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Executive Summary

This current report has focused on the project management of organisations mentioned as case study. Along with this, decision tree map has been provided with its analysis. It includes network diagram and Gantt chart along with probability of the project. This study also includes planned value and earned value of the project along with actual cost and value of work remaining in the project. Cost variance and schedule variance has been included in this study for better analysis of it.

Table of Contents

• Introduction
• Task 1
  • a. Construction of decision tree to map along with probabilities and cost benefit for 2 year planning horizon
  • b. Analysis of decision tree for appraising full set of options along with economically viable decision path
• Task 2
  • a. Construction of Project Activity on Node network diagram and implementation of Critical path method along with project duration
  • b. Gantt chart along with time scale of the project
  • c. Calculation of probability of the project on completion within 50 days
• Task 3
  • a. Planned value of the project
  • b. Earned value of the work completed
  • c. Actual cost of the project
  • d. Value of the work remaining
  • e. Cost variance and Schedule variance of each activity and performance of project in terms of cost and time at the end of 5th month
  • f. Revised budget of the project that are based on data available at the end of 5th month
• Conclusion
• Reference list

Introduction

Project management is important for an organisation as it helps in practice of initiating, planning and controlling of projects. Each project is unique in nature and specific set of operations are required to be designed for achieving specific project goals and objectives. Since it is about application of knowledge, skills, and tools therefore, it needs to be practiced in a sequential way. In this study, a local authority of municipal council buildings has made some changes in their project and Aktor ltd has also undertaken some foundation works in their dealership. These include preparation of Gantt chart, activity on node diagram along with implementation of critical path methods and project duration.

Task 1

a. Construction of decision tree to map along with probabilities and cost benefit for 2 year planning horizon

The Eleanor Ridgely building have floor area of around 1200-meter square for which probability is required to be considered around 10 % for the maintenance cost and 20 % on the essential repairs. As per Caglianoet al. (2015), the organisation has provided a table of expenses that has been incurred by the local authority project. Essentials repairs for the local authority have incurred around £ 780000 along with timescale of 6 months. It has also been observed that the stable economy for the first year is around £ 560500 and £ 585000 for second year. Full repairs have time scale of 10 months with total costs around £ 14926000 along with total benefits of £ 625000 for the first year and £ 660400 for second year. Reconfiguration is the decision that has been decided by the local authority for time scale of one year and incurs a total cost of £ 1700500. The following figure shows the decision tree with all possible decision paths which are associated with probabilities and cost benefits.

The above figure shows the decision tree for the local authority project in which essential repairs has been discounted at the rate of 4 % with 20 % of economic boom and 30 % of economic downturn. Therefore, this particular rate of inflation is to be considering only in the case of costs and benefits that are incurred after the period of 12 months. Based on Carvalho and Rabechini Junior (2015), the changes would be implemented only on reconfiguration and relocation that has a timescale of 1 year and 2 years respectively.

b. Analysis of decision tree for appraising full set of options along with economically viable decision path

The above mentioned decision tree for the local authority is required to appraise for their full set of options. Essential repairs for the first year amounts to £ 560500 in stable economy and in case of economic boom it has increased by 20 % that amounts to £ 672600. In case of economic downturn it has decreased by 30% that amounts to £ 392350. In second year, it has increased to amount £ 702000 and decreased to amount £ 409500. These have to be analysed by the economic state (Costantino et al. 2015). On other hand, reconfiguration has a timeline of 1 year for which £ 870700 has been set for first year and £ 925000 for second year. In case of economic boom it has increased by 20 % that amounts to £ 1044840. In case of economic downturn it has decreased by 30% that amounts to £ 609490. In second year, it has increased to amount £ 1110000 and decreased to amount £ 647500. It also includes a discount rate of 4 % on total amount of expenses which has timeline more than 1 year that are incurred by the local authority.

Figure 1: Decision tree
(Source: Inspired from Hornstein, 2015)

From the above analysis, it can be recommended that the most viable decision path is the expenses that required economic boom such as relocation and reconfiguration. It can be seen that the total amount of cost has been incurred for relocation is around £ 1700500 that has to be developed with 10 % probability. According to de Carvalhoet al. (2015), the reconfiguration option should be encouraged with collaborative and innovative working with 70 % of total probability. These costs are required to be incurred for making severe change in decisions which has taken in the project of local authority.

Task 2

a. Construction of Project Activity on Node network diagram and implementation of Critical path method along with project duration

Activity on node diagram mainly refers as a pictorial representation for denoting schedule activities. Based on the viewpoint of Hornstein (2015), it consists of different boxes that are connected from beginning to end of a particular project along with their schedule activities. Aktor ltd has constructed their project by enabling their work by setup and mobilise that has taken place for 2 days and rough grade for installing drain system for 5 days. The service pit is required to excavate for service pit which is required to be initiated with service pit and it has duration of 3 days. This particular network diagram mainly consists of enabling of works and service pit along with service bay and office area. Each head consists of some jobs that are required to be performed within the given period of time for placing steel column in pits.

