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3. Gündüz Ulusoy • Öncü Hazır
An Introduction to Project
Modeling and Planning

4. Gündüz Ulusoy
Faculty of Engineering and Natural
Sciences
Sabancı University
Orhanlı, Tuzla, Istanbul, Turkey
Öncü Hazır
Rennes School of Business
Rennes, France
ISSN 2192-4333 ISSN 2192-4341 (electronic)
Springer Texts in Business and Economics
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5. Preface
Although a large number of projects have been conceived, planned, and completed
since the times of ancient civilizations, it was only in the 1950s that project
management emerged as a discipline with the introduction of the Critical Path
Method (CPM) and the Project Evaluation and Review Technique (PERT). Drawing
upon theoretical developments contributed by numerous researchers and practice
over a wide spectrum of application areas distributed globally, the knowledge base
of project management has been growing ever since at an increasing rate. The
advances in Operation Research methods and the capabilities of the optimization
solvers have contributed considerably to the theoretical development of project
management. Interest and activity in areas like resource constrained project sched-
uling, uncertainty, and robustness have been growing rapidly as attested by the large
number of journal papers published globally each year. The practice of project
management in organizations has also been growing steadily, supported by the
emergence of matrix type and project-based organizations. The organizations deal-
ing with new technologies and business models emerging in the last decades
organize many of their activities such as new product development, innovation
management, and app development as projects.
Project management offers a promising field for theoretical and practical
applications and developing related software and Decision Support Systems. It
attracts not only academicians and software providers, but also professionals who
take part in project management activities. Considering this diverse audience, this
book aims at explaining the basic concepts and methods of project management,
especially project planning and scheduling with an emphasis on mathematical
modeling.
The motivation for this textbook is based on two observations: First, courses
dealing with project management in some context are proliferating in engineering
schools and becoming attractive for engineering students as it has been the case for
some time now for business students. Second, particularly the developments in
quantitative methods achieved in the last decades, especially the very significant
increase in the power of optimization and simulation software, need to find their way
into undergraduate and master’s classrooms to become in due time part of routine
professional practice.
v

6. This textbook is intended to provide theoretical and practical aspects of project
planning, modeling, and scheduling to undergraduates and first year graduate
students in engineering programs, as well as to practitioners seeking to solidify
their knowledge of project management. Most of the material covered in this
textbook emerged from the class notes shared with the students at both undergradu-
ate and graduate levels and has been improved over the years by their remarks and
suggestions, for which we are grateful.
The models and algorithms presented in the following chapters establish a good
starting point to study the relevant literature and pursue academic work in related
fields. Theory is discussed at the introductory and moderate levels, and related
references are given for those who want to pursue more detailed analysis. A central
feature of the book is the support provided for the theoretical concepts through
models with detailed explanations, application examples, and case studies.
Discussions and analyses are based on real-life problems.
All chapters include exercises that require critical thinking, interpretation, analyt-
ics, and making choices. A solution manual for these exercises will be provided
online. The textbook is organized to enable interdisciplinary research and education,
interactive discussions, and learning. Learning outcomes are defined, and the content
of the book is structured in accordance with these goals.
Chapter 1 introduces the basic concepts, methods, and processes in managing
projects. This chapter constitutes the base for defining and modeling project man-
agement problems.
Chapter 2 discusses project management from an organizational perspective,
dealing with the fundamentals of organizing and managing projects. Project-based
organizations have gained increasing importance in the last decades. Many firms are
organized around projects and operate in a multi-project environment. Issues related
to project team formation, the role of project managers, and matrix organization are
discussed. Recent developments in the organization of projects, such as the adoption
of agile techniques and establishing project management offices, are discussed.
Chapter 3 is devoted to project planning and network modeling of projects,
covering fundamental concepts such as project scope, Work Breakdown Structure
(WBS), Organizational Breakdown Structure (OBS), Cost Breakdown Structure
(CBS), project network modeling, activity duration and cost estimating, activity-
based costing (ABC), and data and knowledge management.
