Ch-2 System Planning and Selection

HiLCoE
School of Computer Science and Technology

Course Title: System Analysis and Design
Credit Hour: 4
Instructor: Fantahun B. (PhD) meetfantaai@gmail.com
Office: 30X
Ch-2A System Planning and Selection

May-2023, AA
System Planning and Selection
Agenda:
 Purpose, Components and deliverables
 System Project Identification and Selection
 Project Initiation and Planning
 Planning tools and techniques: Gantt & PERT.
System Analysis and Design Fantahun B. (PhD) 2

Objectives:
After completing this chapter, students will be able to:
 Describe the steps involved when identifying and selecting
projects and initiating and planning projects.
 Explain the need for and the contents of a project scope
statement and baseline project plan.
 List and describe various methods for assessing project feasibility.
 Describe the differences between tangible and intangible
benefits and costs, and the differences between one-time and
recurring costs.
 Describe the activities and participant roles within a structured
walkthrough.

FIGURE 2-1
Systems development life cycle
phase 1: Systems Planning and
Selection.
Activities:
- Project identification and selection
- Project initiation and planning.

Project identification and selection
 The first activity of the systems planning and selection phase of
the SDLC is project identification and selection.
 During this activity, a senior manager, a business group, an IS
manager, or a steering committee:
 identifies and assesses all possible systems development projects
that a business unit could undertake.
 those projects deemed most likely to yield significant
organizational benefits, given available resources, are selected.

 Organizations vary in their approach to identifying and
selecting projects.
 In some organizations, project identification and selection is a formal
process in which projects are outcomes of a larger overall planning
process. For example, a large organization may follow a formal project
identification process that involves rigorously comparing all competing
projects.
 Alternatively, a small organization may use informal project selection
processes that allow the highest-ranking IS manager to select projects
independently or allow individual business units to decide on projects
after agreeing on funding.

 Requests for information systems development can come from
three key sources, as depicted in Figure 2-2:
1) Managers and business units who want to replace or extend an
existing system in order to gain needed information or to provide a
new service to customers
2) Information systems managers who want to make a system more
efficient, less costly to operate, or want to move a system to a new
operating environment
3) Formal planning groups that want to improve an existing system in
order to help the organization meet its corporate objectives, such as
providing better customer service

FIGURE 2-2
Three key sources
for information
systems projects.
Project identification and selection: Process
 Project identification and selection consists of three primary
activities:
― Identifying potential development projects,
― classifying and ranking projects, and
― selecting projects for development.

1) Identifying potential development projects:
• Organizations vary as to how they identify projects. This process
can be performed by:
 A key member of top management, either the CEO of a small or
medium-size organization or a senior executive in a larger
organization
 A steering committee, composed of a cross section of managers
with an interest in systems
 User departments, in which either the head of the requesting unit or
a committee from the requesting department decides which
projects to submit (as a systems analyst, you will help users prepare
such requests)
 The development group or a senior IS manager

• Each identification method has strengths and weaknesses. For
example, projects identified by:
• top management have a strategic organizational focus. (top-down)
• steering committees reflect the diversity of the committee and
therefore have a cross-functional focus. (top-down)
• individual departments or business units have a narrow, tactical focus.
(bottom-up)
• The development group identifies projects based on the ease
with which existing hardware and systems will integrate with the
proposed project.
• Other factors, such as project cost, duration, complexity, and
risk, also influence the people who identify a project.
Common Characteristics of Alternative Methods for Making Information

Systems Identification and Selection Decisions

2) Classifying and ranking IS development projects:
• Assessing the merit of potential projects is the second major
activity in the project identification and selection phase.
• As with project identification, classifying and ranking projects
can be performed by top managers, a steering committee,
business units, or the IS development group.
• The criteria used to assign the merit of a given project can vary
based on the size of the organization.
• In any given organization, one or several criteria might be used
during the classifying and ranking process.

2) Classifying and ranking IS development projects:
Possible Evaluation Criteria When Classifying and Ranking Projects

3) Selecting IS development projects:
• The selection of projects is the final activity in the project
identification and selection phase.
• The short- and long-term projects most likely to achieve business
objectives are considered.
• As business conditions change over time, the relative
importance of any single project may substantially change.
• Thus, the identification and selection of projects is an important
and ongoing activity.

