PERT/ CPM method for Project Management

1. 15-Month Executive MBA 2010
Course: Project Management
Authors:
 Abhik Tushar Das (20104001)
 Ajay Cecil (20104002)
PMC Report: Construction of a
Marine Tank Farm
School of Petroleum Management,
Gandhinagar, Gujarat, India
www.spm.pdpu.ac.in
Comments:
spm_pdpu_emba10@googlegroups.com

2. Contents: The authors would like to thank Mr. ANAND
KUMAR SINGH (Energy Risk Professional) for his
sincere efforts towards guiding them through the
project in terms of Project Risk Management.
- Abhik Tushar Das / Ajay Cecil
1. Project Charter
2. Project Objectives
3. Technical Details
4. Project Organization Structure
5. Work-Breakdown-Structure (WBS)
6. Network Diagram (PERT/ CPM)
7. Project Risk Management
8. Microsoft Project Applications
9. Conclusions
10. Key Findings
All facts and data used in this report are hypothetical and do
not correlate to an actual project.
The sole purpose of this report is to demonstrate
understanding of concepts learnt in the course titled “Project
Management in Oil & Gas”.

3. Project Charter:
Trade is an important facet in the economic development of any nation. The ASSOCHAM
STUDY ON PETROLEUM TRADE™ for the period FY 1999-00 to 2006-07 has found that
petroleum products exported by India have been growing at a whopping rate of 73 per cent
for last three years with the value of oil exports expected to surpass its imports in next six
years. Petroleum is emerging as the largest foreign exchange sector in India with 16.2 per
cent share petroleum exports are expected to exceed US$ 20 billion in FY07. To facilitate
this trade, it is essential to supplement our ports with custom-bonded storage warehouses
to reduce ship turnaround time and help exporters reduce inventories at their
manufacturing locations thus reducing transaction cost.
This project envisages constructing a marine tank farm near the port of NHAVA SHEVA
(JNPT) which will cater to the numerous chemical/ petrochemical industries in the MIDC
(Maharashtra Industrial Development Corporation) as also to the two PSU refineries (BPCL
and HPCL) located at Mumbai. The Marine Tank Farm would be spread over an area of
5acres and have a cargo capacity of 100000 kilolitres with a receiving/ discharging capacity
of 200 kilolitres per hour (pumping rate). The tanks farm will be designed to store
hazardous liquid cargo (Class-A Storage) and will conform to best-in-class safety standards.
The tank farm shall have an access from NH4B which is a spur from NH 4 which links four of
the 10 most populous Indian cities - Mumbai, Pune, Bangalore and Chennai. NH 4
constitutes roughly 90% of the Golden Quadrilateral's Mumbai-Chennai segment and hence
the tank farm is strategically connected to highly industrialized cities. The tank farm is also
in proximity to Mumbai, the financial hub of India and caters to JNPT which is spread over
10 square kilometres (2,500 acres) handling bulk consignments of 7.88 million tons per
annum. The port handles 65% of India's container traffic has an average berthing period of
37 hours which is considered very long. Hence the tank farm is expected to cater to high
business volumes.

4. Project Objectives:
The project objectives can be listed as;
Project area: 5 acres
Project location: Off-NH4B (NHAVA SHEVA Port, JNPT, NaviMumbai)
Shell Capacity: 100000 kilolitres
Project Type: Turnkey contract
Project construction deadline: 36 months
Project Cost: US$ 200 million
Project Location:
Project Area

5. Technical Details:
The technical details for construction can be detailed as;
 Material of construction is Mild Steel
 Type of Tank: Floating Roof tanks (20 nos)
 Diameter of Tanks: 20 meters (largest tank)
 Height of Tanks: 12 meters (highest tank)
 Tank foundation: Reinforced Concrete piling with Bitumen and sand surfacing
 Associated pipelines: 2650 meters (diameter 100mm and 200mm NB)
 Material of Storage: Petroleum derivatives (non-reactive)
 Design guidelines: OISD-STD-105/ OISD-RP-108/ OISD-STD-110/ OISD-STD-112/ OISD-
STD-113/ OISD-STD-114/ OISD-GDN-115/ OISD-STD-117/ OISD-STD-118/ OISD-STD-
119/ OISD-RP-149/ OISD-STD-156/ OISD-GDN-166/ OISD-RP-167
 Tank construction method: Jack-up method
Tank Foundation Details:

