VISION INSTITUTE OF PROFESSIONALS

NETWORK ANALYSIS (NWA) FOR PROJECT MANAGEMENT

INTRODUCTION
Network analysis is a family of related techniques developed to aid management in planning,
coordination and control of large or complex projects using limited resources viz:
- Time
- Equipment
- Money
- Materials
- Personnel etc.

The problem
Given that a project is composed of a number of tasks which can be performed independently i.e.
concurrently or have to be performed sequentially, how should they (the activities) be scheduled in
order to achieve some desirable management objectives such as:
- Minimize completion time
- Minimize total project cost.

Network analysis (NWA) for project management does the following:

1) Defines the jobs to be done.
2) Integrates them in a logical time sequence.
3) Affords a system of dynamic control over the progress of the plan.

Two techniques were developed almost simultaneously in the period 1956-58 by 2 different firms in USA
independently.

i) Critical Path Method/Analysis (CPM/A)

Was developed by a management consultancy firm, E.I. DuPont and Nemours Co. for its clients
as an application to scheduling of routine plant overhaul, maintenance and construction projects.

ii) Program Evaluation & Review Technique (PERT)

Was developed for the US Navy by a consultancy firm for scheduling research and
development activities for the deployment of some missile system (the Polaris fleet
ballistic missile project).

Other than this historical aspect, the major distinction is:

 CPM/A- Activity completion times are taken to be known with certainty. Hence this is a
certainty or deterministic model.

 PERT- Activity completion times are taken to be uncertain; hence treated as random
variables. This is a probabilistic or stochastic model.

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 GENERAL APPROACH
Project management using NWA models can be broken down to 3 phases:

Phase 1 FORMULATION
1. Identify the project.
2. Identify and list all activities in the project.
3. Perform a resource needs analysis for all activities in the project in terms of: Personnel, equipment,
time, material, money, etc.
4. Establish the logical flow of all activities i.e.
* Which activities can be performed concurrently?
* Which activities must be performed sequentially?
Results: Precedence relationship schedule among the activities.

Phase 2 SCHEDULING
1. Draw the network of the project indicating the various events, activities and their durations.
2. Determine the Earliest event time for each event.
3. Determine the Latest event time for each event.
4. Determine the activity floats for all activities.
Results: Deduce the critical path(s) for the network.

Definition
A critical path in a network is an unbroken continuity of activities from project start to project finish,
which is the longest in the network and which thus represents the shortest time the project can take.

A delay in a critical activity will inevitably delay the entire project.

Phase 3 IMPLEMENTATION AND CONTROL

1. Analyze the effects of activity delays in the project.
2. Analyze the effects of time reductions on cost (Activity crashing).
3. Check off the progress of implementation with the plan revising the schedule to incorporate any
changes arising.

PICTORIAL REPRESENTATION OF NETWORKS

There are 2 pictorial representations of networks for project management.
1. Activity -on-Arrow Approach
2. Activity -on-Node convention

ACTIVITY- ON- ARROW CONVENTION

Terminology, Definitions & Symbols used.
1. A project– may be defined as a human undertaking which consists of a series of interrelated tasks
geared towards a definite objective. It usually involves a considerable amount of time and use of
other resources for its completion. It has a definite beginning and a definite end.
2. A task – is an individual identifiable activity or job in a project which has a definite beginning and a
definite end and which requires time and other resources for its completion.
In project networks, it is assumed that a task is not further divisible.

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3. An event – denotes either the beginning or the end of an activity or group of activities.
An event is just but a moment in time; hence it does not require time or any other resource.
4. Dummy activity – This is used in networks for two reasons:
i) To enable all activities to be uniquely described as a connection of two events.
ii) To facilitate the logical flow of activities in the network in certain
cases.

Note: since a dummy activity is non-existent, its duration is zero.It is depicted in a network diagram
differently e.g by use of dotted, coloured or double lines.

