CMS 201 OPERATIONS RESEARCH I

UNIT: OPERATIONS RESEARCH 1

UNIT CODE: CMS 201

NETWORK ANALYSIS
Introduction:
Network analysis is a generic term for a family of related techniques developed to aid management to
plan and control projects. These techniques show the inter-relationship of the various jobs or tasks which
make up the overall project and clearly identifies the critical parts of the project. In other words the OR
techniques used for planning, scheduling and controlling large and complex projects are often referred to
as Network Analysis.
A network is a graphical diagram consisting of a certain configuration of arrows and nodes for showing
the logical sequence of various tasks (or activities) to be performed to achieve project objectives.
Network analysis is quite useful for designing, planning, coordinating, controlling and decision-making
so that the project could be economically completed in the minimum possible time within the limited
available resources.
Two most popular form of this technique now used in many scheduling situations are the Critical Path
Method (CPM) and the Program Evaluation and Review Technique (PERT).

Project:
A project is a one time job that has a set or combination of activities that should have definite starting
point, definite end point, clearly defined scope or work and it is multitask in nature. Hence a project has
a distinct life cycle, starting with an idea and progressing through design, engineering and construction
through to the use by project owner. A project has definite mission and only stops when the mission is
fulfilled.
Examples include:
a) Construction of buildings, bridges, factories, highways, stadiums, irrigation projects etc.
b) Research and development of new products.
c) Planning of political campaigns.
d) Budget and auditing procedures.
e) Missile development programs.
f) Installation of complex new equipment such as computers or large machinery.
g) Advertising programs and for development and launching of new products.
h) Strategic and tactical military planning.
i) Finding the best traffic flow patterns in a large city.
j) Organization of big conferences, public works, etc.

Terminologies:
1) Activity: An activity is one of the tasks in a project. It consumes resources like time, raw
materials, manpower, equipment, capital etc. In the network diagram an activity is represented by
an arrow. The tail of the arrow indicates the point at which the activity can begin and the head of
the arrow indicates a point at which the job ends. The arrow carries the description of the job and
code numbers representing the start and end of the job. The arrow is not drawn to scale, but it is
used physically to represent part of the project in the diagram. Activities are interrelated in a logical
 sequence with some activities being started when others are completed, while others can be done
simultaneously.
(i) Predecessor activities are activities which must be completed before others can begin.
A
C

A and B are predecessor activities.

(ii) Successor activities are the activities which follow other activities.
E
D

F
E and F are successor activities.
(iii) Concurrent activities are activities which can be done at the same time.
G

G and H are concurrent activities.

(iv) Dummy Activities: these are activities that have zero duration and they use no
resources. They are represented in the diagram by broken lines.

 Identity Dummy Activity: these are used to make activities appear unique in the diagram or to
make activities with common starting point and common ending point be distinguishable in the
diagram. This is because no two activities can be identified by the same starting and also be
identified by the same end point. In order to clearly identify such activities we use identity dummy
activities.
2
A

3
1
B
 Logic Dummy Activity: these are used to help keep the logic sequence correct.
e.g.
 Assume activity A and B can be done concurrently and activities C and D can also be done
concurrently. However, the beginning of C depends of A alone, while the beginning of D depends
on both A and B.

A C

X Mind the direction of the dummy

B D

2) Event / State: An event or state indicates the start or end of an activity; it represents the state of
having completed the job or the state of being ready to start the job. An event has no time duration
and consumes no resource. It is represented on the diagram by a circle or oval.

i j

The beginning of an activity is called a tail event and the end of an activity is called a head
event. Hence each activity originates and terminates in a unique pair of events.
 Merge Event: A merge event represents the completion of more than one activity.

 Burst Event: A burst event represent the beginning of more than one activity.

3) Floats: Floats indicate extra time on an activity. It occurs because an activity requires less time
than the time allowed on it.
There are 3 types of floats.
a) Total Float (TFij): This is the amount of time by which a non critical
activity can be delayed beyond its earliest start time without affecting the
completion time of the whole project. It is the difference between the
maximum time available to perform the activity and the activity duration
time. To determine this float use the following formula.