6. Project Organization Structure:
Project Director
Project Manager
Project Management Resource Risk Management
Team Management Team Team
1. Technical Manager 1. Finance Manager 1. Configuration
2. Communication 2. Accountant Manager
Manager 3. Purchase Manager 2. Scheduler
3. Personnel Manager 4. Transportation/ 3. Estimator
4. Project Administrator Logistics Manager 4. Senior Consultant
5. Mechanical Engineer 5. IT Manager (vendor)
6. Civil Engineer 6. Systems Manager 5. Senior Consultant
7. Electrical Engineer 7. Metrics Analyst (customer)
8. Draftsman 8. Contract Manager 6. Insurance Consultant
9. Safety Manager
10.Contractors
PMI’s Standard for Portfolio Management:

7. Work Breakdown Structure (WBS):
Work breakdown structure (WBS), in project management and systems engineering, is a
deliverable oriented decomposition of a project into smaller components. It defines and
groups a project's discrete work elements in a way that helps organize and define the total
work scope of the project.
 Preconstruction Activities:
1. Develop Technical Specifications
2. Contractor Solicitation
3. Pre-construction Meetings
4. Acquisition of Permits and Licences
5. Construction Agreements with vendors, suppliers and sub-contractors
6. Land surveys/ Aerial Photographs/ Soil Tests
 Construction Preparation:
1. Clearing of Site/ Demolition
2. Land excavation/ filling
3. Levelling
4. Ground water removal
 Resource Acquisition:
1. RFQ/ Tendering
2. Vendor Selection
3. Ordering
4. Delivery
5. Testing
6. Payments
7. Construction Equipment hiring
 Construction:
1. Excavation
2. Piling
3. Tank Foundation
4. Plate welding
 Testing and Handover:
1. NDT Testing for Welding joints
2. Hydro test of Tank
3. Handover to operations

8. Tank Construction pictorial representation:
Some Pictures:

9. Network Diagram:

10. Precedence Table:
Task Project Activity Duration Phase Predecessor
No. (days)
1- Recurring Morning Meetings (Daily Activity) Daily
137
138 Preconstruction Activities 27
139 Develop Technical Specifications 5 1
140 Contractor Solicitation 15 139
141 Acquisition of Permits and Licences 20
142 Construction Agreements with vendors, 7 140
suppliers and sub-contractors
143 Land surveys/ Aerial Photographs/ Soil Tests 6 141
144 Construction Preparation 3 141
145 Clearing of Site/ Demolition 9 138
146 Land excavation/ filling 4 2 143
147 Levelling 2 146
148 Ground water removal 5 146
149 Resource Acquisition 60 145
150 RFQ/ Tendering 30 3 139
151 Vendor Selection 7 150
152 Ordering 3 150
153 Delivery 15 152
154 Testing 5 153
155 Payments 7 154
156 Construction Equipments Hiring 3 144
157 Construction 35 149
158 Piling 4 4 156
159 Tank Foundation 6 158
160 Plate Welding 25 159
161 Testing and Handover 4 157
162 NDT Testing for Welding joints 2 5 160
163 Hydro test of Tank 3 160
164 Handover to operations 1 163
Total Project Duration: 126days
Activity No’s:

11. Network Diagram (Critical Path Method):
Abbreviations:
 Critical Path:
 Non Critical Path:
 Dummy Path:
 Node:
 Project time (Early/ Late finish):