Preparation of a network diagram

i) Each activity is shown by an arrow only once in the network.
ii) Network has to be developed on the basis of logical dependencies between various activities.
iii) The length of arrows does not correspond to activity duration.
iv) Arrow direction shows the general progression in time.
v) Events in the network are shown by numbers.
vi) Activities are identified by the numbers of the starting and the ending events.
vii) Looping is to be minimized in network construction.
viii) A complete network will have one and only one starting event
node and one and only one ending event node

CRITICAL PATH CALCULATIONS

Earliest Event Times (EETs)
Use forward pass method as follows:
Beginning with the first event and proceeding towards the last event, the EET for each event is the
largest cumulative time for all activities flowing into the event.
Take the EET for 1st event = 0

Latest Event Times (LETs)

Use backward pass method as follows:
Beginning from the last event and proceeding towards the first event, the LET for any event is the
smallest cumulative time difference for all activities flowing out of the event.
Take LET for last event to equal its earliest event time.

Exercises on network structuring

Construct the network diagram for the following projects:

Question One

Activity Immediate Days

predecessor
A - 8
B - 2
C A 3
D B 7
E C, D 6

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Question 2

Activity Preceeded by Weeks

A - 4
B - 3
C - 1
D A, C 5
E A, C 5
F B, E 2

Question 3
A housing construction project has the following data:

Activity Preceded by Duration (days)

A - 8
B - 5
C - 3
D A 5
E A 6
F B, G 6
G A, C 3
H A, C 10
I D 8
J E, F, H 12
K E, F, H 11

Required
a) Construct the activity–on-arrow network.
b) Compute the EETs, LETs and hence deduce the critical path and its duration.
c) Calculate the 3 types of floats for all the activities
d) Prepare a table of earliest and latest start and finish times and
slack times (total floats, TFs) for this project

FLOATS
Generally floats give a measure of the flexibility which exists for individual activities or a group of
activities in a network in relation as to whether it shall extend project duration (as measured by critical
path) if such an activity is delayed.
There are three types of floats depending on the assumptions made regarding EETS and LETS at
beginning and ending nodes for each activity or group of activities.

These are
i) Total float, TF
ii) Free float, FF
iii) Independent float, IF

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 Total Float (TF)
Is the amount of time an activity can be delayed without delaying the project if preceding activities
are completed as early as possible and subsequent activities begin as late possible.
TFx = LETj - EETi - Dij.

Free Float (FF)

Is the amount of time an activity can be delayed if all preceeding
activities are completed at the earliest event times and also subsequent activities begin at their EETs.
FFx = EETj - EETi – Dij

Independent Float (IF)

Is the amount of time an activity can be delayed if all preceding activities are completed as late as
possible but subsequent activities begin at their EETs.
IFx = EETj – LETi – Dij

Activity floats and the critical path

1. If total float for an activity, TF = 0, then it is critical, otherwise it is not critical ---------- sufficient
condition.
2. If an activity is critical, then its free float = 0 (FF=0)
However the fact that an activity has FF = 0 does not mean it is critical ----merely a necessary but
not a sufficient condition.
3. Generally TF >= FF >= IF

Example
Question 8 (June 2003)
a) Explain briefly the network planning procedures.
b) Explain the following terms as used in network analysis:
i) Total float.
ii) Free float.
iii) Independent float.

c) The following is a PERT network planning modeling for the construction of a new home by Tunza
Development:

5
 D
2 4
3 Dummy
0
A 3 I
6 E 3

C 1 5
5
1
J 1
F 7
B 4
8 G L
10 3
3 H
5 6

Required

i) Prepare a table of the earliest and latest start and finish times and slack times for this project.
ii) Can the project be finished in 16 weeks? Explain.

