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Faculty of Science & Technology


EBTM 3103
PROJECT MANAGEMENT / PENGURUSAN PROJEK
MAY 2014 / MEI 2014

_________________________________________________________________________
NO. MATRIKULASI

800508085734001

NO. KAD PENGENALAN

800508085734

NO. TELEFON

019-3375408

E-MEL
PUSAT PEMBELAJARAN

:
:

mysuri@oum.edu.my
Shah Alam Selangor

EBTM 3103/PROJECT MANAGEMENT

Table of Contents
1.

Introduction..................................................................................................... 2
1.1.

2.

3.

Planning, Control, Leading and Organizing......................................................6


2.1.

Planning ................................................................................................... 6

2.2.

Leading..................................................................................................... 6

2.3.

Organizing................................................................................................. 7

2.4.

Control...................................................................................................... 7

The Critical Path Method................................................................................. 8


3.1.

4.

Calculations for the Critical Path Method..................................................9

NPV and IRR.................................................................................................. 11


4.1.
4.1.1.
4.2.

5.

Project Planning Steps...............................................................................2

Net Present Value Method.......................................................................11


NPV RULE FOR CAPITAL BUDGETING....................................................12
Internal Rate of Return (IRR)...................................................................13

CONCLUSIONS............................................................................................... 15

EBTM 3103/PROJECT MANAGEMENT

1. Introduction
Planning aims at formulation of a time based plan of action for coordinating various activities
and resources to achieve specified objectives. Planning is the process of developing the
project plan. The plan outlines how the project is to be directed to achieve the assigned goals.
Planning involves the breakdown of the project into definable, measurable, and identifiable
tasks/activities, and then establishes the logical interdependences among them.
Four main steps:

Performing breakdown of work items involved in the project into activities.


Identifying the proper sequence by which the activities should be executed.
Activities representation.
Estimating the resources, time, and cost of individual activities.

Scheduling is the determination of the timing of the activities comprising the project to
enable managers to execute the project in a timely manner. The project scheduling id sued
for:
Knowing the activities timing and the project completion time.
Having resources available on site in the correct time.
Making correction actions if schedule shows that the plan will result in late
completion.
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 pf project delay and the responsible parties.

1.1.

Project Planning element

The following steps may be used as a guideline, or checklist to develop a Road Inspection
System:
Step 1
Define the scope of work, method statement, and sequence of work.
The main objective of Road inspection system was to formulate good practice guidelines for
implementing road inspection inspections. Road inspection Sheet is defined as a preventive
tool for detecting inspection issues, consisting of a regular, systematic, on-site inspection of
existing roads, covering the whole road network, carried out by trained inspection expert
teams.
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Step 2
Generate the work breakdown structure (WBS) to produce a complete list of activities. The
WBS is described as a hierarchical structure which is designed to logically subdivide all the
work-elements of the project into a graphical presentation. The full scope of work for the
project is placed at the top of the diagram, and then sub-divided smaller elements of work at
each lower level of the breakdown. At the lowest level of the WBS the elements of work is
called a work package. A list of projects activities is developed from the work packages.
The WBS elements at various levels can be related to the contractors organizational
breakdown structure (OBS), which defines the different responsibility levels and their
appropriate reporting needs. The unified code of accounts allows cataloging, sorting, and
summarizing of all information.
Step 3
Develop the organization breakdown structure (OBS) and link it with work breakdown
structure to identify responsibilities. At the design stage, a Road Inspection Audit (RIA) is
carried out to ensure that a new road schemes operate as safely as possible for all road user
groups. RIA consists of the examination of road schemes at the different stages of project
development (starting with the preliminary design), before or shortly after a road is opened to
traffic (Matena, et al, 2007). Once fully operational, the inspection level of an existing road
may be improved through several types of procedures: Black Spot Management, Network
Inspection Management and Road Inspection Inspections. Black Spot Management (BSM)
consists of identification, analysis and treatment of black spots.

Step 4
Determine the relationship between activities.
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In order to identify the relationships among activities, the planning team needs to answer the
following questions for each activity in the project:
- Which activities must be finished before the current one can start?
- What activity (ies) may be constructed concurrently with the current one?
- What activity (ies) must follow the current one?
A circle of activity precedence will result in an impossible plan. For example, if activity A
precedes activity B, activity B precedes activity C, and activity C precedes activity A, then
the project can never be started or completed. Figure 1.9 illustrates the resulting activity
network.