TFij = LCj – ESi - Dij

Where:
TFij = Total float of the activity
LCj = Latest completion time at the head of activity.
ESi = Earliest start time at tail of activity.
Dij = Duration of the activity
b) Free Float (FFij): This is the amount of time by which a non critical
activity can be delayed from its earliest start time without affecting the
EST of the activities immediately following it. It is based on the
assumption that all activities start as early as possible. To calculate free
float use the following formula.

FFij = ESj – ESi – Dij

Where:
FFij = the free float of activity.
ESj = EST at the head of activity.
ESi = EST at the tail of the activity.
Dij = Duration of the activity.
c) Independent Float (Iij): This is based on the assumption that the
predecessor event occurs at its latest possible time and the successor event
at its earliest possible time. It is that portion of the total float within which
an activity may be delayed for start without affecting the floats of the
preceding activities.

i.e. Iij = ESj – LCi - Dij

Three possibilities of calculating floats
1) TFij (0) = FFij (0)
Implications:

a) The activity is critical

b) The activity cannot be started later than scheduled and cannot be completed later than scheduled;
otherwise the whole project will be affected and will be late.
c) Such an activity takes precedence in the use of resources.
d) They require close management attention and control.

2) TFij > FFij

Implications:
a) This is a near-critical activity
b) It can be delayed, but the amount of delay must not exceed the amount of free float.
c) They are assigned resources after the critical activities.

3) TFij (> 0) = FFij (>0)

Implications:
a) This is a non-critical activity.
b) Can be delayed. Can start any time between EST and LST.
c) Are allocated resources last.

TECHNIQUES:
1) Gantt Charts:
These are the traditional techniques used for scheduling and planning small projects with fewer activities.
A Gantt chart is a graph with the bar representing each activity in the project. The bar is drawn from left
to right across the chart indicating the duration of the activity.

A
Activity

Duration
The Gantt charts however have their weaknesses (flaws)
a) Appropriate for small projects with few activities and precedence relationships.
b) Do not clearly indicate the interrelationships among the activities.

2) CPM and PERT

Both methods were developed in USA in the 1950s.
CPM (Critical Path Method) was developed to help in planning of more complex projects
PERT (Program Evaluation and Review Technique) was developed by USA Navy to help them in their
complex projects in developing missiles.
Both CPM and PERT are deviations of Gantt charts.
The main initial difference between the two methods was that CPM used a single time estimate for activity
duration, hence it was deterministic. PERT, however used multiple time estimate for each activity
duration, hence was probabilistic.
Nowadays, the two methods are used interchangeably and concurrently. PERT also reduces the multiple
time estimates to a single time for each activity.
PERT Times:
The PERT times are three:
1) Most optimistic time = a
2) Most pessimistic time = b
3) Most likely time = m

Expected activity time, te = a + 4m + b

6

Guidelines for drawing network diagrams:

1) A complete network diagram should have only one beginning point without predecessor and only
one end point without successor.
2) The flow of the diagram should be from left to right.
3) Arrows should not cross each other unless it is absolutely necessary.
4) Arrows should be kept straight and not bent or curved.
5) Each activity is represented by one and only one arrow in the diagram, hence no single activity
can be represented twice in the network.
6) No activity can begin until all activities preceding it are complete.
7) Each activity must have one beginning point and one end point. However many activities may
have the same beginning event and also use the same end event.
8) The length of the arrow is not proportional to its duration.
9) Dummy activities should only be used when absolutely necessary.
 10) Once the diagram is complete the events should be numbered serially from left to right. The tail
event number must be smaller than the head event number. Hence each activity must uniquely be
identified by its tail and head event numbers.

To place arrows on an activity ask yourself 3 questions.

a) Precedence question: i.e. which activity must be completed before this particular one
begins?
b) Successor question: i.e. which activity immediately follows this activity?
c) Concurrent question: i.e. which activities can be done simultaneously with this activity?
Example: draw the network for the following activities:

Activity A B C D E F G H
Preceded by - - A A B B C, E C, E, F

Solution:
D
A 2 6
C G
H
1 B E 4

3 5
F

(Join 4 and 5 with a dummy)

Question:

Activity Duration te
a m b
1- 2 6 8 10 8
1–3 3 6 9 6
1–4 1 3 5 3
2–5 0 0 0 0
2–6 2 4 12 5
3–5 2 3 4 3
4–5 3 4 5 4
4–7 2 2 2 2
5–7 2 4 6 4
5–8 3 7 11 7
7–8 0 0 0 0
6–9 1 4 7 4
8–9 1 10 13 9

a) Draw the network

b) Identify i) Critical activities
ii) Critical Path
iii) Project duration.

