PROJECT MANAGEMENT

Module 3 — Comprehensive Study Notes

PROJECT SCHEDULING AND RESOURCE MANAGEMENT

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 MODULE 3 — TOPICS COVERED

Topic Description
1. Project Time & Cost Estimation Methods to estimate activity durations and costs
accurately.
2. Time Management & Project Plan WBS to schedule; activity sequencing and schedule
development.
3. Network Analysis — PERT / CPM Arrow diagrams, critical path, forward/backward pass,
float.
4. Resource Management Resource levelling, scheduling, and allocating project
resources.
5. Cost Management Cost baseline, budgeting, Earned Value Management
(EVM).

1. Project Time and Cost Estimation

Estimation is the process of approximating the time, effort, and cost required to complete project
activities. Accurate estimation is the foundation of a realistic schedule and budget.

A. Time Estimation Methods

Method Description
Expert Judgment Experienced team members estimate duration based
on past projects. Fast but subjective.
Analogous Estimating Uses actual duration of similar past projects as basis.
Quick; less accurate for unique projects.
Parametric Estimating Uses statistical relationships (e.g., lines of code per
day, [Link] per day). More objective.
Three-Point (PERT) Uses Optimistic (O), Most Likely (M), Pessimistic (P)
estimates. Expected Time = (O + 4M + P) / 6.
Bottom-Up Estimating Each work package estimated separately; rolled up.
Most accurate; most time-consuming.
Reserve Analysis Adds contingency time buffers for identified risks.

PERT Three-Point Formulas

Expected Time (tE) = (O + 4M + P) / 6 Standard Deviation (σ) = (P − O) / 6 Variance (σ²) = [(P − O) /
6]² O = Optimistic time | M = Most Likely time | P = Pessimistic time
B. Cost Estimation Methods
Method Description
Rough Order of Magnitude (ROM) −25% to +75% accuracy. Used in early phases for
budgeting.
Analogous Cost Estimating Uses actual costs of similar past projects. Quick but
imprecise.
Parametric Cost Estimating Uses cost drivers (cost per unit, per [Link]). More
accurate than analogous.
Bottom-Up Cost Estimating Estimates each work package separately; total rolled
up. Most accurate.
Three-Point Cost Estimating PERT formula applied to cost: (O + 4M + P) / 6.
Vendor Bid Analysis Evaluates vendor bids as realistic cost benchmarks.

C. Types of Project Costs

Cost Type Definition
Direct Costs Directly attributable to project work — labour, materials,
equipment, subcontractors.
Indirect Costs Shared overhead — rent, utilities, admin support,
insurance.
Fixed Costs Do not change with activity volume — equipment
purchase, lease, site preparation.
Variable Costs Change with volume — materials consumed, hourly
labour, energy usage.
Sunk Costs Already incurred and cannot be recovered. Should
NOT influence future decisions.
Opportunity Cost Value of the next best alternative foregone by choosing
this project.

2. Time Management — Developing the Project Plan

Time management encompasses all processes to ensure the project is completed on time. Developing
the project plan translates work scope into an ordered, time-bound schedule.

Steps to Develop the Project Schedule

Step Description
Step 1: Define Activities Decompose WBS work packages into specific,
actionable schedule activities.
Step 2: Sequence Activities Identify the logical order of activities; define
dependencies and relationships.
Step Description
Step 3: Estimate Resources Identify and estimate the type and quantity of resources
for each activity.
Step 4: Estimate Durations Use PERT, analogous, or bottom-up estimation to
determine activity durations.
Step 5: Develop the Schedule Analyse sequences, durations, and constraints to
create the schedule model.
Step 6: Control the Schedule Monitor progress, compare to baseline, and manage
schedule changes.

Activity Dependency Types

Type Explanation
Finish-to-Start (FS) B cannot start until A finishes. Most common. e.g.,
foundation before walls.
Start-to-Start (SS) B cannot start until A starts. Allows partial overlap.
Finish-to-Finish (FF) B cannot finish until A finishes.
Start-to-Finish (SF) B cannot finish until A starts. Rare.