Step 5.
Estimate activities time duration, cost expenditure, and resource requirement.
Having defined the work activities, each activity has associated time duration. These
durations are used in preparing a schedule. All scheduling procedures rely upon estimates of
the durations of the various project activities as well as the definitions of the predecessor
relationships among activities. A straightforward approach to the estimation of activity
durations is to keep historical records of particular activities and rely on the average durations
from this experience in making new duration estimates. Since the scope of activities is
unlikely to be identical between different projects, unit productivity rates are typically
employed for this purpose.
The duration of an activity may be estimated as:
Activity duration = quantity of work / number of crews x resource output
Typically, the quantity of work is determined from engineering drawings of a specific project.
The number of crews working is decided by the planner. In many cases, the number or
amount of resources applied to particular activities may be modified in light of the resulting
project plan and schedule. Some estimate of the expected work productivity must be
provided. Historical records in a firm can also provide data for estimation of productivities.
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Having defined an activity duration, it means that the planner have already defined the
number of resources that will be employed in a particular activity. Knowing activity duration
and resources employed, it is simple to estimate the activity direct cost.
Step 6
Developments in the road network may create a conflict between the current function of a
road and its intended use, along with the inadequacy of equipment and design characteristics
to the current use of the road. Furthermore, improvements in road standards may result in
discrepancies between characteristics of newly built or reconstructed roads and existing ones,
interfering with the establishment of common a priori expectations concerning road use. Due
to technological developments and new technical standards, existing road equipment may
become obsolete, its replacement being necessary. Once open to traffic, the road environment
is likely to be affected by interference

2. Planning, Control, Leading and Organizing


A managers primary challenge is to solve problems creatively. While drawing from a variety
of academic disciplines, and to help managers respond to the challenge of creative problem
solving, principles of management have long been categorized into the four major functions
of planning, organizing, leading, and controlling (the P-O-L-C framework). The four
functions, summarized in the P-O-L-C figure, are actually highly integrated when carried out
in the day-to-day realities of running an organization.
The key project management processes, which run though all of these phases, are:

Planning.
Control.
Leading
Organizing

2.1.

Planning

Carry out high-level planning for the whole project at the start of the project, then do more
detailed planning for each phase at the start of each phase. Ensure that you have the right
people, resources, methodologies, and supporting tools in place for each planning phase, so
that you can deliver the project on time, on budget, and to appropriate quality standards.
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Schedules also help you do the following:

To provide a basis to monitor and control project activities.

To determine how best to allocate resources so can achieve the project goal.

To assess how time delays will impact the project.

To figure out where excess resources are available to allocate to other projects.

to provide a basis to help you track project progress.

Project managers have a variety of tools to develop a project schedule from the relatively
simple process of action planning for small projects, to use of Gantt Charts and Network
Analysis for large projects

2.2.

Leading

As a Project manager the responsible is for managing the project team. Working on a project
is often different from most "business as usual" activities, and project work may require a
different approach and set of skills.Through directing, management is able to influence and
oversee the behavior of the staff in achieving the company's goals, as well as assisting them
in accomplishing their own personal or career goals. This influence can be gained through
motivation, communication, department dynamics, and department leadership.
Employees that are highly motivated generally go above and beyond in their job
performance, thereby playing a vital role in the company achieving its goals. For this reason,
managers tend to put a lot of focus on motivating their employees. They come up with reward
and incentive programs based on job performance and geared toward the employees' needs.
Effective communication is vital in maintaining a productive working environment, building
positive interpersonal relationships, and problem solving. Understanding the communication
process and working on areas that need improvement help managers to become more
effective communicators. The best way to find areas that need improvement is to periodically
ask themselves and others how well they are doing.

2.3.

Organizing

Getting organized is the second function of management. Management must organize all its
resources in order to implement the course of action it determined in the planning process.
Through the process of getting organized, management will determine the internal organizational

EBTM 3103/PROJECT MANAGEMENT

structure; establish and maintain relationships, as well as allocate necessary resources. In


determining the internal structure, management must look at the different divisions or
departments, the coordination of staff, and what is the best way to handle the necessary tasks and
disbursement of information within the company. Management will then divide up the work that
needs to be done, determine appropriate departments, and delegate authority and
responsibilities.

2.4.