Computation of Earliest Start Time (EST) and the Latest Completion Time (LCT)
1) Phase I: Forward Pass Computation
For determining the earliest start (ESi) time for each activity, the calculation begins from the initial event
and moves forward to terminate at the terminal event. The earliest expected time for the initial event is
zero because no activity has preceded it. The zero event time becomes a base time to which subsequent
activity duration are added. The earliest expected time for activities immediately following the initial
event is found by adding to the base time the duration of that activity. If an event has two or more activities
flowing into it, the earliest start time at this event will be determined after all activities flowing into it are
completed. This is because no activity can start from this event until all the activities that it depends on
are complete. Hence take the maximum allowable time using the following formula.

ESj = Max ESi + Dij for all (i, j)

2) Phase II: Backward Pass computation:

Used for determining the latest completion (LCj) time for each activity. Calculations begin from the
terminal event and move backward to terminate at the initial event. This is the difference between the
latest allowable time for the event and the duration of the activity. When one or two activities flow from
an event take the minimum time using the following formula.

LCi = Min LCj – Dij for all (i, j) activities

For an activity to be Critical 3 conditions must be satisfied simultaneously

1) ESi = LCi
2) ESj = LCj
3) ESj – ESi = Dij or LCj – LCi = Dij
Critical Path:
This is the path that runs continuously from the initial event to the terminal event carrying critical activities
uninterrupted. It is the longest path in the network. To find the duration of the critical path, add the
durations of the critical activities. Note: It is the critical activities that determines the duration of the
project.

Crashing the Project:

Crashing an activity refers to taking special costly measures to reduce the duration of an activity below
its normal value. These special measures might include using overtime, hiring additional help, using
special time-saving materials, obtaining special equipment, etc. Crashing the project refers to crashing
a number of activities in order to reduce the duration of the project below its normal duration. The CPM
method of time-cost trade-offs is concerned with determining how much (if any) to crash each of the
activities in order to reduce the anticipated duration of the project to a desired value.

In crashing the following assumptions are made:-

1) There’s a direct time cost relationship such that a reduction in time will lead to proportionate
increase in cost.
2) The cost of reduction per unit time remains the same for each activity i.e. the cost slope is constant.

Definitions:
1) Normal duration (Dn): This is the time required to perform an activity under normal circumstances
and with minimum direct costs.
2) Crash duration (Dc ): This is the time taken to perform an activity if the duration is reduced or
shortened. The normal duration is greater than the crash duration.
3) Normal cost (Cn): This is the absolute minimum direct cost required to perform an activity within
the normal duration.
4) Crash cost (Cc): This is the cost incurred to achieve a reduced performance time. It is generally
more than the normal cost because of the introduction of additional resources.
5) Incremental cost (cost slope): This is the increase in cost incurred per unit of time saved or reduced.
It is determined by:
(Cc – Cn) / (Dn – Dc)

Rules of Crashing:
1) Only activities on the critical path are crashed.
2) Start crashing the activities with the least cost slopes.
3) If two or more paths are critical, then an activity is crashed from each path simultaneously or a
shared activity whichever is cheaper.
4) A critical path must remain critical throughout the crashing i.e. it must be the longest or among
the longest path.
5) A non critical path can become critical when it becomes critical, it must remain critical thereafter.
6) Crashing stops when the “Crashable” activities are exhausted in at least one of the critical paths.
Gantt Charts and Resource Scheduling:
A Gantt chart as mentioned earlier is a bar chart that is drawn to a line scale, where the length or height
of each bar is proportional to the duration of the project. The bars are drawn such that they start at the
point where an activity begins and finish at the point where the activity ends. Gantt charts are used in
scheduling of resources and also the leveling of the resources.
Since organizations do have limited amount of resources, it is necessary to produce a plan for effective
and efficient use of resources available. The scarcity of resources affects the scheduling of the project,
and hence whatever resources are available, they must be utilized to the maximum extent. It is often the
wish of the management to keep the total amount of resources used during the project time, as nearly
constant as possible. Aiming of constant use of resources is known as resource leveling. These results
to:-
a) Smooth usage of resources without changing project duration.
b) Reducing resource requirements.
c) Constant assignment of resources from period to period

It is during the resource scheduling that floats in non-critical activities becomes extremely important.
The activity with the least float should have priority on the use of resources. When activities have equal
floats, the longest activity should be given resources first.