Schedule Compression Techniques

Technique Description & Trade-off
Crashing Add more resources to critical path activities to reduce
duration. Increases cost. Use cost-slope analysis to
select most cost-effective activity to crash first.
Fast-Tracking Perform activities in parallel that are normally
sequential. Increases risk of rework. Does not add cost
directly.

Cost Slope Formula (Crashing)

Cost Slope = (Crash Cost − Normal Cost) / (Normal Duration − Crash Duration) Always crash the
activity on the critical path with the LOWEST cost slope first.

3. Network Analysis — PERT and CPM

Network Diagram Representations

Type Description
Activity-on-Arrow (AOA) Activities are arrows. Nodes represent events. Dummy
activities (dashed arrows) used to maintain logic
 Type Description
without consuming time/resources.
Activity-on-Node (AON) / PDM Activities are nodes (rectangles). Arrows represent
dependencies. No dummy activities needed. Most
widely used today.

CPM — Critical Path Method

CPM uses a single deterministic time estimate per activity. It identifies the critical path — the longest
sequence of activities — which determines the minimum project duration.

Forward Pass — Earliest Times

Term Definition / Rule
Earliest Start (ES) Earliest time an activity can start. ES = Maximum EF of
all predecessors.
Earliest Finish (EF) EF = ES + Duration.
Rule Go left → right. First activity ES = 0. At merge points
(multiple predecessors), take MAXIMUM EF.

Backward Pass — Latest Times

Term Definition / Rule
Latest Finish (LF) Latest time an activity can finish without delaying the
project. LF = Minimum LS of all successors.
Latest Start (LS) LS = LF − Duration.
Rule Go right → left. Last activity LF = EF (project end time).
At burst points (multiple successors), take MINIMUM
LS.

Float (Slack)
Term Definition
Total Float (TF) Max time an activity can be delayed without delaying
the project. TF = LF − EF (or LS − ES).
Free Float (FF) Max time an activity can be delayed without delaying
the ES of its immediate successor. FF = ES(successor)
− EF(current).
Critical Activity Activity with Total Float = 0. Delaying it directly delays
the project.
Critical Path Sequence of all critical activities (TF = 0) from start to
finish. It is the LONGEST path.
 Critical Path Key Rules
• Critical Path = Longest path through the network = Shortest possible project duration • All activities
on the critical path have Total Float = 0 • A project can have multiple critical paths • To reduce project
duration, crash activities on the critical path • If a non-critical activity is delayed beyond its float, it
becomes critical

CPM Worked Example

Activity network with dependencies and durations (weeks):

Activity Predece Duratio ES EF LS LF TF Critical?

ssor n
A — 4 0 4 0 4 0 YES

B — 3 0 3 2 5 2 No

C A 5 4 9 4 9 0 YES

D A, B 6 4 10 5 11 1 No

E C 3 9 12 9 12 0 YES

F D, E 4 12 16 12 16 0 YES

Critical Path: A → C → E → F | Project Duration = 16 weeks

Activity B has TF = 2 (can be delayed up to 2 weeks). Activity D has TF = 1 (can be delayed 1 week).

PERT — Programme Evaluation and Review Technique

PERT extends CPM by incorporating uncertainty. It uses three time estimates per activity and
computes a probability of completing the project by a target date.

PERT Parameters and Formulas

Parameter Definition / Formula
Optimistic Time (O / to) Minimum possible time — best case scenario.
Most Likely Time (M / tm) Most realistic estimate under normal conditions.
Pessimistic Time (P / tp) Maximum possible time — worst case scenario.
Expected Time (tE) tE = (O + 4M + P) / 6 — weighted average using beta
distribution.
Standard Deviation (σ) σ = (P − O) / 6 — measures uncertainty in the estimate.
Variance (σ²) σ² = [(P − O) / 6]²
Project Expected Duration (Te) Te = Σ tE of all critical path activities.
Project Variance (σ²p) σ²p = Σ σ² of all critical path activities.
Project Std Deviation (σp) σp = √(σ²p)
 Parameter Definition / Formula
Z-Score (Probability) Z = (Ts − Te) / σp. Use Z-table to find probability of
completion by target date Ts.