ACTIVITY SCHEDULING AND RESOURCE PROFILING

So far, we have assumed that activities begin as soon as their immediate predecessors are completed.
 In practice this may not occur due to resource limitations, e.g. activities which could be
concurrently performed may require the same resource such as labour.
 Further, resource utilization is to be planned so that it is as balanced as possible in order to
minimize periods of excess (and hence idle) resources and those of resource scarcity.
 Resource profiling also helps in planning for the human resource, e.g. when leave is to be taken,
when a given employee reports for duty etc.

Methodology
Resource profiling is done as follows:
 We construct a Gantt chart which is a diagram showing when each activity begins, when it
ends and the resources required in a time frame (calendar).
 The Gantt chart is then used to derive an unbalanced resource aggregation diagram or
resource profile which shows at any point in time in project implementation how much of a
particular resource is required given the ongoing activities.
 One can then attempt balancing the profile basically by utilizing activities which have non-
zero floats (non-critical activities).

Sequence
1. Gantt chart 2. Unbalanced Profile 3. Balanced Profile

Resource Balancing
This represents an attempt to have a more efficient usage of resources. There are normally one of two
possible objectives:

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 1) If the project has to be completed within critical path duration, then only activities which are not
critical can be rescheduled to achieve some level of balancing.
2) The objective could also be to optimize a certain scarce resource such as personnel, in which
case project time will be extended.

There is not as yet an analytical (mathematical) technique to obtain the best smoothed profile.
Nevertheless there are certain “rules of thumb” (these are called heuristics) used by
practitioners which are provided next.

Heuristics for resource allocation and activity scheduling

i) Allocate the resources to activities serially in line i.e. in the order the activities become due first.
ii) When several activities compete for scarce resources, give preference to activities having minimum
float.
iii) If two competing activities happen to have equal floats, allocate the resources to activity having
lower duration.
iv) Reschedule non-critical jobs, if possible, to make resources free for scheduling critical jobs.

Examples
Question 1
Consider the following project with the accompanying data.

Activity Preceeded by Duration (days) Resources

required (units)
A - 1 2
B - 2 1
C A 1 1
D - 5 1
E B 1 1
F C 1 1

Required
a) Obtain as balanced a resource profile as possible within the project duration.
b) Suppose the maximum number of resources is 2 units at any given time, provide the resulting
resource profile. By how long is the duration extended?

Question 2
Suppose in the previous illustration (Q3) (housing construction project) the activities A to K require
various levels of manual labour as follows:

Activity No. of Persons Activity No. of Persons

A 4 G 2
B 2 H 3
C 4 I 0
D 4 J 3
E 2 K 1
F 2

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Required:
Construct a Gantt chart and then derive as balanced a resource profile as possible, without exceeding
project completion time.

TREATMENT OF UNCERTAINTY IN NETWORK MODELS

Activity completion time
So far, we have taken activity completion time as being known with certainty, an unlikely situation in
practice. The completion time of an activity is thus better treated as a random variable described by a
probability distribution rather than by a single estimate.

Problem
What is the best probability distribution to describe activity completion time? The originators of PERT
(Program Evaluation and Review Technique) tried various probability distributions and the one that
resulted in the least error i.e. having the best fit, turned out to be Beta-distribution.

For Beta- distribution, 3 time estimates are required for every activity:
1. The shortest time possible (optimistic), a
2. The most likely (modal) time, m
3. The largest possible time (pessimistic), b
Thus
Expected activity completion time, te = a +4m+b
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Standard deviation of activity completion time, Ϭi = b-a
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Project Completion Time
If activity completion time is uncertain, it follows that project completion time is also uncertain. Provided
the number of activities in the project is sufficiently large (usually n>4) normal distribution can be used
to describe project completion time. Treatment of uncertainty for the project is with regard to critical
path duration.

Assumptions
1. Non- critical and critical activities maintain their status i.e. the CP does not change.
2. The activity completion times are statistically independent i.e. they do not influence one another.

The Parameters
Mean completion time, μcp= Summation of expected CP activity times.

Standard deviation of completion time, Ϭcp =square root of the sum of variances of CP activities.
Note: Variances are linearly additive; standard deviations are not.