Incorporating Probability:
It is possible to determine the probability of completing the project in a given time. This is done by using
a probability distribution referred to as beta distribution. The distribution is very similar to normal
distribution except that it has a slight skew. The beta distribution is characterized by mean, μ = (a + 4m
+ b)/6 and a variance
σ 2 = [(b – a)/6]2. We can assume that the form of the probability distribution of the project duration is
normally distributed and hence use the normal probability tables.
Note:
The sum of the variances of the critical activities is the variance of the whole project
The attributes that make beta distribution chosen in PERT analysis are:
1) It has the best fit to uncertain project completion time.
2) It is uni-modal
3) It has finite limits.
4) It helps us to adequately estimate expected project completion time and its variance.
Example:
Activity Predecessor a m b te σ2
A - 4 6 8 6 0.44
B A 5 7 15 8 2.77
C A 4 8 12 8 1.78
D B 15 20 25 20 2.77
E B 10 18 26 18 7.11
F C 8 9 16 10 1.78
G E 4 8 12 8 1.78
H D,F 1 2 3 2 0.11
I G,H 6 7 8 7 0.11
∑ = 12.21

a) Draw the network.

b) Determine the probability of completing the project in 55 days. [0.9890]

QUESTION ONE
Interlink service ltd. (ISL) are in the process of introducing a new service. The service manager has
listed the following activities, their predecessors and associated costs:

Activity Predecessor (Weeks) Standard Cost (Sh.)

Expected time deviation
A - 8 1.0 41,600
B - 3 0.25 15,600
C A 7 0.69 36,400
D A 5 1.0 26,000
E A 3 0.22 16,000
F C 3 0.11 15,000
G D 4 0.18 20,800
H B,D,E 8 0.85 40,800
I H 3 0.25 14,000
J F,G,I 4 0.11 23,800
Required:

(a)The project network, critical path and expected project duration.

(b)If activity B is delayed by 3 weeks, activity E by 4 weeks and activity F by 2 weeks, by how many
weeks will the project time be delayed?
(c)If there are no delays, how many weeks should be targeted to finish the project with a 98%
confidence?

(d) Interlink Services Ltd. has at an expected revenue of Sh. 5 million projected if the project is
completed within 30 weeks but if the deadline is not met, the expected revenue is only Sh. 500,000 with
a penalty of Sh. 750,000 being imposed. Compute the expected profit.

Suggested Solution

(a)

15 21
F
C
7 3

8 8
J
D
24 24 4 28 28
A 5 G
8
4

13 13
E 3 3 I

0 0
0 D1

21 21
3
B

8
H

13 13
  Critical path: A – D – H – I-J
 Expected project duration = 28 weeks.

(b) Activity LFT New EFT Comment

B 13 3+3=6 Not delayed
E 13 8 + 3 + 4 = 15 Delayed
F 24 15 + 3 + 2 = 20 Not delayed.

∴ The project is delayed by 15 – 13 = 2 weeks.

(c) Average completion time of critical activities, te = 28 weeks.