PERT Probability Example

Te = 30 weeks, σp = 3 weeks, Target date Ts = 33 weeks Z = (33 − 30) / 3 = 1.0 From Z-table: P(Z ≤
1.0) = 84.13% → There is an 84.13% probability of completing the project within 33 weeks.

CPM vs. PERT — Comparison

Basis CPM PERT
Time Estimates Single deterministic estimate Three estimates (O, M, P)

Uncertainty Assumes certain/known durations Accounts for uncertainty

Type of Project Construction, manufacturing R&D, new product development

(repetitive) (novel)

Focus Cost-time trade-offs (crashing) Time uncertainty and probability

Output Deterministic schedule Probabilistic completion time

Dummy Activities Required in AOA network Not required in AON/PDM

4. Resource Management
Resource management ensures that the right resources (people, equipment, materials) are available at
the right time in the right quantity throughout the project.

A. Resource Levelling
Resource levelling adjusts the start/finish dates of activities to smooth resource demand — eliminating
overallocation peaks and underutilisation troughs.

When is Resource Levelling Needed?

• Resource histogram shows peaks exceeding available resource limits.
• Key personnel or equipment are required on multiple activities simultaneously.
• Organisation policy requires a stable workforce (no sudden hiring/layoff cycles).
• Supply chain or procurement constraints limit resource availability.

Resource Levelling Methods

Method Description
Delaying Non-Critical Activities Activities with positive float are delayed within their float
window to reduce peak demand. No impact on project
duration if float is not exhausted.
 Method Description
Extending Activity Durations Reduce resource usage per period by extending the
activity duration (less resource per day over more
days).
Splitting Activities Interrupt an activity, release resources temporarily,
then resume. Increases setup complexity.
Resource Substitution Replace one resource type with an equivalent to
balance loads.

Resource Levelling vs. Resource-Constrained Scheduling

Resource Levelling: Adjusts schedule within available float to smooth demand. May not extend project
duration. Resource-Constrained Scheduling: When demand exceeds supply, activities are serialised.
Project duration is often extended.

B. Resource Loading and Resource Histogram

Concept Explanation
Resource Loading Calculating the total demand for each resource type
per time period based on the schedule.
Resource Histogram Bar chart showing resource demand (Y-axis) over time
(X-axis). Horizontal line = maximum available resource
limit.
Overallocation Resource demand exceeds availability in a time period.
Must be resolved by levelling or adding resources.
Underallocation Resource demand is below availability — resources
are idle. Indicates schedule efficiency loss.

C. Scheduling and Allocating Project Resources

Resource allocation is assigning specific resources to specific activities at specific times. When multiple
activities compete for the same limited resource, priority rules are applied.

Resource Allocation Priority Rules

Priority Rule Logic
Minimum Slack (Most Common) Activity with least total float gets resources first.
Protects critical and near-critical activities.
Earliest Latest Finish (ELF) Activity whose latest finish is earliest gets priority.
Prevents late-finishing activities from delaying the
project.
Shortest Activity Duration (SAD) Shortest activities get resources first. Maximises
number of completed activities.
Most Critical Successor Activity whose downstream successor is most critical
gets priority.
 Priority Rule Logic
Most Resources Required Activity requiring the most resources gets priority.
Clears large demands early.