12. Project Evaluation & Review Technique (PERT):
 Optimistic Time of completion: t0
 Most Likely Time of completion: tl
 Pessimistic Time of completion: tp
 Expected Time of completion: te
Task No. Project Activity t0 tl tp te Std Dev Variance
138 Preconstruction Activities
139 Develop Technical Specifications 3 5 7 5 0.666667 0.444444
140 Contractor Solicitation 12 15 21 15.5 1.5 2.25
141 Acquisition of Permits and Licences 15 20 60 25.83333 7.5 56.25
Construction Agreements with
vendors, suppliers and sub-
142 contractors 5 7 10 7.166667 0.833333 0.694444
Land surveys/ Aerial Photographs/
143 Soil Tests 4 6 7 5.833333 0.5 0.25
144 Construction Preparation 2 3 5 3.166667 0.5 0.25
145 Clearing of Site/ Demolition
146 Land excavation/ filling 3 4 6 4.166667 0.5 0.25
147 Levelling 1 2 5 2.333333 0.666667 0.444444
148 Ground water removal 4 5 7 5.166667 0.5 0.25
149 Resource Acquisition
150 RFQ/ Tendering 20 30 60 33.33333 6.666667 44.44444
151 Vendor Selection 5 7 8 6.833333 0.5 0.25
152 Ordering 1 3 7 3.333333 1 1
153 Delivery 12 15 20 15.33333 1.333333 1.777778
154 Testing 3 5 6 4.833333 0.5 0.25
155 Payments 2 7 8 6.333333 1 1
156 Construction Equipments Hiring 2 3 5 3.166667 0.5 0.25
157 Construction
158 Piling 3 4 7 4.333333 0.666667 0.444444
159 Tank Foundation 5 6 7 6 0.333333 0.111111
160 Plate Welding 22 25 35 26.16667 2.166667 4.694444
161 Testing and Handover
162 NDT Testing for Welding joints 1 2 4 2.166667 0.5 0.25
163 Hydro test of Tank 2 3 4 3 0.333333 0.111111
164 Handover to operations 1 1 3 1.333333 0.333333 0.111111
Here critical path is: 139-140-142-150-152-153-154-155-158-159-160-163-164

13. Computation of Event Times
Task No. Project Activity Duration (D) TEi TLi TEj TLj Total Float Free Float Independent Float
138 Preconstruction Activities
139 Develop Technical Specifications 5 0 0 5 5 0 0 0
140 Contractor Solicitation 15 5 5 20 20 0 0 0
141 Acquisition of Permits and Licences 20 0 49 20 69 49 0 -49
142 Construction Agreements with vendors, suppliers and sub-contractors 7 20 20 27 27 0 0 0
143 Land surveys/ Aerial Photographs/ Soil Tests 6 20 69 26 75 49 0 -49
144 Construction Preparation 3 20 69 23 84 61 0 -49
145 Clearing of Site/ Demolition
146 Land excavation/ filling 4 26 75 30 79 49 0 -49
147 Levelling 2 30 79 32 85 53 0 -49
148 Ground water removal 5 30 79 35 84 49 0 -49
149 Resource Acquisition
150 RFQ/ Tendering 30 27 27 57 57 0 0 0
151 Vendor Selection 7 57 57 64 88 24 0 0
152 Ordering 3 57 57 60 60 0 0 0
153 Delivery 15 60 60 75 75 0 0 0
154 Testing 5 75 75 80 80 0 0 0
155 Payments 7 80 80 87 87 0 0 0
156 Construction Equipments Hiring 3 35 84 38 87 49 0 -49
157 Construction
158 Piling 4 87 87 91 91 0 0 0
159 Tank Foundation 6 91 91 97 97 0 0 0
160 Plate Welding 25 97 97 122 122 0 0 0
161 Testing and Handover
162 NDT Testing for Welding joints 2 122 122 124 125 1 0 0
163 Hydro test of Tank 3 122 122 125 125 0 0 0
164 Handover to operations 1 125 125 126 126 0 0 0
For Critical Tasks: TF=FF=IF=0
Critical Path
Activity Nos Activity Name t0 tl tp Weightage te Std Dev Variance
139 Develop Technical Specifications 3 5 7 5 0.666667 0.444444
140 Contractor Solicitation 12 15 21 15.5 1.5 2.25
142 Construction Agreements with vendors, suppliers and sub-contractors 5 7 10 7.166667 0.833333 0.694444
150 RFQ/ Tendering 20 30 60 33.33333 6.666667 44.44444
152 Ordering 1 3 7 3.333333 1 1
153 Delivery 12 15 20 15.33333 1.333333 1.777778
154 Testing 3 5 6 4.833333 0.5 0.25
155 Payments 2 7 8 6.333333 1 1
158 Piling 3 4 7 4.333333 0.666667 0.444444
159 Tank Foundation 5 6 7 6 0.333333 0.111111
160 Plate Welding 22 25 35 26.16667 2.166667 4.694444
163 Hydro test of Tank 2 3 4 3 0.333333 0.111111
164 Handover to operations 1 1 3 1.333333 0.333333 0.111111
131.6667 57.33333
Expected Project Duration (days) 131.6667
Expected Project Variance 57.33333
Activities to be monitored 44.44444 RFQ/ Tendering
Scheduled completion of project (days) 120
Probability of completion within 120 days -1.54079 0.061684 6%