Standard deviation, ϭe = Summation of var iances of critical activities

= 12  12  0.852  0.252  0.112

ϭe = 1.67

X 0  te
Ƶ0 = e

X0 = te + Ƶ0ϭe, , Ƶ0.98 = 2.05

X0 = 28 + 2.05 x 1.67

X0 = 31.4 weeks

(d) Total project cost = Sh.250,000

When t ≤ 30, Profit = 5,000,000 – 250,000 = Sh.4,750,000
When t > 30, Profit = 500,000 – 250,000 – 750,000 = Sh.-500,000 (Loss)
 30  28
Ƶ = 1.67  1.2, Area  0.3849

28 30

Ϭ = 1.67 P(t ≤ 30)=0.5 + 0.3849 = 0.8849

P(t > 30) = 1 – 0.8849 = 0.1151

Expected profit = 0.8849 x 4,750,000 – 0.1151 x 500,000

= Sh.4,145,726

QUESTION TWO

Mrs. Mwangi wants to open a cafeteria in Kisumu. A small business enterprise adviser whom she
approached, listed for her six major activities to be carried out. The table below gives a summary of
the normal time estimates of each activity, crash time and the cost reduction per day.

Activity Predecessor Normal time Crash time

(weeks) (weeks)
A: Procurement of materials - 3 3
B: Plumbing A 6 4
C: Masonry - 5 3
D: Electrical works C 8 7
E: Carpentry C 6 4
F: Finishing B,D,E 4 2
 Activity Cost slope (Sh.)
A -
B 45,000
C 30,000
D 60,000
E 22,500
F 75,000

Required:
(a) The normal completion time of the project and the critical activities.
(b) (i) The shortest time the project can be completed.
(ii) The additional cost to be incurred if the project is crashed.
(c) Explain the meaning of the cost slope and how it is computed.
(d) Assumptions made when crashing.

Suggested solution
(a)

A 3 7
B
3 6

0 0 F
13 13
4 17 17

D
C 8 d1
5
0

6
5 5 11 13
E
Normal completion time = 17 weeks
Critical activities are C, D and F

(b) (i) Activity Time reduction Cost slope (Sh)

A 0 -
B 2 45,000
C 2 30,000
D 1 60,000
E 2 22,500
F 2 75,000

Path Time Cash C by Cash D by 1 Cash F by 2

2
C. D. F 17 15 14 12
A, B, F 13 13 13 11
C, E, F 15 13 13 11
Additional 2 x 30 = 60 60 + 60 x 1 = 120 120 + 75 x 2 = 270
Cost Sh’000’

Shortest
(ii) Additional cost if the project is crashed = Sh.270,000.

(c) Cost slope is the additional cost that is incurred when an activity time is reduced by one unit.

Cost slope = Crash cost – Normal cost

Normal time – Crash time

(d) Assumptions made when crashing

 Cost slope is constant
 There is a direct relationship between time and costs.
QUESTION THREE

A construction project consists of the activities shown below:

Time (weeks)
Activities Optimistic Most likely Pessimistic
1–2 4 6 10
1–3 3 5 9
2–4 7 12 20
2–5 3 5 8
3-4 6 11 15
4–5 4 6 11
4–6 3 9 14
5–6 2 4 8
6–7 3 5 9

Required:
(a) The expected time and variance of each activity.
(b) A project network for the activities.
(c) The expected completion time and variance of the project.
(d) If the project is completed in less than 30 weeks, it will cost Sh.1.0 million. It will cost Sh.1.5
million if the project is completed between 30 and 35 weeks and Sh.2.0 million if it takes more
than 35 weeks. Compute the expected cost of the project.

Suggested Solution

(a) Activity  t0  4tm  t p   t p  t0 

2

 
Expected time  Variance =  6 
 6   
1–2 6.3 1.00
1–3 5.3 1.00
2–4 12.5 4.69
2–5 5.2 0.69
3–4 10.8 2.25
4–5 6.5 1.36
4–6 8.8 3.36
5–6 4.3 1.00
6–7 5.3 1.00
 (b)
2
5

6.3 6.3 5.2

25.3 25.3

4.3
12.5
6.3 6.5

4 6 7
1
8.0 5.3

34.9 34.9
0 0 18.8 18.8 29.6 29.6

5.3
10.8

5.3 8.0

Critical path is 1-2, 2-4, 4-5, 5-6, 6-7.

(c) Expected project completion time = 34.9 weeks

Variance of the project = Sum of variances of critical path activities
= 1 + 4.69 + 1.36 + 1 + 1
= 9.05
(d) Project standard deviation = 9.05  3.008 .
Project completion time follows a normal probability distribution.

