary equivalents.
Differences of opinion are resolved by the usual discussions between senior and
junior managers. If necessary, the project manager and the functional manager(s) may
enter the discussion in order to ensure the accuracy of the estimates.
The resulting task budgets are aggregated to give the total direct costs of the
project. The PM adds such indirect costs as general and administrative (G&A), possibly
a project reserve for contingencies, and then a profit figure to arrive at the final project
budget.
Dr. Rahul V. Dandage
Top Down Vs. Bottom Up Budgeting
The advantage of the top-down process is that aggregate budgets can often be
developed quite accurately, though a few individual elements may be significantly in
error.
Not only are budget categories stable as a percent of the total budget, the statistical
distribution of each category (e.g., 5 percent for R & D) is also stable, making for high
predictability.
Another advantage of the top-down process is that small yet costly tasks need not
be individually identified, nor need it be feared that some small but important aspect
has been overlooked. The experience and judgment of the executive is presumed
automatically to factor all such elements into the overall estimate.
Dr. Rahul V. Dandage
Top Down Vs. Bottom Up Budgeting
The advantages of the bottom-up process are those generally associated with
participative management.
Individuals closer to the work are apt to have a more accurate idea of resource
requirements than their superiors or others not personally involved.
In addition, the direct involvement of low-level managers in budget preparation
increases the likelihood that they will accept the result with a minimum of grumbling.
Involvement also is a good managerial training technique, giving junior managers
valuable experience in budget preparation as well as the knowledge of the operations
required to generate a budget.
Dr. Rahul V. Dandage
Gantt Chart
• One of the oldest but still one of the most useful methods of presenting project schedule
information is the Gantt chart, developed around 1917 by Henry L. Gantt, a pioneer in the
field of scientific management.
• The Gantt chart shows planned and actual progress for a number of tasks displayed as bars
against a horizontal time scale. It is a particularly effective and easy-to-read method of
indicating the actual current status for each of a set of tasks compared to the planned
progress for each item of the set.
• As a result, the Gantt chart can be helpful in expediting, sequencing, and reallocating
resources among tasks, as well as in the valuable but routine job of keeping track of how
things are going.
• Gantt charts provide a picture of the current state of a project.
• Gantt charts have a serious weakness that If a project is complex with a large set of
activities, it may be very difficult to follow multiple activity paths through the project.
• Gantt charts are powerful devices for communicating to senior management, but networks
are usually more helpful in the hands-on task of managing the project.
Dr. Rahul V. Dandage
Gantt Chart (Sample)
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage
Network Analysis in Project Management
CPM/PERT or Network Analysis as the technique is sometimes called, developed along two
parallel streams, one industrial and the other military.
CPM (Critical Path Method) was the discovery of M. R. Walker of E. I. Du Pont de
Nemours & Co. and J. E. Kelly of Remington Rand, circa 1957. The first test was made in
1958, when CPM was applied to the construction of a new chemical plant.
PERT (Project Evaluation and Review Technique) was devised in 1958 for the
POLARIS missile program by the Program Evaluation Branch of the Special Projects office of
the U.S. Navy, helped by the Lockheed Missile Systems division and the Consultant firm of
Booz-Allen & Hamilton.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
The methods are essentially network-oriented techniques using the same principle.
PERT and CPM are basically time-oriented methods in the sense that they both lead to
determination of a time schedule for the project.
The significant difference between CPM & PERT approaches is that the time estimates for
the different activities in CPM were assumed to be deterministic while in PERT these are
described probabilistically.
These techniques are referred as project scheduling techniques.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
In a network representation of a project certain definitions are used.
1. Activity: Any individual operation which utilizes resources and has a starting point and end
point is called activity. An arrow is commonly used to represent an activity with its head
indicating the direction of progress in the project.
2. Event: An event represents a point in time signifying the completion of some activities and
the beginning of new ones. This is usually represented by a circle in a network which is also
called a node or connector.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
The activities are classified into following categories:
1. Predecessor activity – Activities that must be completed immediately prior to the start of
another activity are called predecessor activities.
2. Successor activity – Activities that cannot be started until one or more of other activities
are completed but immediately succeed them are called successor activities.
3. Dummy activity – An activity which does not consume any kind of resource but merely
depicts the technological dependence is called a dummy activity.
The dummy activity is inserted in the network to clarify the activity pattern:
To make activities with common starting and finishing points distinguishable
To identify and maintain the proper precedence relationship between activities that is not
connected by events.
Activity A is Predecessor for Activity B and C
Activity B and C are Successors for Activity A.
Activity D is Successor for Activity B and C.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
The Events are classified into following categories:
1. Merge Event– When more than one activity comes and joins an event such an event is
known as merge event.
2. Burst Event– When more than one activity leaves an event such an event is known as
burst event.
3. Merge & Burst Event– An activity may be merge and burst event at the same time as
with respect to some activities it can be a merge event and with respect to some other activities
it may be a burst event.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
Rules/Guidelines for Drawing Network Diagram:
• Each activity is represented by one and only one arrow in the network.