14. Project Risk Management:
Risk likelihood is the probability that a potential risk factor will actually materialize. It is
expressed numerically between:
 never happen (0)
 will happen (1)
Risk likelihood table:
S No. Qualitative Quantitative
1 Low 0 to 0.20
2 Medium 0.21 to 0.50
3 High 0.51 to 1.00
Composite Likelihood Factor (CLF)
Activity Nos Activity Name Likelihood of Failure Weight-1 (Finance) Weight-2 (Manpower) Weight-3 (Technology) CLF
139 Develop Technical Specifications 0.1 0.05 0.05 0.2 0.03
140 Contractor Solicitation 0.3 0.05 0.055 0.05 0.0465
142 Construction Agreements with vendors, suppliers and sub-contractors 0.5 0.01 0.0025 0.03 0.02125
150 RFQ/ Tendering 0.5 0.2 0.05 0.05 0.15
152 Ordering 0.1 0.0025 0.01 0.01 0.00225
153 Delivery 0.7 0.05 0.03 0.055 0.0945
154 Testing 0.7 0.0025 0.25 0.2 0.31675
155 Payments 0.3 0.05 0.05 0.05 0.045
158 Piling 0.3 0.055 0.05 0.25 0.1065
159 Tank Foundation 0.5 0.2 0.2 0.05 0.225
160 Plate Welding 0.7 0.25 0.2 0.05 0.35
163 Hydro test of Tank 0.9 0.03 0.05 0.0025 0.07425
164 Handover to operations 0.5 0.05 0.0025 0.0025 0.0275
Project CLF (max value) 1 1 1 0.35
Composite Impact Factor (CIF)
Activity Nos Activity Name Cost impact Weight-1 (Financial) Time impact Weight-2 (Schedule) CIF
139 Develop Technical Specifications 0.1 0.7 0.28
140 Contractor Solicitation 0.5 0.7 0.56
142 Construction Agreements with vendors, suppliers and sub-contractors 0.3 0.5 0.36
150 RFQ/ Tendering 0.3 0.3 0.3
152 Ordering 0.1 0.7 0.28
153 Delivery 0.1 0.7 0.28
154 Testing 0.1 0.7 0.5 0.3 0.22
155 Payments 0.1 0.5 0.22
158 Piling 0.5 0.7 0.56
159 Tank Foundation 0.5 0.7 0.56
160 Plate Welding 0.9 0.7 0.5
163 Hydro test of Tank 0.3 0.7 0.42
164 Handover to operations 0.1 0.9 0.34
Project CLF (max value) 0.56

15. Low 0.1
Minor 0.3 RCR (Risk Consequence Rating) 0.714
Likelihood Moderate 0.5
Significant 0.7
High 0.9
RCR = Impact * Likelihood
Since the RCR of the project is 0.64, it is a moderately risky project and hence can be
executed with proper safeguards.
# for detailed calculations, please refer to the attached MS Excel worksheet.
MS Projects Applications:
Project Overview:

16. Critical Tasks:
Project Resources:

17. Conclusion:
The tank farm project, which is supposed to be a very lucrative project in terms of future
business prospects, faces immediate project implementation challenges in terms of high
risk of failure. Also the project envisages to be completed in 4months, would face a delay of
a fortnight, where only a remote possibility of completion (6%) within the timeframe
announced by the promoters. Although a detailed cost analysis was not undertaken due to
resource constraints, it can be safely concluded that adequate safeguards should be
implemented to mitigate project risks. In case of cost over runs due to delays in project
implementation, a cost-benefit-analysis should be performed to ascertain the benefits of
employing more man-hours during for the project vis-a-vis the cost of capital and the
opportunity cost of completing the project before time. Contractors can be given
commensurate benefits based on early completion of project.
Key Findings:
The key findings in the project can be summarized as;
1. Lucrative business prospects
2. Project deadline would be breached by a fortnight (inclusive of holidays)
3. Project risk is high (RCR=0.714)
4. High risk due to critical activities like Piling & Plate Wielding
5. Mitigation required for the above activities which would significantly reduce risk
exposure
6. Manpower deployment to increase at the fag-end of the project (phase- 4/5)
7. RFQ/ Tendering process has to be critically monitored for smooth project execution
8. Due to high project risk, equity should be preferred over debt for capital infusion as
high cost of capital (debt) could make the project unfeasable