Schedules determine when projects can be delivered, intervals when each activity
needs to be performed, and how resources are assigned to activities and present
multiple decision problems. In Chap. 4, we deal with a decision environment where
we assume that the decision-makers know the problem parameters precisely and no
constraints are imposed on the resource usage. Models employing time-based and
finance-based objectives are introduced. We use Operations Research techniques to
formulate and solve these deterministic scheduling models for constructing the time
schedules as mathematical programming problems. The CPM is covered, resulting
in a baseline project schedule, the project duration, the critical path, and the critical
activities. The unconstrained version of maximizing Net Present Value (NPV) is also
treated here together with the case of time-dependent cash flows. Continuous
vi Preface

7. tracking of the project plan and associated data and relationships allow it to be
revised through replanning whenever deemed necessary. A case study on installing a
plant biotechnology lab is presented.
In project management, it is often possible to reduce the duration of some
activities and expedite the completion of the project by incurring additional costs.
The resulting time/cost trade-off problem has been widely studied in the literature,
and Chap. 5 addresses this important topic for both the continuous and discrete
cases.
Chapter 4 introduced project scheduling in a deterministic decision environment.
However, in reality, project managers have at best limited information on the
parameters of the decision environment in many cases. For this reason, Chap. 6
discusses models and methods of scheduling under uncertain activity durations.
PERT is introduced for minimizing the expected project duration and extended to
the PERT-Costing method for minimizing the expected project cost. Simulation is
presented as another approach for dealing with the uncertainty in activity durations
and costs. To demonstrate the use of the PERT, a case study on constructing an
earthquake resistant residential house is presented.
Another important topic for a more realistic representation of the decision
environment is the integration of the resource constraints into the mathematical
models since in almost all projects, activities compete for scarce resources.
Classifications of resource and schedule types are given in Chap. 7, and exact and
heuristic solution procedures for the single- and multi-mode resource constrained
project scheduling problem (RCPSP) are presented. The objective of maximizing
NPV under resource constraints is addressed, and the capital constrained project
scheduling model is introduced.
In Chap. 8, resource leveling and further resource management problems are
introduced. Two problems associated with resource leveling are discussed, namely
total adjustment cost and resource availability cost problems. Various exact models
are investigated. A heuristic solution procedure for the resource leveling problem is
presented in detail. In addition, resource portfolio management policies and the
resource portfolio management problem are discussed. A case study on resource
leveling dealing with the annual audit project of a major corporation is presented.
Project contract types and payment schedules constitute the topics of Chap. 9.
Contracts are legal documents reflecting the results of some form of client–contrac-
tor negotiations and sometimes of a bidding process, which deserve closer attention.
Identification and allocation of risk in contracts, project control issues, disputes, and
resolution management are further topics covered in this chapter. A bidding model is
presented to investigate client–contractor negotiations and the bidding process from
different aspects.
Along with planning and scheduling, project monitoring and control are impor-
tant responsibilities of project managers. Whereas monitoring the project includes
actions to collect, record, and present project realization data, control covers the
analysis of the data with the purpose of preparation of action plans to eliminate the
deviations from the current plan. Chapter 10 focuses on processes and methods for
Preface vii

8. monitoring and control. Earned Value Management is studied to measure the project
performance throughout the life of a project and to estimate the expected project time
and cost based on the current status of the project. How to incorporate inflation into
the analysis is presented.
Risk management is essential for effective project management. In Chap. 11,
qualitative and quantitative techniques including decision trees, simulation, and
software applications are introduced. Risk phases are defined and building a risk
register is addressed. An example risk breakdown structure is presented. The design
of risk management processes is introduced, and risk response planning strategies
are discussed. At the end of the chapter, the quantitative risk analysis is demonstrated
at the hand of a team discussion case study.
Uncertainty in project schedules has been a topic of great interest for both
researchers and practitioners, accumulating a rich literature over the last decades.
Chapter 12 covers several models and approaches dealing with various stochastic
aspects of the decision environment. Stochastic models, generation of robust
schedules, and use of reactive and fuzzy approaches are presented. Sensitivity and
scenario analysis are introduced. In addition, simulation analysis, which is widely
used to analyze the impacts of uncertainty on project goals, is presented.
Chapter 13 addresses repetitive projects that involve the production or construc-
tion of similar units in batches such as railway cars or residential houses. Particularly
in the construction industry, repetitive projects represent a large portion of the work
accomplished in this sector of the economy. A case study on the 50 km Gebze–
Orhangazi Section of the Gebze–Izmir Motorway Project is used for demonstrating
the handling of repetitive project management.