• No two activities can be identified by the same end events.
• In order to ensure the correct precedence relationship in the arrow diagram, following
questions must be checked whenever any activity is added to the network
What activity must be completed immediately before this activity can start?
What activities must follow this activity?
What activities must occur simultaneously with this activity?
• Try to avoid arrows which cross each other & always use straight arrows only.
• Do not attempt to represent duration of activity by its arrow length.
• Use arrows from left to right.
• Avoid the use of any redundant dummy activities.
• The network should have only one start event and only one end event.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
Common Errors while Drawing Network Diagram:
1. Dangling: To disconnect an activity before the completion of all activities in a network
diagram is known as dangling.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
Common Errors while Drawing Network Diagram:
2. Looping or Cycling: Drawing an endless loop in a network is known as error of looping or
Cycling.
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
Common Errors while Drawing Network Diagram:
3. Redundancy: Unnecessarily inserting the dummy activity in network logic is known as the
error of redundancy.
6 B
A
Redundant Dummy Activity
5 8
C D
7
Dr. Rahul V. Dandage
Network Analysis (CPM/PERT)
Critical Path: It is the longest path (Maximum duration Path) in the network diagram. It
represents the minimum duration required for Project completion.
Minimum Project duration=Critical path duration
Sub-Critical Path: It is the second longest path in the network diagram.
Critical Activities: The activities which are on the critical path are called as Critical
Activities.
As the Minimum Project duration is equal to critical path duration, any delay in critical
activities results in the extension of project duration.
Non-Critical activities: The activities on the network diagram which are not on critical
path are called as Non-critical activities.
The difference between the duration of Critical path and duration of Non-critical path
represents the margin available for acceptable delay in completion of activities on the respective
non-critical path.
Dr. Rahul V. Dandage
Network Analysis (CPM)
The notations used are
(i, j) = Activity with tail event i and head event j
Ei = Earliest occurrence time of event i
Li = Latest allowable occurrence time of event i
Ej = Earliest occurrence time of event j
Lj = Latest allowable occurrence time of event j
Dij = Estimated Duration of activity (i, j)
EST=(Es)ij = Earliest starting time of activity (i, j)
EFT=(Ef)ij = Earliest finishing time of activity (i, j)= EST+ Dij
LFT=(Lf)ij = Latest finishing time of activity (i, j)
LST=(Ls)ij = Latest starting time of activity (i, j)= LFT- Dij
Dr. Rahul V. Dandage
Network Analysis (CPM)
1. Determination of Earliest time (Ej): Forward Pass computation
Step 1
The computation begins from the start node and move towards the end node. For easiness,
the forward pass computation starts by assuming the earliest occurrence time of zero for the
initial project event.
Step 2
i. Earliest starting time of activity (i, j) is the earliest event time of the tail end event
i.e. (Es)ij = Ei
ii. Earliest finish time of activity (i, j) is the earliest starting time + the activity time
i.e. (Ef)ij = (Es)ij + Dij or (Ef)ij = Ei + Dij
iii. Earliest event time for event j is the maximum of the earliest finish times of all activities
ending in to that event
i.e. Ej = max [(Ef)ij for all immediate predecessor of (i, j)] or
Ej =max [Ei + Dij]
Dr. Rahul V. Dandage
Network Analysis (CPM)
2. Backward Pass computation (for latest allowable time)
Step 1
For ending event assume E = L. Remember that all E’s have been computed by forward
pass computations.
Step 2
Latest finish time for activity (i, j) is equal to the latest event time of event j i.e. (Lf)ij = Lj
Step 3
Latest starting time of activity (i, j) = the latest completion time of (i, j) – the activity time
or (Ls)ij =(Lf)ij - Dij or (Ls)ij = Lj - Dij
Step 4
Latest event time for event ‘i’ is the minimum of the latest start time of all activities
originating from that event i.e.
Li = min [(Ls)ij for all immediate successor of (i, j)] = min [(Lf)ij - Dij] = min [Lj - Dij]
Dr. Rahul V. Dandage
Network Analysis (CPM)
3. Determination of floats and slack times
Float: It indicates the amount of time by which an activity can be delayed without delaying
the total project completion time.
For Critical activities,
EST= LST
EFT=LFT
This indicates that we can’t delay either the start or finish of any critical activity without
delaying the total project completion time.
Hence,
Float of any critical activity is always equal to ZERO.
Float exists only for Non-critical activities.
Dr. Rahul V. Dandage
Network Analysis (CPM)
3. Determination of floats and slack times
Total float – The amount of time by which the completion of an activity could be delayed
beyond the earliest expected completion time without affecting the overall project duration
time.
Mathematically
Free float – The time by which the completion of an activity can be delayed beyond the
earliest finish time without affecting the earliest start of a subsequent activity.
