UNIVERSITY OF SAINT LOUIS TUGUEGARAO
SCHOOL OF ACCOUNTANCY, BUSINESS AND HOSPITALITY
MANAGEMENT SCIENCE (ACCT 1013)
SHORT TERM, A.Y. 2024-2025
TOPIC 2 – PROJECT MANAGEMENT
Topic Outline:
I. Basic Concepts
II. Critical Path Method (CPM)
III. Program/Project Evaluation and Review Technique
IV. Gantt Chart
V. Time-Cost Trade-Offs
I. Basic Concepts
In the dynamic field of project management, efficient planning and control are essential to
ensure projects are completed on time and within budget. This section explores key tools and
techniques that project managers use to manage time, resources, and performance effectively.
The Critical Path Method (CPM) is a powerful scheduling technique that identifies the
longest path of dependent activities and the earliest possible completion time for a project. It helps
managers prioritize tasks and allocate resources wisely.
The Program Evaluation and Review Technique (PERT) complements CPM by
incorporating uncertainty in activity durations. PERT uses probabilistic time estimates to improve
scheduling accuracy, particularly in complex projects with variable timelines.
Gantt Charts provide a visual representation of a project schedule. They display the start
and end dates of activities along a timeline, making it easier to track progress, manage
dependencies, and communicate timelines with stakeholders.
Finally, Time-Cost Trade-Offs highlight the relationship between a project’s duration and
its cost. By analyzing how changes in schedule impact expenses, project managers can make
informed decisions to optimize performance, reduce delays, or minimize costs.
Together, these tools and techniques form a foundational framework for effective project
planning, monitoring, and execution.
II. Critical Path Method (CPM)
The Critical Path Method (CPM) is a vital project management tool used to schedule, plan,
and control complex projects. Developed in the 1950s, CPM helps project managers determine the
most efficient sequence of tasks that must be completed on time to avoid delays in the entire
project.
The Critical Path Method (CPM) is essential in project management because it enables
managers to identify the most important tasks that directly affect the project's completion time. By
determining the critical path, project managers can focus their attention and resources on activities
that cannot be delayed without causing the entire project to be late. This helps in setting realistic
timelines, improving resource allocation, and anticipating potential bottlenecks. CPM also aids in
monitoring project progress, allowing for timely adjustments when delays occur. Overall, CPM
enhances decision-making, reduces risks, and increases the likelihood of delivering projects on time
and within budget.
Terms to Remember:
Critical Path
Immediate Predecessor
Activity Slack or Float Activity
Forward Pass
Backward Pass
Illustration:
Project Activities:
Activity Description Duration (days) Predecessor
A Site Preparation 3 —
B Foundation Work 4 A
C Framing 5 B
D Electrical 2 B
E Plumbing 3 B
F Roofing 2 C
G Inspection 1 D, E, F
Required:
1. Draw a project network.
2. Identify the critical path.
3. Develop the activity schedule for the project.
4. Determine the expected completion time of the project.
Step 1: Determine the list of activities, its immediate predecessors, and approximate time,
which is already provided in the problem. (This is already illustration based on the table provided
above).
Step 2: Develop the project network.
Step 3: Determine the completion time per activity, earliest start time and earliest finish time
using the forward pass and latest start time and latest finish time using backward pass.
Step 4: Compute for the slack of all activities using the formula provided below and identify the
zero slack to determine the critical path. The slack value can be obtained using the formula
below:
SLACK = LS – ES or LF – EF
Activity ES LS EF LF Critical Path
A 0 0 3 3 0 Yes
B 3 3 7 7 0 Yes
C 7 7 12 12 0 Yes
D 7 12 9 14 5 No
E 7 11 10 14 4 No
F 12 12 14 14 0 Yes
G 14 14 15 15 0 Yes
Therefore, the critical part is A – B – C – F – G with 15 days to finish the project. This would mean
that activities A, B, C, F and G are the critical activities and should be done according to schedule or
else it will cause a delay in the project. On the other hand, activity D can be extended for another 5
days and activity E for 4 days because they have slack time of 5 and 4, respectively.
III. Program/Project Evaluation and Review Technique
The Program Evaluation and Review Technique (PERT) is a project management tool
designed to handle uncertainty in project schedules. Developed in the 1950s by the U.S. Navy for the
Polaris missile project, PERT helps in planning, scheduling, and coordinating tasks within a project,
especially when activity durations are uncertain or variable. Unlike the Critical Path Method (CPM),
which uses fixed time estimates, PERT uses probabilistic time estimates to reflect real-world
unpredictability.
PERT time estimates provide a more realistic approach to project scheduling by accounting
for uncertainty in activity durations. Instead of using a single fixed time estimate, PERT uses three
different time values for each activity: the optimistic time (O), the most likely time (M), and the
pessimistic time (P). The optimistic time represents the shortest duration in which the task could
be completed under ideal conditions. The most likely time is the best estimate of the task duration
under normal circumstances, and the pessimistic time reflects the longest duration the task might
take if problems or delays occur. These three estimates are combined using the PERT formula: T =
(O + 4M + P) / 6, which gives greater weight to the most likely time. This weighted average
provides a more balanced and probable estimate of the actual task duration, making it especially
useful for planning and managing projects with uncertain timelines.
In PERT, the time estimates follow a Beta distribution, which is a good model for
representing uncertain activity durations. To measure the uncertainty or variability of an activity's
time estimate, we calculate the variance.