How best to select one or more of a set of candidate projects to maintain a project
portfolio is an important problem for project-based organizations with limited
resources. The project selection problem is inherently a multi-objective problem
and is treated as such in Chap. 14. Several models and solution techniques are
introduced. A multi-objective, multi-period project selection and scheduling model
is presented. A case study that addresses a project portfolio selection and scheduling
problem for the construction of a set of dams in a region is presented.
Chapter 15 discusses three promising research areas in project management in
detail: (i) Sustainability and Project Management, (ii) Project Management in the Era
of Big Data, and (iii) the Fourth Industrial Revolution and the New Age Project
Management. We elaborate on the importance of sustainability in project manage-
ment practices, discuss how developments in data analytics might impact project life
cycle management, and speculate how the infinite possibilities of the Fourth Indus-
trial Revolution and the new technologies will transform project management
practices.
In the several years of teaching and research on project management, we are
indebted to many researchers and practitioners whose work motivated and guided us
in our efforts to write this book. We are particularly grateful to Professor Reha
Uzsoy, who has been extremely generous with his time going over several versions
of the manuscript and making a large number of suggestions for improvement. We
have also benefited greatly from the critical remarks made by Professor Kuban
viii Preface

9. Altınel and thank him for that. We also would like to thank two PhD students, Nozir
Shokirov and Ahmed Faran, for their contributions to the case studies and the
Solution Manual. The responsibility for any remaining errors obviously rests solely
with us.
Istanbul, Turkey Gündüz Ulusoy
Rennes, France Öncü Hazır
September 2020
Preface ix

10. Acknowledgement
With love and gratitude to my wife Nefise Ulusoy and my parents Zeynep and Halit
Ulusoy
With love to my wife Çilem Selin Hazır
xi

11. Contents
1 Introduction to Project Modeling and Planning . . . . . . . . . . . . . . . 1
1.1 What Is a Project? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Project Management in Today’s World . . . . . . . . . . . . . . . . . . . 4
1.3 Challenges in Keeping to Scope, Cost, and Schedule Targets . . . 5
1.4 A Life Cycle Concept for Projects . . . . . . . . . . . . . . . . . . . . . . 6
1.4.1 Conceptual Design and Project Definition . . . . . . . . . . 7
1.4.2 Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.4.3 Implementation, Monitoring, and Control . . . . . . . . . . 9
1.4.4 Evaluation and Termination . . . . . . . . . . . . . . . . . . . . 10
1.5 Post-Project Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.6 Uncertainty and Risks in Projects . . . . . . . . . . . . . . . . . . . . . . . 12
1.7 Project Modeling and Planning Tools . . . . . . . . . . . . . . . . . . . . 13
1.8 Resource Constrained Modeling . . . . . . . . . . . . . . . . . . . . . . . . 16
1.9 Agile Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2 Organizing and Managing Projects . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1 Projects and Organizational Structure . . . . . . . . . . . . . . . . . . . . 23
2.1.1 Functional Organizations . . . . . . . . . . . . . . . . . . . . . . 24
2.1.2 Project Organizations . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.1.3 Matrix Organizations . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2 How to Choose the Project Management Structure? . . . . . . . . . . 27
2.3 Stakeholder Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.4 Project Management Culture . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.5 Organizing Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.5.1 Steering Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.5.2 Project Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.5.3 Project Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.5.4 Project Team and Team Members . . . . . . . . . . . . . . . . 35
2.5.5 Project Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.6 Project Management Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.7 Program Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
xiii
xiii

12. 2.8 Project Portfolio Management . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.9 Agile Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.10 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3 Planning and Network Modeling of Projects . . . . . . . . . . . . . . . . . . 49
3.1 Project Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.1.1 Project Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.2 Work Breakdown Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.2.1 Decomposition of WBS into Work Packages . . . . . . . . 52