σ = 3.008

Time (t)
30 34.9 35
Z1 Z2

t  te 35  34.9
Z= Ζ2   0.03
 3.008

30  34.9
Z1 =  1.63 Area = 0.0120
3.008
Area = 0.4484

P(t < 30) = 0.5 – 0.4484 = 0.0516

P(30 < t < 35) = 0.4484 + 0.012 = 0.4604

P(t > 35) = 0.5 – 0.012 = 0.488

Expected cost of the project = ΣPiXi

= 0.0516 x 1 + 0.4604 x 1.5 + 0.488 x 2
= Sh.1.7182 million
QUESTION FOUR
James Mutiso is a computer engineer in an information technology firm. The firm has decided to
install a new computer system to be used by the firm’s help desk. James Mutiso has identified nine
activities required to complete the installation.

The table below provides a summary of the activities’ durations and the required number of
technicians:
 Activity Duration (weeks) Required number of
technicians
1–2 3 2
1–3 1 4
2–4 3 4
2–5 2 2
3–4 2 4
3–6 4 4
4–5 2 2
5–6 2 2
6–7 2 2
Required:
(i) Draw a gantt chart for the project.
(ii) Mr. Mutiso would like to reschedule the activities so that not more than 6 technicians
are required each week.
Determine if this is possible and how it can be achieved by rescheduling the activities.

Suggested Solution
 3

6
4
1 4

1 2 10 10
2
7
1

4
2 12 12
0 0

6 6

2 5
3 3

8 8

2
2

3 3

Critical path: 1-2, 2-4, 4-5, 5-6, 6-7

Project completion time = 12 weeks
Total Floats (TF)
TF (Critical activity) = 0
TF(1 – 3) = 3 TF (3 – 4) = 3
TF(2 – 5) = 3 TF (3 - 6) = 5
 (i) Gantt Chart for the Project

Activities
6-7 2
5-6 2
4-5 2
3-6 4 4
3-4 4
2-5 2
2-4 4
1-3 4
1-2 2
WEEKS 1 2 3 4 5 6 7 8 9 10 11 12
Time
Technicians 6 10 10 10 10 4 2 2 2 2 2 2
Reschedule 6 6 6 6 6 4 6 6 6 6 2 2
3-6 by 5 weeks

QUESTION FIVE

A project involving the installation of telephone lines has eight activities. The project manager has
determined the normal and crash times together with their respective normal and crash costs as
follows:
 Time (weeks) Cost (Sh.)
Activity Normal Crash Normal Crash
1–2 4 2 180,000 340,000
1–3 6 4 400,000 800,000
2–3 3 2 100,000 200,000
3–4 6 4 360,000 480,000
3–6 10 5 1,600,000 1,960,000
4–5 5 4 300,000 370,000
5–6 4 2 600,000 780,000
6–7 4 3 200,000 400,000

Required:
(a) Draw a project network diagram for this project.
(b) Identify the critical path, the normal completion time and the normal project cost.

(c) (i) The shortest time the project can be completed if it is crashed
(ii) The additional cost incurred if the project is crashed.

Suggested Solution
Project network diagram

2
4 5

4 4 5
13 13 18 18

4
6
3 4

3 7
6
0 0

7 7 4 26 26
22 22
6 10

(b) Critical path is: 1 – 2 – 3 – 4 – 5 – 6 - 7

Normal time = 26 weeks
Normal cost = Sh.3,740,000.
 (c) (i) Activity Crashable time Cost slope = Crash cost – normal cost
Normal time – Crash time
1–2 2 80,000
1–3 2 200,000
2–3 1 100,000
3–4 2 60,000
3–6 5 72,000
4–5 1 70,000
5–6 2 90,000
6–7 1 200,000

Path Time 3-4 by2 4-5 by1 1-2 by1 5-6 by2 6-7 by1 1-2 and 1-3 and
1-3 by1 2-3 by1
1-2-3-4-5-6-7 26 24 23 22 20 19 18 17
1-3-4-5-6-7 25 23 22 22 20 19 18 17
1-3-6-7 20 20 20 20 20 19 18 17
1-2-3-6-7 21 21 21 20 20 19 18 17
Additional cost 120,000 190,000 270,000 450,000 650,000 930,000 1,230,000
incurred (Sh.)
Shortest time the project can be completed if it is crashed = 17 weeks.