Terms to Remember:
Stochastic PERT
Deterministic PERT
Expected Time
Beta Distribution
Optimistic Time
Most Probable Time
Pessimistic Time
Illustration:
The KK Company is planning to develop a new process. They have identified the following activities:
Optimistic Most Likely Pessimistic
Activity Description Predecessor
Time (O) Time (M) Time (P)
A Site Preparation — 2 days 4 days 6 days
B Foundation Work A 5 days 5 days 11 days
C Framing B 1 day 2 days 3 days
D Electrical B 5 days 10 days 15 days
E Plumbing B 6 days 6 days 12 days
F Roofing C 1 day 3 days 5 days
G Inspection D, E, F 3 days 6 days 3 days
Required:
1. Develop a project network and determine the expected project completion time.
2. What is the probability that project completion time will meet the 30-day deadline?
Step 1: Compute for the expected times and variances.
Optimistic Most Likely Pessimistic Expected Variance
Activity Description
Time (O) Time (M) Time (P) Time (TE) Value
A Site Preparation 2 days 4 days 6 days 4 days 0.44
B Foundation Work 5 days 5 days 11 days 6 days 1
C Framing 1 day 2 days 3 days 2 days 0.11
D Electrical 5 days 10 days 15 days 10 days 2.78
E Plumbing 6 days 6 days 12 days 7 days 1
F Roofing 1 day 3 days 5 days 3 days 0.44
G Inspection 3 days 6 days 3 days 5 days 0
Step 2: Construct the network diagram, determine the earliest start time and earliest finish
time using forward pass and develop the latest finish time and latest start time using the
backward pass.
Step 3: Compute for the slack for all activities using the formula provided below and identify
the critical path.
SLACK = LS – ES or LF – EF
Activity ES LS EF LF Critical Path
A 0 0 4 4 0 Yes
B 4 4 10 10 0 Yes
C 10 15 12 17 5 No
D 10 10 20 20 0 Yes
E 10 13 17 20 3 No
F 12 17 15 20 5 No
G 20 20 25 25 0 Yes
Therefore, the critical path is A – B – D – G with 25 days to finish the project. Let us determine what
probability this the project will be done given a 30-day deadline. First is to determine the variance
of the critical activities. We will only consider all the variance of activities A, B, D and G.
Optimistic Most Likely Pessimistic Expected Variance
Activity Description
Time (O) Time (M) Time (P) Time (TE) Value
A Site Preparation 2 days 4 days 6 days 4 days 0.44
B Foundation Work 5 days 5 days 11 days 6 days 1
D Electrical 5 days 10 days 15 days 10 days 2.78
G Inspection 3 days 6 days 3 days 5 days 0
a. Add all their variances:
❑ =¿0.44 + 1 + 2.78 + 0 = 4.22
2
❑ =√ ❑
2 2 2
❑ =√ 4.22
2 2
= 2.05
b. Solve for z-test value:
T −E(t )
z=
❑
30−25
z=
2.05
z=2.44
Using z = 2.44 and the table for normal distribution, we will find that the probability of the project
meeting 30-day deadline is 0.4927+0.5000 = 0.9927 or 99.27%. Thus, even though activity time
variability may cause the completion time to exceed 25 days, there is an excellent chance that the
project will be completed before the 30-day deadline.
III. Gantt Chart
Gantt chart is a powerful project management tool used to visually represent the timeline of
a project. It displays activities or tasks along a horizontal time axis, showing their start and end
dates, durations, and dependencies. Named after Henry Gantt, who developed it in the early 20th
century, the Gantt chart helps project managers plan, coordinate, and track specific tasks within a
project.
By clearly illustrating what needs to be done and when, a Gantt chart provides a comprehensive
overview of the project schedule. It enhances team communication, identifies potential bottlenecks,
and ensures that deadlines are met. Whether managing simple tasks or complex projects, Gantt
charts are essential for ensuring clarity, accountability, and timely completion of project goals.
Illustration:
*We will continue the previous illustration.
Optimistic Most Likely Pessimistic Expected Time
Activity Description Predecessor
Time (O) Time (M) Time (P) (TE)
A Site Preparation — 2 days 4 days 6 days 4 days
B Foundation Work A 5 days 5 days 11 days 6 days
C Framing B 1 day 2 days 3 days 2 days
D Electrical B 5 days 10 days 15 days 10 days
E Plumbing B 6 days 6 days 12 days 7 days
F Roofing C 1 day 3 days 5 days 3 days
G Inspection D, E, F 3 days 6 days 3 days 5 days
In days
Activity 1 1 1 1 1 2 2 2
1 2 3 4 5 6 7 8 9 11 13 15 17 19 21 23 25
0 2 4 6 8 0 2 4
A
B
C
D
E
F
G
IV. Time-Cost Trade-Offs
Another important aspect of project management is of reducing the overall project time at
an acceptable cost. Most activities within a project can be reduced at some cost, but there are some
activities that cannot be reduced in terms of time. Crashing is the process of reducing the time
necessary to complete a project by adding resources. Crashing an activity refers to taking special
costly measure to minimize the activity time in its normal value. Crashing the project refers to
crashing a number of activities to reduce the time of the project below its normal value. The
minimum possible duration for an activity is known as the crash duration.
Since cost is of prime importance in deciding whether or not to take advantage of feasible time
reductions. It will greatly affect our decision what activities to crash. Figure 7.1 shows the
relationship of the normal and crash points. The figure shows that whenever an activity reduced
the time of completion, the costs increase, in other words as the time decreases, the cost increases.
The normal point on the time cost graph shows the time and the cost of activity in a normal way.
The crash point shows the time and cost when the activity is fully crashed.
Illustration:
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