• Numerous factors must be considered when selecting a project,
as illustrated in Figure 2-3. These factors include:
 Perceived needs of the organization
 Existing systems and ongoing projects
 Resource availability
 Evaluation criteria
 Current business conditions
 Perspectives of the decision makers

FIGURE 2-3
Numerous factors must be
considered when
selecting a project.
Decisions can result in
one of seven outcomes.
• This decision-making process can lead to numerous outcomes.
― Accepted
― Rejected
― Conditionally accepted
― Projects may also be returned to the original requesters who are told to
develop or purchase the requested system themselves.
― Asked to modify and resubmit their request after making suggested
changes or clarifications.

Project identification and selection: Deliverables and Outcomes
• The primary deliverable, or end product, from the project
identification and selection phase is a schedule of specific IS
development projects.
• These projects come from both top-down and bottom-up
sources, and once selected they move into the second activity
within this SDLC phase—project initiation and planning. This
sequence of events is illustrated in Figure 2-4.
• An outcome of this activity is the assurance that people in the
organization gave careful consideration to project selection
and clearly understood how each project could help the
organization reach its objectives.

FIGURE 2-4
Information systems
development projects
come from both top-down
and bottom-up initiatives.

• Because of the principle of incremental commitment, a
selected project does not necessarily result in a working system.
• Incremental commitment means that after each subsequent
SDLC activity, you, other members of the project team, and
organization officials will reassess your project.
• This reassessment will determine whether the business conditions
have changed or whether a more detailed understanding of a
system’s costs, benefits, and risks would suggest that the project
is not as worthy as previously thought.

Initiating and Planning Systems Development Projects
• Many activities performed during initiation and planning could
also be completed during the next phase of the SDLC—systems
analysis.
• Proper and insightful project initiation and planning, including
determining project scope and identifying project activities,
can reduce the time needed to complete later project phases,
including systems analysis.
― For example, a careful feasibility analysis conducted during initiation
and planning could lead to rejecting a project and saving a
considerable expenditure of resources.
• The actual amount of time expended will be affected by the
size and complexity of the project as well as by the experience
of your organization in building similar systems.
• A rule of thumb is that 10-20% of the entire development effort
should be expended on initiation and planning.
• In other words, you should not be reluctant to spend
considerable time and energy early in the project’s life in order
to fully understand the motivation for the requested system.
• Most organizations assign an experienced systems analyst, or
team of analysts for large projects, to perform project initiation
and planning.
• The analyst will work with the proposed customers—managers
and users in a business unit—of the system and other technical
development staff in preparing the final plan.

• The objective of project initiation and planning is to transform a
vague system request document into a tangible project
description, as illustrated in Figure 2-5.
• Effective communication among the systems analysts, users,
and management is crucial to the creation of a meaningful
project plan.
• Getting all parties to agree on the direction of a project may
be difficult for cross-department projects when different parties
have different business objectives.

Initiating and Planning Systems Development Projects: Process
• As its name implies, two major activities occur during project
initiation and project planning.
― Project initiation
― Project planning
• Project initiation: focuses on activities that will help organize a
team to conduct project planning.
• During initiation, one or more analysts are assigned to work with
a customer to establish work standards and communication
procedures.

Activities Performed during Project Initiation

FIGURE 2-5
The systems analyst
transforms a vague systems
request into a tangible
project description during
project initiation and
planning.
• Project planning: focuses on defining clear, discrete tasks and the
work needed to complete each task.
• The objective of the project planning process is to produce two
documents:
― baseline project plan (BPP) and
― project scope statement (PSS).
• The BPP becomes the foundation for the remainder of the
development project. It is an internal document used by the
development team but not shared with customers.
• The PSS, produced by the project team, clearly outlines the
objectives of the project for the customer.

• As with the project initiation process, the size, scope, and
complexity of a project dictate the comprehensiveness of the
project planning process and the resulting documents.
• Further, numerous assumptions about resource availability and
potential problems will have to be made.
• Analysis of these assumptions and system costs and benefits
forms a business case.