3.2.2 Types of WBS Representation . . . . . . . . . . . . . . . . . . . 54
3.2.3 Gantt Chart Representation of Work Packages . . . . . . . 55
3.2.4 Organizational Breakdown Structure . . . . . . . . . . . . . . 58
3.2.5 Cost Breakdown Structure . . . . . . . . . . . . . . . . . . . . . 59
3.3 Network Modeling of Projects . . . . . . . . . . . . . . . . . . . . . . . . . 61
3.3.1 Types of Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
3.3.2 Network Modeling of Projects . . . . . . . . . . . . . . . . . . . 62
3.3.3 Activity on Arc Type Representation . . . . . . . . . . . . . . 64
3.3.4 Activity on Node Type Representation . . . . . . . . . . . . 68
3.3.5 Generalized Precedence Relationships . . . . . . . . . . . . . 69
3.3.6 Level of Aggregation in Project Networks . . . . . . . . . . 71
3.3.7 Network Modeling of Multiple Projects . . . . . . . . . . . . 74
3.4 Estimating Activity Durations . . . . . . . . . . . . . . . . . . . . . . . . . 76
3.4.1 Tools for Estimating Activity Durations . . . . . . . . . . . . 77
3.5 Cost Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
3.5.1 Tools for Estimating Activity Cost . . . . . . . . . . . . . . . 80
3.5.2 Types of Project Costs . . . . . . . . . . . . . . . . . . . . . . . . 83
3.5.3 Activity-Based Costing . . . . . . . . . . . . . . . . . . . . . . . . 84
3.6 Data, Information, and Knowledge Management . . . . . . . . . . . . 86
3.6.1 Which Data to Collect? . . . . . . . . . . . . . . . . . . . . . . . . 87
3.6.2 With Which Frequency to Collect Data? . . . . . . . . . . . 88
3.6.3 With Which Tools to Collect and Integrate Data? . . . . . 89
3.6.4 With Which Tools and How to Analyze Data? . . . . . . . 90
3.7 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
4 Deterministic Project Scheduling with No Resource Constraints . . . 101
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
4.2 Critical Path and Its Determination . . . . . . . . . . . . . . . . . . . . . . 102
4.2.1 Critical Path Method . . . . . . . . . . . . . . . . . . . . . . . . . 103
4.3 Linear Programming Formulation . . . . . . . . . . . . . . . . . . . . . . . 111
xiv Contents

13. 4.4 Maximizing the Net Present Value of a Project Under
No Resource Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
4.4.1 A Zero-One Mathematical Programming
Formulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
4.4.2 Time Dependent Cash Flows . . . . . . . . . . . . . . . . . . . 120
4.5 Keeping the Project Plan Current . . . . . . . . . . . . . . . . . . . . . . . 122
4.6 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
4.7 Case Study: Installation of a Plant Biotechnology Lab . . . . . . . . 124
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
5 The Time/Cost Trade-off Problems . . . . . . . . . . . . . . . . . . . . . . . . . 141
5.1 Problem Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
5.2 Time/Cost Trade-Off in Projects . . . . . . . . . . . . . . . . . . . . . . . 145
5.2.1 Project Crashing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
5.2.2 An Algorithm for Project Crashing . . . . . . . . . . . . . . . 146
5.3 Continuous Time/Cost Trade-off Problems . . . . . . . . . . . . . . . . 154
5.3.1 Activity-on-Arc Representation . . . . . . . . . . . . . . . . . . 154
5.3.2 Activity-on-Node Representation . . . . . . . . . . . . . . . . . 155
5.4 Discrete Time-Cost Trade-off Problems . . . . . . . . . . . . . . . . . . 156
5.4.1 The Deadline Problem . . . . . . . . . . . . . . . . . . . . . . . . 157
5.4.2 The Budget Problem . . . . . . . . . . . . . . . . . . . . . . . . . . 157
5.5 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
6 Stochastic Project Scheduling with No Resource Constraints . . . . . 167
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
6.2 Representation of the Randomness of Activity Durations . . . . . . 168
6.3 Determining the Critical Path . . . . . . . . . . . . . . . . . . . . . . . . . . 170
6.4 Shortcomings of the PERT Method . . . . . . . . . . . . . . . . . . . . . 174
6.5 A Model for Managing Uncertainty in Activity Costs . . . . . . . . 177
6.6 Monte Carlo Simulation Approach to Handle Uncertainty . . . . . 178
6.7 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
6.8 Case Study: Constructing an Earthquake Resistant
Residential House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Appendix 6A: Area Under the Normal Curve . . . . . . . . . . . . . . . . . . . 196
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Contents xv

14. 7 Resource Constrained Project Scheduling . . . . . . . . . . . . . . . . . . . . 199
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
7.1.1 Categories of Resources . . . . . . . . . . . . . . . . . . . . . . . 200
7.1.2 Resource Parameters . . . . . . . . . . . . . . . . . . . . . . . . . 201
7.2 Objective Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
7.2.1 Regular and Non-regular Objective Functions . . . . . . . 203