Mathematically
(Ff)ij = (Earliest time for event j – Earliest time for event i) – Activity time for ( i, j)
(Ff)ij = (Ej - Ei) - Dij
Dr. Rahul V. Dandage
Network Analysis (CPM)
3. Determination of floats and slack times
Independent float – The amount of time by which the start of an activity could be delayed
without affecting the earliest start of the subsequent activity, assuming that the preceding
activity has finished at its latest finish time.
Mathematically
(Independent float)ij = (Earliest start time of subsequent activity– Latest finish time of
preceding activity) – Activity time for ( i, j)
(Independent float)ij = (Ej - Li) - Dij
Interfering float – It is a part of total float which reduces the float of subsequent activity. It
is the amount of time by which the earliest possible start of subsequent activity will be delayed
if activity ij finishes on latest finish time.
Mathematically
(Interfering Float)ij = (Latest Finish Time of activity ij – Earliest Start time of subsequent
activity)
(Interfering Float)ij =(Lj - Ei)
Dr. Rahul V. Dandage
Network Analysis (CPM)
3. Determination of floats and slack times
Slack– Slack is always associated with an event. Slack of an event is the amount of time by
which an event can be delayed beyond its earliest occurrence time without affecting the total
project completion time.
Slack of Tail Event
Tail Slack= Li-Ei
Head Slack= Lj-Ej
Tail Slack and Head Slack for critical activities are always ZERO.
Revised Expressions for Floats:
Total Float= LST-EST or LFT-EFT
Free Float=Total Float- Head Slack
Independent Float= Free Float-Tail Slack
Interfering Float= Head Slack
Dr. Rahul V. Dandage
Network Analysis (PERT)
A distinguishing feature of PERT is its ability to deal with uncertainty in activity
completion times. For each activity, the model usually includes three time estimates:
Optimistic time (a) or (To) - Generally the shortest time in which the activity can be
completed.
Most likely time (m) or (Tm)- the completion time having the highest probability. Note that
this time is different from the expected time.
Pessimistic time (b) or (TP)- the longest time that an activity might require.
Expected time (Te)= (Optimistic + 4 x Most likely + Pessimistic)/ 6
Te= (a+4m+b)/6 = (To +4 Tm + TP)/6
This expected time can be displayed on the network diagram.
To < Tm < TP
Dr. Rahul V. Dandage
Network Analysis (PERT)
Variance & Standard Deviation:
Variance for each activity completion time: Variance=[( Pessimistic - Optimistic) / 6 ]2
Variance = [(b - a) / 6 ]2 = (b - a) 2 / 36
Variance = [(TP - To) / 6 ]2 = (TP - To) 2 / 36
Standard Deviation (σ) = Square Root of Variance= [(b - a) / 6 ]= [(TP - To) / 6 ]
Standard Deviation of Critical Path= √ (Sum of Variance of all critical activities)
𝐷𝑢𝑒 𝐷𝑎𝑡𝑒−𝐸𝑥𝑝𝑡𝑒𝑐𝑡𝑒𝑑 𝑃𝑟𝑜𝑗𝑒𝑐𝑡 𝐶𝑜𝑚𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝐷𝑎𝑡𝑒
Z=
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝐶𝑟𝑖𝑡𝑖𝑐𝑎𝑙 𝑃𝑎𝑡ℎ
𝐷𝑢𝑒 𝐷𝑎𝑡𝑒−𝐶𝑟𝑖𝑡𝑖𝑐𝑎𝑙 𝑃𝑎𝑡ℎ 𝐷𝑢𝑟𝑎𝑡𝑖𝑜𝑛
Z=
√ (𝑆𝑢𝑚 𝑜𝑓 𝑉𝑎𝑟𝑖𝑎𝑛𝑐𝑒 𝑜𝑓 𝑎𝑙𝑙 𝑐𝑟𝑖𝑡𝑖𝑐𝑎𝑙 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠)
Dr. Rahul V. Dandage
Network Analysis (PERT)
PERT Analysis:
1. Calculate the expected time for each activity using the Optimistic, Pessimistic and Most
Likely time estimates.
2. Using expected time estimate, identify the critical path and calculate the Expected project
completion time.
3. Calculate the variance for each activity.
4. Calculate the variance for critical path.
5. Using the variance of critical path, calculate the Standard Deviation of critical path.
6. Using critical path duration and standard deviation for critical path, calculate the value of
‘z’ to determine the probability of project completion for a specific date(Duration)
7. Using the ‘z’ value, estimate the probability of project completion for the specific date using
Normal distribution table.
8. For a specific value of probability of project completion, obtain the z value from Normal
distribution table and calculate the corresponding Due date.
Dr. Rahul V. Dandage
References
• Guide to Project management Body of Knowledge (PMBOK
Guide), sixth edition, Project Management Institute, 2017
• Jack Meredith, Samual Mantel (2009) Project Management: A
managerial approach, 7th Edition.
Dr. Rahul V. Dandage
Dr. Rahul V. Dandage