Figure 2: Network diagram
(Source: Inspired from Joslin and Müller, 2015)

The network diagram mentioned above shows different types of project tasks that are required to be performed within allocated period of time. Four main services are present among which there are different subtasks which are associated with the main job and are required to be performed within their allocated resources and timeframe. Kaiser et al. (2015) has stated that each tasks are related to their parent task and completion of one task would initiate another task only after its completion. Critical path method has been implemented in the project of Aktor Ltd as a visual presentation of network logic that consists of paths of completion of a particular task.

Keeping the Critical Path Method and the above network diagram in mind, the critical path of this project has been observed to be including the following tasks:

• Rough grade and install drain system: 3 days
• Service pit footings: 5 days
• Place steel columns in pit: 1 day
• Install access stairs: 1 day
• Pour service toppings over service pit: 3 days
• Backfill around bays: 2 days
• Office area footings: 5 days
• Ground slab: 4 days

Considering all these activities, it can be mentioned that the longest stretch of dependent activities would be (3+5+1+1+3+2+5+4) = 24 days. In other words, it can be mentioned that these 24 days would be required in order to complete the entire project from start to finish.

b. Gantt chart along with time scale of the project

A Gantt chart is a special type of bar chart that mainly focuses a schedule of a particular project. Inspired from Kiviläet al. (2017), it also helps in showing the dependency of relationship with activities and current schedules. The following figure shows the gantt chart of the project that is related to tasks of Aktor ltd. It mainly shows the relationship between different tasks that are associated with activity of maintenance of vehicle garage. The first part starts with enabling of works which took around 7 days in total for completion and it is required to be completed for starting the new task. Service pit is the second task in which different activities has been performed and different time has been allocated for different activities. Klein et al. (2015) has mentioned that it also consist of immediate predecessor that are related with each task of service pit. It is the area where vehicles would be serviced for regular maintenance and these works is required to be completed before starting service bays.

Figure 3: Gantt chart
(Source: Inspired from Martens and Carvalho, 2017)

The service bay that is associated with project includes excavating of service bays along with bay footings. These tasks are related with backfill around pit that is required to be completed for continuing other tasks (Niaziet al. 2016). Moreover, the last task that is office area is required to be performed after completion of previous tasks that is service bay. All of these tasks are related with their previous tasks and those has to be completed at first start these tasks. The interrelationship has been shown in the diagram by arrows as these are the critical paths of the entire project.

c. Calculation of probability of the project on completion within 50 days

The project planner has the fear of uncertainty that consists of service pit footings and ground slab in the office areas. From the mentioned table in the project, it can be seen that total duration for completing the project is around 83 days and probability of completion within 50 days is required to be evaluated (Papke-Shields and Boyer-Wright, 2017). Activity D and activity Z includes optimistic time of 4 days and 3 days respectively. It can also be seen that the particular activity that is D and Z are likely to complete within 5 days and 4 days respectively. Moreover, these estimates are based on the project which is required to be completed within 50 days.

Standard deviation can be calculated by the following formula in which square root of difference of upper limit and lower limit of duration. Therefore, square root of (12 days – 1 day) is 3.32.

Therefore, square root of 11 = 3.32

So, probability can be evaluated by the following formula.

Probability = (required days – expected duration) / standard deviation

Probability = (83 days – 50 days) / 3.32

Probability = 33 days / 3.32 which is around 9.93

Therefore, it can be seen that the probability of the project is around 9.93 days which is pessimistic for both of the activities that is A and Z. Ramazani and Jergeas (2015) has opined that duration estimates of the probability for vehicle estimate garage is in the state of pessimistic for which it includes uncertainty regarding service of pit footings and ground slabs for office areas. Moreover, difference of actual days and required days plays a vital role in evaluation of probability of completion of a particular project.

Task 3

a. Planned value of the project

Planned value of the project is the first element that is required to be earned in its value management. In the viewpoint of Rolfe et al. (2016), planned value is the evaluation of approved value for which work has to be completed in a given period of time. This particular value is required to be earned as per the mentioned schedule by the project management on an organisation. It includes authorised budget that are mainly assigned with work for accomplishing an activity.

Planned can be calculated by the following formula.

Planned value = percentage of completion * allocated budget for the task

Task A, task B, task C has planned for 100 % of their work as completed. Therefore, their planned value would remain same at £ 200000, £ 1000000 and £ 400000. On other hand, activity D has planned for 40 % of its estimated budget which amount to £ 480000.

Activity E has planned for 0 % of completion which amounts to £ 0.
Activity F has planned for 33 % of completion which amounts to £ 297000.

Moreover, both activity G and H has planned value of 0 % for which it has £ 0 at the end of the period.