7.2.2 Time-Based Objectives . . . . . . . . . . . . . . . . . . . . . . . . 204
7.2.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 206
7.2.4 Quality Based Objectives . . . . . . . . . . . . . . . . . . . . . . 206
7.2.5 Resource Based Objectives . . . . . . . . . . . . . . . . . . . . . 207
7.3 A Mathematical Programming Formulation of the Resource
Constrained Project Scheduling Problem . . . . . . . . . . . . . . . . . 207
7.4 Exact Solution Procedures Using Branch and Bound . . . . . . . . . 209
7.5 Heuristic Solution Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 214
7.5.1 Types of Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 214
7.5.2 Priority Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
7.5.3 Serial Schedule Generation . . . . . . . . . . . . . . . . . . . . . 218
7.5.4 Parallel Schedule Generation Scheme . . . . . . . . . . . . . 220
7.5.5 A Brief Assessment of Serial and Parallel Schedule
Generation Schemes . . . . . . . . . . . . . . . . . . . . . . . . . . 221
7.6 A Mathematical Programming Formulation
with Multiple Modes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
7.7 A Mathematical Programming Formulation
for Maximizing the Net Present Value of a Project
Under No Budgetary Constraint . . . . . . . . . . . . . . . . . . . . . . . . 224
7.8 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
Appendixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
Appendix 7A: Computational Complexity . . . . . . . . . . . . . . . . 240
Appendix 7B: Branch and Bound . . . . . . . . . . . . . . . . . . . . . . . 245
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
8 Resource Leveling and Other Resource Management Problems . . . 251
8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
8.2 Resource Leveling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
8.2.1 The Burgess and Killebrew Algorithm . . . . . . . . . . . . . 254
8.2.2 Other Solution Approaches . . . . . . . . . . . . . . . . . . . . . 261
8.2.3 The Total Adjustment Cost Problem . . . . . . . . . . . . . . 263
8.3 Resource Availability Cost Problem . . . . . . . . . . . . . . . . . . . . . 265
8.4 Resource Management Policies . . . . . . . . . . . . . . . . . . . . . . . . 267
8.5 The Resource Portfolio Management Problem . . . . . . . . . . . . . . 268
8.6 Conclusions, Recent Developments, and Some
Future Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
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15. 8.7 Case Study: Conducting Annual Audit for Celik Company . . . . 270
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
9 Project Contract Types and Payment Schedules . . . . . . . . . . . . . . . 281
9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281
9.2 Contract Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
9.2.1 Fixed Price Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 284
9.2.2 Variable Price Contracts . . . . . . . . . . . . . . . . . . . . . . . 284
9.2.3 Cost of Managing Contracts . . . . . . . . . . . . . . . . . . . . 285
9.3 Payment Scheduling Models . . . . . . . . . . . . . . . . . . . . . . . . . . 286
9.4 Change and Control Issues in Contracts . . . . . . . . . . . . . . . . . . 287
9.4.1 Managing Change Issues in Contracts . . . . . . . . . . . . . 287
9.4.2 Control Issues in Contracts . . . . . . . . . . . . . . . . . . . . . 288
9.5 Identification and Allocation of Risk in Contracts . . . . . . . . . . . 288
9.6 Bidding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290
9.6.1 Estimating the Total Cost of the Project . . . . . . . . . . . . 292
9.6.2 Front-loaded Bidding Strategy . . . . . . . . . . . . . . . . . . . 293
9.6.3 A Bidding Model for Determining the Bidding
Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
9.7 Mathematical Models for Negotiation in Project
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
9.7.1 Preparation for a Bid . . . . . . . . . . . . . . . . . . . . . . . . . 297
9.7.2 Client-Contractor Bargaining Problem . . . . . . . . . . . . . 297
9.7.3 Equitable Payment Schedule Problem . . . . . . . . . . . . . 298
9.8 Conclusions, Recent Developments, and Some
Future Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . 298
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308
10 Progress and Cost Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
10.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
10.2 Cost/Schedule Control System Measures . . . . . . . . . . . . . . . . . 312
10.3 Estimating the Percent Complete . . . . . . . . . . . . . . . . . . . . . . . 313
10.4 Cost/Schedule Control Performance Indicators . . . . . . . . . . . . . 314
10.4.1 The Impact of Inflation . . . . . . . . . . . . . . . . . . . . . . . . 320
10.5 Time and Cost Predictions Using EVM . . . . . . . . . . . . . . . . . . 322
10.6 Limitations of Earned Value Management . . . . . . . . . . . . . . . . 325
10.7 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