Example
The time estimates in days for each activity in a project and the precedence relationships are as follows:

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 Activity Preceded by Time estimates (days)
a m b
A - 5 7 15
B - 3 5 7
C - 2 4 6
D A 1 2 3
E A 6 9 18
F C 1 6 11
G B, E, F 1 3 5
H B, E, F 4 7 10
I D, G 1 3 5

a = Optimistic time; m = Most likely time; b = Pessimistic time.

Required:
a) Construct the network diagram and determine the critical path activities and the expected
duration of the project.
b) What is the probability that the project will be completed
i) Within 27 days?
ii) Before the 24th day?
iii) Within 23rd and 29th days?
c) Construct a 95% confidence interval for project completion time.
d) What completion date can one bet with 95% confidence that the project will have been
completed then?
e) Revenue for the project has been negotiated and agreed at Sh.680 million irrespective of when
the project will be completed.
The cost however depends on project completion time and they are estimated as follows:

Completion time Estimated cost (Sh.

Million)

Within 24 days 210

Between 24 and 27 500
days
After 27 days 790

Required
Calculate the expected profit or loss for this project.

TIME- COST ANALYSIS IN ACTIVITY SCHEDULING (ACTIVITY CRASHING)

This is the process of trying to reduce project duration from the expected completion time to a shorter
duration in order to achieve some objective, such as
- Minimize duration
- Minimize total project cost

Reasons
1. Reduction of activity duration inevitably increases direct activity cost e.g. personnel working
overtime.

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2. When duration is reduced, daily or weekly overhead costs may be saved.
3. There may be bonus or penalty provisions in the agreement which are tied to or dependent upon
project completion time.

GUIDELINES
1. Reduce the duration of CP activities only.
2. If there are two or more critical paths, reduce the duration of all critical paths simultaneously by the
same duration.
3. Crash an activity by (i) its maximum “crashable” time or (ii) just to make another path equally
critical. Out of these two, use the one that will result in the lower crash time.
4. If there are alternative activities to be crashed, use the ones(s) that will result in the lowest cost
slope i.e. change in cost per unit change in time as follows:

Cost slope = Crash cost - Normal cost =CC-NC =Δ cost

Normal time - Crash time NT-CT Δ time

5. After a crash, revise the affected data in readiness for the next one.
6. Perform a time-cost analysis consistent with management requirements or prepare a management
report.

Example
A project has the following data:

Time Estimates (weeks) Cost Estimates (£)

Activity Normal Crash Normal Crash
1-2 6 3 10000 14000
1-3 4 3 5000 8000
2-4 1 1 2000 2000
2-5 3 2 4000 5000
3-4 0 0 0 0
3-6 6 4 9000 12000
4-6 2 2 3000 3000
5-6 7 4 7000 8000

Apart from direct activity costs shown above, there is a site overhead cost of £900 every week.

Required
a) i) Construct the project network using normal time and determine the critical path.
ii) What is the project duration and total cost for normal time?
b) What is the shortest possible time that the project can take, and what is the associated cost?
c) If the objective of the firm is to minimize cost irrespective of duration, determine this duration
and the cost.
d) Construct a time-cost graph for the crashing process above.

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 TIME AND C0ST MONITORING IN PROJECT MANAGEMENT:
TIME-COST STATUS REPORTS

 Time -cost status report for a project compares actual cost and budgeted (expected) cost at
any given time during project implementation.
 If actual cost is greater than budgeted cost, then we’ve a cost overrun; otherwise we have a
cost underrun (saving).

Budget > Actual is cost underrun (desirable)

Budget < Actual is cost overrun (not desirable)

Importance / Significance

 Cost overrun and cost underrun guide management on the cost status of the project so that
corrective action can be taken in either case in good time.