Control

It's essential to control scope, cost, and issues; and to manage time, risks , and benefits
effectively. Create reports that contain the information you need to create an accurate picture
of how things are proceeding. A common way of doing this is to use a Project Dashboard.
Special project controls over time, cost and quality are very different compared to routine
reports. These include:
Time Control: normally applied with network scheduling (Critical Path Method)
which provides the best time control for the project. Other techniques such as
Program evaluation and Review Technique (PERT) allows the use of multiple time
estimates for each activity.
Cost Control: Project control techniques, though not formalized to the same degree as
time controls, can be followed if these steps are followed:
break the comprehensive cost summary into work packages
devise commitment reports for technical decision makers
Act on early, approximate data
concentrate talent on major problems and opportunities
Quality Control: It comprises three elements:
Defining performance criteria
Expressing the project objective in terms of quality standards
Monitoring progress towards these standards

3. The Critical Path Method


The most widely used scheduling technique is the critical path method (CPM) for scheduling.
This method calculates the minimum completion time for a project along with the possible
start and finish times for the project activities. Many texts and managers regard critical path
scheduling as the only usable and practical scheduling procedure. Computer programs and
algorithms for critical path scheduling are widely available and can efficiently handle projects
with thousands of activities.
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The critical path itself represents the set or sequence of activities which will take the longest
time to complete. The duration of the critical path is the sum of the activities' durations along
the path. Thus, the critical path can be defined as the longest possible path through the
"network" of project activities. The duration of the critical path represents the minimum time
required to complete a project. Any delays along the critical path would imply that additional
time would be required to complete the project.

3.1.

Calculations for the Critical Path Method

The inputs to network scheduling of any project are simply the networks with the individual
activity duration defined. With activity A at the start, followed by three parallel activities B,
C, and D; which are then succeeded by activity H. Detailed analysis of these networks are
presented in the following subsections. It is noted that the example at hand involves only
simple finish-to-start relationships among activities.
STEP 1: Identify the logic network & 2nd step is to Draw the actual
network based on Step 1: fill in the ID and duration

STEP 3: Forward path calculation (+ve & max value) get Early Start and
Late Start

EBTM 3103/PROJECT MANAGEMENT

STEP 4: Backward path calculation (-ve & min value)

STEP 5: Identify the total duration =34

total duration

STEP 6: Calculate the FLOAT = the different between ES and LS or/and


EF and LF

STEP 7: Identify the critical path= A--> B-->C-->D-->E-->F-->G ->H-->JK-O-P-Q


(The network from task with 0 float to the next task with 0 float)

STEP 8: Summary in table

Activity/ID
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P

Duration(weeks
)
2
5
4
1
1
1
1
2
1
5
8
1
1
1
2
1

IPA

ES

EBTM 3103/PROJECT MANAGEMENT


EF
LS
LF
TF

A
B
C
D
E
F
G
H
H
J
A
L
M
K,N
O

0
2
7
11
12
13
14
15
17
17
22
2
2
4
30
32

2
7
11
12
13
14
15
17
18
22
30
3
4
5
32
33

0
2
7
11
12
13
14
15
17
17
22
27
28
29
30
32

2
7
11
12
13
14
15
17
18
22
30
28
29
30
32
33

0
0
0
0
0
0
0
0
0
0
0
25
25
25
0
0

33

34

33

34

STEP 9: Gantt Chart (from ES to EF each task)

4. NPV and IRR


In the following are described two different methods for ranking road the net present value
method and the point ranking method. The first is a method that results in cost information on

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EBTM 3103/PROJECT MANAGEMENT

the rehabilitation strategy for the whole road stock. The second method can be a technical
help or an alternative method to the economic method.

4.1.

Net Present Value Method

In the net present value method, the costs of repairs, traffic diversions, traffic noise and
pollution, operation and maintenance are calculated year for year within a chosen time
horizon; the timing of each cost is based on the service life of each repair. The annual costs
are then discounted back to the initial year using a given discount rate. In this way the present
value of each years expenditure is obtained.
By summing the present values, a value for the strategy in question is obtained that can be
compared with the corresponding value for other strategies. The strategy for which the
cumulative present value is lowest is the economic optimum for the structure considered in
isolation. The cumulative net present value makes it possible to compare strategies in which
the costs are spread over varying periods, as all costs are converted to the initial year. The
further in the future a cost falls due, the lower is the present value of that cost. This effect is
proportional to the discount rate adopted. To put it simply, the present value is the amount
that must be deposited in the bank today to cover a cost that will fall due at the time the repair
is carried out.
The present value is calculated by

Where:
P
NCIF (m)

= Present investment
=

Net cash in-flow (RM) in the period of m, which represents revenue earned

cost
i

= Cost of capital rate

CR

= Capital recovery (RM), which is the amount regained at the end of the

project through resale or other methods of dispositions


Once the calculation has been performed, projects with the largest NPV are to be preferred.
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EBTM 3103/PROJECT MANAGEMENT

4.1.1.