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16. 11 Project Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
11.2 Processes in Project Risk Management . . . . . . . . . . . . . . . . . . . 336
11.2.1 Risk Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . 336
11.2.2 Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339
11.2.3 Risk Response Planning . . . . . . . . . . . . . . . . . . . . . . . 348
11.2.4 Risk Monitoring and Control . . . . . . . . . . . . . . . . . . . 350
11.3 Project Risk Analysis: A Team Discussion Case . . . . . . . . . . . . 350
11.4 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355
12 Project Scheduling Under Uncertainty . . . . . . . . . . . . . . . . . . . . . . 357
12.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357
12.2 Robust Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359
12.2.1 Critical Chain Project Management . . . . . . . . . . . . . . . 359
12.2.2 A Robust Optimization Model for Project
Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361
12.2.3 Robustness Measures and Project Scheduling . . . . . . . . 365
12.3 Stochastic Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366
12.4 Sensitivity, Scenario, and Simulation Analysis . . . . . . . . . . . . . 369
12.4.1 Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 369
12.4.2 Scenario Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370
12.4.3 Monte Carlo Simulation . . . . . . . . . . . . . . . . . . . . . . . 370
12.5 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378
13 Planning and Scheduling of Repetitive Projects . . . . . . . . . . . . . . . . 381
13.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381
13.1.1 An Analogy to Serial Production Lines . . . . . . . . . . . . 384
13.1.2 Duration – Resource Relation for WPs . . . . . . . . . . . . . 384
13.2 A Mathematical Programming Model for the Repetitive
Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385
13.2.1 The Objective Function . . . . . . . . . . . . . . . . . . . . . . . 386
13.2.2 The Constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
13.2.3 The Mathematical Programming Model . . . . . . . . . . . . 388
13.3 A Model with an Alternative Total Cost Function . . . . . . . . . . . 389
13.4 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394
13.5 Case Study: 50 Km Gebze-Orhangazi Section of Gebze-Izmir
Motorway Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405
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17. 14 Project and Portfolio Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
14.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407
14.2 A Multi-criteria Scoring Model . . . . . . . . . . . . . . . . . . . . . . . . 408
14.3 The Analytic Hierarchy Process . . . . . . . . . . . . . . . . . . . . . . . . 410
14.3.1 Sensitivity Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . 417
14.4 Mathematical Programming Models . . . . . . . . . . . . . . . . . . . . . 418
14.4.1 A Single Objective Mathematical Programming
Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419
14.4.2 Multi-objective Mathematical Programming Models . . . 421
14.4.3 Multi-objective Linear Programming Approach . . . . . . 423
14.4.4 Goal Programming Model . . . . . . . . . . . . . . . . . . . . . . 429
14.4.5 Multi-objective, Multi-period Project Portfolio
Selection and Scheduling Model . . . . . . . . . . . . . . . . . 433
14.5 Conclusions, Recent Developments, and Some Future
Research Directions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436
14.6 Case Study: Project Portfolio Selection for the Construction
of a Series of Dams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437
Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455
15 Recent Developments and Some Promising Research Areas . . . . . . 457
15.1 Sustainability and Project Management . . . . . . . . . . . . . . . . . . . 457
15.2 Project Management in the Era of Big Data . . . . . . . . . . . . . . . 460
15.2.1 Meaning and Techniques of Big Data Analytics . . . . . . 460
15.2.2 Application Areas and Opportunities in Project
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462
15.3 Fourth Industrial Revolution and the New Age Project
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463
15.3.1 Evolution of the Project Environments . . . . . . . . . . . . . 463
15.3.2 Transformation of the Project Management Practices . . 464
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467
References for Section Sustainability and Project
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467
References for Section Project Management in the Era
of Big Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468
References for Section Fourth Industrial Revolution
and the New Age Project Management . . . . . . . . . . . . . . . . . . . 469
Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471
Mathematical Notations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
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