Cost overrun – take measures to save costs

Cost underrun – reinforce the causes of the savings provided quality is not
compromised

 Rule of Thumb: Investigate cost overrun/underrun if they are above or below 5% of the
budget.
 Time-cost status reports are also used to assess whether the project is ahead of, or behind
schedule at any given point in time in project implementation.
 This is so as to take corrective action if project is behind schedule by speeding up one or
more critical activities.

Example
For the PERT network below, the project cost of each activity was Sh.600,000. After the eleventh week,
the following data has been forwarded to management concerning the project status.

B E 4 D
8 3

C J
1 10 5 8
6
A F H I
9 4 5 4

2 G
3 3

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 Activity Actual cost % Complete
Sh ‘000’

A 620 100%
B 570 100%
C 560 90%
D 0 0%
E 100 25%
F 500 75%
G 200 50%
H 0 0%
I 0 0%
J 0 0%

Required
a) Solve for the earliest and latest start and finish times for each activity as well as the expected
overall completion time.
b) Do the total expenditures to date represent an overall cost overrun or underrun?
c) Is the project being completed on time?
d) What corrective action, if any, do you recommend?

ACTIVITY–ON–NODE DIAGRAMS

The symbol (Node) use Connecting activities

Activity Duration
J 8 K 6
ES EF
5 13 13 19
LS LF
16 24 24 30

Nodes for starting and ending the project

0 55
START END
0 55

NB: An activity-on-node diagram does not have a dummy activity.

Exercise
Draw the activity – on – arrow diagram for the following project, then convert it into an activity-on-node
diagram.

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 Activity Preceeded by Duration (days)
A - 1
B - 2
C A 1
D - 5
E B 1
F C 1

ESTABLISHMENT OF PRECEDENCE RELATIONSHIPS

In practice, we require to obtain the precedence relationships. An example is the following past paper
question.

Question Eight (June 1998)

a) John Kamau is in charge of planning and co-coordinating the next annual auditors’ management
training programme for the Institute of Certified Accountants. John has listed the
following activity information for this project:

Time in Days
Description Optimistic Most probable Pessimistic
Plan topic 5 6 7
Obtain speakers 5 12 13
List meeting locations 6 8 10
Select location 4 10 10
Speaker travel plans 5 6 13
Final check with speakers 7 7 10
Prepare and mail brochure 4 7 10

Required:
i) Which activities are critical?
ii) How long would it take John to complete the task?
ii) Because of other commitments, John wants to finish the task of obtaining speakers in 10
days or less. What is the probability of doing this task in 10 days or less?

b) What are the assumptions and advantages of the quantitative technique you have used to solve
part (a) above?

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 APPRAISAL OF NWA MODELS FOR PROJECT MANAGEMENT

Advantages
1. It specifies and compels management to think about project
planning and such issues as
- Tasks to be performed.
- Resources required.
- Logical precedence relationship etc.

2. Helps management to complete a project using minimum time or cost, whichever is its objective.

3. Provides management with a framework for keeping planning up to date such that impact of change
is easily captured and incorporated into the remaining tasks of the project, particularly with
computing facilities.

4. Through resource balancing, the following are achieved:

- Balancing minimizes instances of resource overload (scarcity) and idleness.
- Helps plan for uses of limited resources which are required by concurrent activities.
- Helps plan for the human resource in terms of time for leave, time to report on duty and so on.

5. Periodic time-cost reports aid in monitoring the project performance in terms of adhering to
budgeted cost and time so that any adverse variances can be addressed promptly.

6. Every manager knows when his/her activity will begin and when they end, hence s(he) coordinates
in good time with the relevant departments of the organization. This improves communication,
resource utilization and managerial control

Disadvantages
1. Data – it is difficult to obtain reliable or accurate time and cost estimates.
2. Resistance to change- management may be resistant to implement such techniques as network
models to problem solving.
3. Facilities – computing facilities, particularly appropriate software, may be too expensive or not
available particularly in developing countries.
4. Trained personnel – this is a major problem in developing economies.

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