NPV RULE FOR CAPITAL BUDGETING

Choose a project if it costs less than the PV of its cash flows. More generally:
Take a project if its Net Present Value is positive.

Investors would have to invest 123 more (a total of 723) to get the cash flows of 200, 200,
and 500 at an interest rate of 10%. Therefore the project has a value of 123 for investors. The
interest rate is called the cost of capital, because it is the opportunity cost of funds - the rate
investors can earn on alternative investments.

4.2.

Internal Rate of Return (IRR)

The IRR or yield of a project is the rate of return at which the present value of the net cash
inflows equals the initial cost, which is the same as the discount rate which produces a NPV
of zero. For an investment to be worthwhile the IRR must be greater than the cost of capital.
Due to the following reasons, DCF method is identified as a best method for Investment
appraisal processes,
They give due weight to timing and size of cash flow
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Thy take the whole life of the project in to irregular cash flows do not invalidate the result
obtained.
Estimate of risk and uncertainty can be incorporated
Use of discounting methods may lead to move accurate estimating and
They rank projects correctly in order of profitability and give better criteria for acceptance
or rejection of projects than other method.
IRR can be calculated as follows (using the same notation as for NPV

This equation is normally solved by using trial and error, or by using the standard functions in
Excel. The IRR is the discount rate for which NPV equals 0, and subsequently it indicates
how large the discount rate can be before the project is no longer economically viable. It can
be used to appraise projects in unstable economies, as it can be said to indicate the safety
margin.

5. CONCLUSIONS
Road inspection system is initiated to meet cost, duration and quality needs of clients. The
project team is by these basic criteria required to implement and accomplish the project tasks
on time and within the budget as specified in the project management plan. These seemingly
perfect project conditions are often times unduly exceeded making the project teams work
more challenging. The adoption of CPM, one of the network scheduling techniques would
enable the project manager of determine justified request for extension of project time and
claims arising thereof, thereby minimizing time and cost surprises.
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Due to these factors, organizations must rethink how they will manage Single-Time Efforts.
They should define a Project Management Framework that is distinctive from more
traditional operations practices. This framework must define a Project Life-Cycle along with
processes and information required to plan and monitor projects. Failure to recognize the new
assumptions of Project Management results in applying traditional practices in illogical and
unsuccessful ways.
A systematic review of various investment decision-making methods shows that discount
rates have been proposed by Chen (1998), Shen and Li (2002) and WAAC method .It
incorporates the time value of money into the mean-variance method using NPV concept, and
financing methods take into account the discount rate and risk. The comparison of different
methods shows that discount rate proposed by Shen and Li (2002) gives better results and can
be considered to determine NPV at risk for similar projects with the same macroeconomic
data, and this method may not be suitable for other projects/other countries because of
changing macroeconomic data like interest rate, return on equity and inflation rate. It may be
varied from case to case and from country to country. Best discount rate can be found out by
comparing various methods and adopting the suitable method for a specific project analysis.

5.0 REFERENCES
Open University Malaysia (OUM), July 2010,EBTM3103
ASTM E833, Definitions of Terms Relating to Building Economics, American Society for
Testing and Materials, West Conshohocken, PA (1999).
H.L. Gantt, Work, Wages and Profit, published by The Engineering Magazine, New York,
1910; republished as Work, Wages and Profits, Easton, Pennsylvania, Hive Publishing
Company, 1974, ISBN 0-87960-048-9.
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http://www.ekt.bme.hu/CM-BSC-MSC/BasicsOfEngineeringEconomics
Chase, Richard, Nicholas Aquilano and Robert Jacobs,
2001, Operations Management for Competitive Advantage, ninth edition, McGraw-Hill.
DeMarco, Tom and Tim Lister. Peopleware: Productive Pro-jects and Teams. 2nd edition.
New York: Dorset House Pub-lishing, 1999
Greer, Michael. The Managers Pocket Guide to Project Manage-ment. Amherst, MA: HRD
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Haynes, Marion E. Project Management. Menlo Park, CA: Crisp Publications , 1989
Martin, Paula, and Karen Tate. Getting Started in Project Man-agement. New York: Wiley,
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Wysocki, Robert K., et al. Effective Project Management. New York: Wiley, 199

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