The above planned budget consists of different amounts that are associated with their project for particular period of time. This particular planned value is mainly used for calculating schedule variance and schedule performance index in the project. Sánchez (2015) has mentioned that the summation of these amounts is the planned value of project. Percentage of completion is required to be multiplied with the allocated budget for task and those have to be included in their overall operation.

b. Earned value of the work completed

Earned value of the total amount that is associated with value management of a particular project in which it requires some special work. It is the value of work that is completed with the date that has been allocated. It helps in showing the value of the project that has to be produced with period of time of project. It is the value of work that is required to be performed and expressed with the terms of approving the budget (Serra and Kunc, 2015). This particular budget is assigned to the work for some particular activity and structure components. Earned value is simple in nature which can be calculated by multiplying actual percentage with the projected budget. The percentage of completed work is required to be multiplied with the available budget at completion.

Different types of activities are mentioned with their earned percentage for the budget that is available on their percentage of completion.

Both activity A and D has actual 100 % of total completion in which their amounts remains same throughout the project. Moreover, activity B has completed around 70 % for which £ 700000 and activity C consist of £ 240000. Activity E has completed around 50 % of its total completion in which it has £ 400000 of its budget. The summation of these amounts is the earned value of project. Therefore, these are the amounts that are evaluated under earned value of the project management. The rest of the activities has completed 0 % in which the allocated budget remains the same.

c. Actual cost of the project

Actual cost of the project is an important element of earned value management in which it consist of total amount of cost that has incurred in its overall process of project management. It is the utilization of funds that are allocated as budget which is required to be completed within the given period of time. Svejvig and Andersen (2015) have opined that amounts that are spent by the project managers in overall progress of project is also coined as actual cost of the project. In the given provided table, it can be clearly seen that each task has incurred some actual cost within the period and those costs are to be added for determining total actual cost of the overall project.

Activity F, G and H has zero as actual cost and other tasks has some amount of actual cost that has incurred during their duration of project. Total amount of actual cost has been evaluated around £ 2380000. This is the amount that has already incurred by the appointed project manager. Actual cost is used for calculating cost variance and cost performance index of a particular project.

d. Value of the work remaining

Value of work remaining is the amount that is excluded with the part of cost that has already been incurred. In other ways, it is the difference of amount that has been allocated for budgeting and amount that has already been incurred. In this project, different activities are included in which some amount of budgets are allocated for their performance and those amount are required to be deducted from actual cost for evaluation of value of work remaining (Todorovićet al. 2015). The provided table shows the budgeted amount of the project and actual costs of the project that has already been incurred and from it total budgeted amount can be determined by adding up all amounts.

Total budgeted amount = £ 200000 + £ 1000000 + £ 400000 + £ 1200000 + £ 800000 + £ 900000 + £ 300000 + £ 500000
Total budgeted amount = £ 5300000
On other hand, total amount of actual cost = £ 240000 + £ 900000 + £ 300000 + £ 500000 + £ 440000
Actual cost = £ 2380000

Therefore, value of work remaining = £ 5300000 – £ 2380000 which is around £ 2920000.

e. Cost variance and Schedule variance of each activity and performance of project in terms of cost and time at the end of 5th month

Cost variance

Cost variance refers to the cost that has been generated for comparison with planned cost. It can be denoted by differentiating earned value and actual cost of a particular project. Both of these amountshave been derived in the above part and those amounts are to be compared with their performance. Cost variance mainly puts negative impact on the project that is against over budget which has been allocated in their project (ulMusawiret al. 2017). Monitoring of cost variance in the project is critical that provides assistance in ensuring the project to be delivered on time with allocated amount of budget. Therefore, cost variance of the project £ 5300000 – £ 2380000 = £ 2920000.

Schedule variance

Schedule variance is the completion of work that are compared with the planned schedule of the project. It is computed by calculating the difference between earned value and planned value of the project. Schedule analysis of the project is positive in nature when it shows the project that is ahead of schedule. On other hand, negative schedule analysis mainly highlights the project that is behind its schedule. It requires some monitoring by which an organisation can deliver the project on time that has been allocated by an appointed project manager. Therefore, schedule variance of the project £ 1340000 – £ 777000 = £ 563000.

f. Revised budget of the project that are based on data available at the end of 5th month

Particulars	Amount [£]
Activity A	200000
Activity B	700000
Activity C	240000
Activity D	480000
Activity E	400000
Activity F	900000
Activity G	300000
Activity H	500000
Total	3720000

Table 1: Revised budget of the project
(Source: Created by author)

Conclusion

From the above study, it can be concluded that project management is important for an organisation as it includes the practice of planning and implementing of resources. The decision tree in the first task includes probabilities along with cost benefit analysis. It also includes decisions that are taken for the project that has taken for the organisation. It also includes network diagram that consist of critical path in its duration. Gantt chart has also been provided for which helps the project to complete in a periodic manner. Planned value is the evaluation of approved value for which work has to be completed in a given period of time. It helps in showing the value of the project that has to be produced with period of time of project. Amounts that are spent by the project managers in overall progress of project is also coined as actual cost of the project. Cost variance and schedule is also included for evaluation of the project.

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