Resource Scheduling Steps

1. Prepare the project network (CPM/PERT); compute ES, EF, LS, LF, and Total Float for all
activities.
2. Prepare a resource requirement table — resources needed per activity per time period.
3. Prepare an initial resource histogram using ES schedule (all activities start as early as possible).
4. Identify resource overallocations — periods where demand exceeds availability.
5. Apply resource levelling: delay non-critical activities (within float) to smooth peaks.
6. Prepare a revised resource histogram — verify overallocations are resolved.
7. If project duration must be extended (resource-constrained), document and re-baseline.

5. Cost Management
Cost management covers planning, estimating, budgeting, and controlling costs so the project is
completed within the approved budget.

A. Cost Baseline and Budget

Term Definition
Budget at Completion (BAC) Total planned cost for the project — the approved
project budget.
Cost Baseline (S-Curve) Time-phased cumulative planned expenditure. Forms
an S-curve from project start to completion.
Contingency Reserve Budget for identified risks with agreed-upon responses
(known unknowns).
Management Reserve Budget for unidentified risks — unknown unknowns.
Controlled by management.

B. Earned Value Management (EVM)

EVM integrates scope, schedule, and cost to objectively measure project performance. It answers: Are
we on schedule? Are we on budget?

EVM Key Parameters

Parameter Definition
Planned Value (PV) Authorised budget for scheduled work at the status
date. Also called BCWS. PV = Planned % Complete ×
BAC.
Parameter Definition
Earned Value (EV) Budget value of work actually performed. Also called
BCWP. EV = Actual % Complete × BAC.
Actual Cost (AC) Total cost actually incurred for work performed. Also
called ACWP.
Budget at Completion (BAC) Total planned cost for the entire project.

EVM Performance Measures

Measure Formula & Interpretation
Schedule Variance (SV) SV = EV − PV. Positive → ahead of schedule.
Negative → behind schedule.
Cost Variance (CV) CV = EV − AC. Positive → under budget. Negative
→ over budget.
Schedule Performance Index (SPI) SPI = EV / PV. SPI > 1: ahead of schedule. SPI < 1:
behind schedule.
Cost Performance Index (CPI) CPI = EV / AC. CPI > 1: under budget. CPI < 1: over
budget.

EVM Forecasting Measures

Measure Formula & Interpretation
Estimate at Completion (EAC) Forecast of total project cost. EAC = BAC / CPI
(assuming current efficiency continues).
Estimate to Complete (ETC) Expected cost to finish remaining work. ETC = EAC −
AC.
Variance at Completion (VAC) VAC = BAC − EAC. Positive → will finish under
budget. Negative → over budget.
TCPI CPI needed on remaining work to finish within BAC.
TCPI = (BAC − EV) / (BAC − AC).

EVM Quick Reference

Green (good): SV > 0, CV > 0, SPI > 1, CPI > 1 → Ahead of schedule AND under budget Red (bad):
SV < 0, CV < 0, SPI < 1, CPI < 1 → Behind schedule AND over budget Note: CPI is considered the
most reliable predictor of final project cost.
 FORMULA QUICK REFERENCE — MODULE 3

Formula Symbol Expression

PERT Expected Time tE (O + 4M + P) / 6

PERT Std Deviation σ (P − O) / 6

PERT Variance σ² [(P − O) / 6]²

Project Std Deviation σp √(Σ σ² of critical activities)

PERT Z-Score Z (Ts − Te) / σp

Earliest Finish EF ES + Duration

Latest Start LS LF − Duration

Total Float TF LF − EF (or LS − ES)

Free Float FF ES(successor) − EF(current activity)

Cost Slope — (Crash Cost − Normal Cost) / (Normal Dur

− Crash Dur)

Schedule Variance SV EV − PV

Cost Variance CV EV − AC

Schedule Performance Index SPI EV / PV

Cost Performance Index CPI EV / AC

Estimate at Completion EAC BAC / CPI

Estimate to Complete ETC EAC − AC

Variance at Completion VAC BAC − EAC

TCPI TCPI (BAC − EV) / (BAC − AC)

KTU | Project Management — Module 3 | Exam Preparation