(ii) Additional cost incurred if the project is crashed = Sh.1,230,000.

QUESTION SIX
David Mutiso, an estate developer, is considering investing inlow cost housing projects. Initially, he
intends to start with a pilot project of 50 houses.

Mr. Mutiso has identified the activities necessary to undertake the project and listed them as shown in
the table below:

Activity Description Duration (months)

1–2 Prepare architectural plans 6
1–3 Identify potential tenants 7
2–3 Develop prospectus 5
2–4 Apply for permits 2
2–5 Select contractor 4
3–6 Finalise tenant contracts 13
4–5 Obtain permits 5
5–6 Construction 15
6–7 Tenants move in 3
Required:
(a) A network diagram for the project.

(b) Identify the critical activities and the project duration.

(c) Due to some technical problems, the development of prospectus takes 8 months and finalizing
of contracts takes 15 months.
Explain how the delays affect the completion of the project.
(d) By week 10, the following work had been done:

Activity % complete
1–2 100
1–3 0
2–3 0
2–4 100
2–5 50
3–6 0
4–5 60
5–6 0
6–7 0

Determine if the project is running on schedule.

(NB: Assume a month is made up of 4 weeks).
Suggested Solution

(a) Network diagram for the project:

 4

8 8
2
2

6 6
4 5

6
6 7
5 5

1 3
28 28 31 31
13 13 15

0 0

7 13

53

11 15

(b) Critical activities are: 1 – 2, 2 – 4, 4 – 5, 5 – 6 and 6 – 7

Project duration = 31 months.

(c) TF = LFT – EST - D

TF(2-3) = 15 – 6 – 5 = 4
TF(3 – 6) = 28 – 11 – 13 = 4
 Since 2 – 3 and 3 – 6 lies on the same path, the analysis below is important.

Activity Slack Delay Cumulative delay

2–3 4 3 3
3–6 4 2 5

Delay = 5 – 4 = 1
The project will delay by 1 month.

10
10 weeks = 4  2 2 months
1
(d)

2 .5
By week 10: 1 – 2 should be 6 x100  42% complete
2 .5
1 – 3 should be 7 x100  36% complete

TF(1 – 3) = 15 – 0 – 7 = 8 months. 1 – 3 can be delayed for 8 months.

Since (1 – 2) is already 100% complete and (1 – 3) can be delayed for 8 months, the project is on
schedule.

QUESTION SEVEN
Highflier National Institute (HNI) is considering building a new tuition complex. The new complex
will provide extra space for offices and classrooms. The activities to be undertaken before construction
begins have been determined and labeled A to I.

The table below shows the normal and crash times of the project activities and their respective normal
and crash costs.

Activity Predecessor Normal Time Cash Time Normal cost Crash cost
(weeks) (weeks) (Sh.’000’) Sh.’000’
A - 4 2 300 700
B A 3 2 400 800
C - 9 7 1,000 1,200
D C 7 6 700 1,000
E B,C 5 4 600 1,000
F D,E 6 4 1,100 1,500
G D,E 2 2 800 800
H F 6 5 1,000 1,300
I F,G 7 6 500 650
Activities F and I attract a daily overhead cost of Sh.50,000 each.

Required:
(a) A network diagram for the above project. State the critical path.
(b) Calculate the project time and the normal cost of the project.
(c) Determine the shortest time in which the project could be completed if activities were crashed.

(d) The additional cost incurred in crashing the project.

(e) State any two assumptions made when crashing the project.

Suggested Solution
(a) Network diagram

3
4 8 9 11

A
H
4 22 22
6
5 E

d1
0
d2

0 0 0
29 29

16 16
7
9
D 2 7
C I
G
9 9 22 22

Critical path is C – D – F - I

(b) Normal project completion time = 29 weeks.

Normal costs = Sh.6,400,000 + 6 x 50,000 + 7 x 50,000 = Sh.7,050,000
NB: Activities F and I attract a weekly overhead cost of Sh.50,000 each.
 (c) Activity A B C D E F G H I
Cost slope 200,000 400,000 100,000 300,000 400,000 200,000 - 300,000 150,000
(Sh.)
Crashable 2 1 2 1 1 2 - 1 1
time (weeks)

Path Time (weeks) Crash C by 2 Crash I by 1 Crash F by 2 Crash D by 1

weeks week weeks week
C-D-F-I 29 27 26 24 23
C-D-F-H 28 26 26 24 23
C-D-G-I 25 23 22 22 21
C-E-F-H 26 24 24 22 22
C-E-F-I 27 25 24 22 22
C-E-G-I 23 21 20 20 20
A-B-E-F-H 24 24 24 22 22
A-B-E-F-I 25 25 24 22 22
A-B-E-G-I 21 21 20 20 20
Additional 0 200,000 200000+150000- 300000+400000- 600000+300000
costs (Sh.) 50000=300,000 50000x2=600000 = 900,000

Shortest time of the project = 23 weeks.

(d) Additional costs incurred in crashing the project = Sh.900,000.

(e) Assumptions made when crashing:

 There is a direct linear relationship between cost and time.

 The cost slope is constant.
PRACTICE QUESTIONS-DRAW NETWORK DIAGRAM FOR THE FOLLOWING QUESTIONS
QUESTION ONE

Immediate Estimated
Activity Activity Description Predecessors Duration

A Select location — 2 weeks

B Obtain keynote speaker — 1 week
C Obtain other speakers B 2 weeks
D Make travel plans for A, B 2 weeks
keynote speaker
Make travel plans for 3 weeks
E A, C
other speakers
Make food arrangements 2 weeks
F A
Negotiate hotel rates 1 week
G A
H Prepare brochure C, G 1 week
I Mail brochure H 1 week
J Take reservations I 3 weeks
K Prepare handouts C, F 4 weeks

QUESTION TWO

Immediate Estimated
Activity Predecessors Duration

A — 1 month
B A 2 months
C BB 4 months
D B 3 months
E C 2 months
F D, E 3 months
G F 5 months
H G, H 1 month
I I 4 months
J IJ 2 months
K K 3 months
L L 3 months
M 5 months
N 4 months
Question:

Activity Duration te
a m b
1- 2 6 8 10 8
1–3 3 6 9 6
1–4 1 3 5 3
2–5 0 0 0 0
2–6 2 4 12 5
3–5 2 3 4 3
4–5 3 4 5 4
4–7 2 2 2 2
5–7 2 4 6 4
5–8 3 7 11 7
7–8 0 0 0 0
6–9 1 4 7 4
8–9 1 10 13 9

a) Draw the network

b) Identify i) Critical activities
ii) Critical Path
iii) Project duration.
QUESTION FOUR Alfred Lowenstein is the president of the research and development project. Referring to the work to be done
research division for Better Health, Inc., a major pharmaceutical by the respective groups as activities A, B, J, the precedence
company. His most important project coming up is the development relationships for when these groups need to do their work are shown
of a new drug to combat AIDS. He has identified 10 groups in his in the following project network.
division which will need to carry out different phases of this

A E

C F

START FINISH

D G

B H

To beat the competition, Better Health’s CEO has informed

Alfred that he wants the drug ready within 22 months if possible. Duration
Alfred knows very well that there is considerable uncertainty about Activity Estimated Mean Estimated Variance
how long each group will need to do its work. Using the PERT three-
estimate approach, the manager of each group has pro- vided a most A 4 months 5 months
likely estimate, an optimistic estimate, and a pessimistic estimate of B 6 months 10 months
the duration of that group’s activity? Using PERT formulas, these C 4 months 8 months
estimates now have been converted into estimates of the mean and D 3 months 6 months
E 8 months 12 months
variance of the probability distribution of the duration of each
F 4 months 6 months
group’s activity, as given in the following table (after rounding to the G 3 months 5 months
nearest integer). H 7 months 14 months
I 5 months 8 months
J 5 months 7 months
Required
(a) Find the mean critical path for this project.
(b) Use this mean critical path to find the approximate probability that the project will be completed within 22
months.
(c) Now consider the other three paths through this project net- work. For each of these paths, find the approximate
probability that the path will be completed within 22 months.
(d) What should Alfred tell his CEO about the likelihood that the drug will be ready within 22 months?