Activities Performed during Project Planning

Initiating and Planning Systems Development Projects:
Deliverables and Outcomes
• The major outcomes and deliverables from project initiation and
planning are the baseline project plan and the project scope
statement.
• The baseline project plan (BPP) contains all information collected
and analyzed during the project initiation and planning activity.
• The plan contains the best estimate of the project’s scope,
benefits, costs, risks, and resource requirements given the current
understanding of the project.
• The BPP specifies detailed project activities for the next life cycle
phase—systems analysis—and provides less detail for subsequent
project phases (because these depend on the results of the
analysis phase).
Initiating and Planning Systems Development Projects:
Deliverables and Outcomes
• Similarly, benefits, costs, risks, and resource requirements will
become more specific and quantifiable as the project
progresses.
• The project selection committee uses the BPP to help decide
whether to continue, redirect, or cancel a project.
• If selected, the BPP becomes the foundation document for all
subsequent SDLC activities; however, it is updated as new
information is learned during subsequent SDLC activities.

System Planning and Selection: Feasibility Analysis
• Most information systems projects have budgets and deadlines.
• Assessing project feasibility is a required task that can be a large
undertaking because it requires you, as a systems analyst, to
evaluate a wide range of factors.
• Although the specifics of a given project will dictate which factors
are most important, most feasibility factors fall into the following six
categories:
1. Economic 4. Schedule
2. Operational 5. Legal and contractual
3. Technical 6. Political
• The analysis of these six factors forms the business case that
justifies the expenditure of resources on the project.
CASE STUDY
• To help you better understand the feasibility assessment process, we examine a
project at Pine Valley Furniture. Jackie Judson, Pine Valley Furniture’s (PVF) vice
president of marketing, prepares a system service request (SSR), illustrated in
Figure 2-6 (refer this on page-91; please consult the full CASE STUDY from your
textbook), to develop a customer tracking system.
• Jackie feels that this system would allow PVF’s marketing group to better track
customer purchase activity and sales trends. She also feels that, if implemented,
the Customer Tracking System (CTS) would help improve revenue, a tangible
benefit, and improve employee morale, an intangible benefit.
• PVF’s Systems Priority Board selected this project for an initiation and planning
study. The board assigned senior systems analyst Jim Woo to work with Jackie to
initiate and plan the project.
• At this point in the project, all project initiation activities have been completed:
Jackie prepared an SSR, the selection board reviewed the SSR, and Jim Woo was
assigned to work on the project. Jackie and Jim can now focus on project
planning activities, which will lead to the baseline project plan.
CASE STUDY : Assessing Economic Feasibility
• A study of economic feasibility is required for the baseline project
plan. The purpose for assessing economic feasibility is to identify the
financial benefits and costs associated with the development
project.
• Economic feasibility is often referred to as cost-benefit analysis.
During project initiation and planning, it will be impossible for you to
define precisely all benefits and costs related to a particular project.
Yet, it is important that you identify and quantify benefits and costs,
or it will be impossible for you to conduct a sound economic analysis
and determine whether one project is more feasible than another.
• Next, we review worksheets you can use to record costs and
benefits, and techniques for making cost-benefit calculations. These
worksheets and techniques are used after each SDLC phase to
decide whether to continue, redirect, or kill a project.
• Determining Project Benefits An information system can provide
many benefits to an organization.
• For example, a new or renovated IS can
― automate monotonous jobs,
― reduce errors,
― provide innovative services to customers and suppliers, and
― improve organizational efficiency, speed, flexibility, and morale.
• These benefits are both
― tangible and
― intangible.

• A tangible benefit is an item that can be measured in dollars
and with certainty.
• Most tangible benefits fit in one or more of the following
categories:
― Cost reduction and avoidance
― Error reduction
― Increased flexibility
― Increased speed of activity
― Improvement of management planning and control
― Opening new markets and increasing sales opportunities

• Jim and Jackie identified several tangible benefits of the
Customer Tracking System at PVF and summarized them in a
worksheet, shown in Figure 2-7.
• Jackie and Jim collected information from users of the current
customer tracking system in order to create the worksheet. They
first interviewed the person responsible for collecting, entering,
and analyzing the correctness of the current customer tracking
data.
• This person estimated that he spent 10 percent of his time
correcting data-entry errors. This person’s salary is $25,000, so
Jackie and Jim estimated an error reduction benefit of $2,500
(10 percent of $25,000).

• Jackie and Jim also interviewed managers who used the
current customer tracking reports to estimate other tangible
benefits.
• They learned that cost reduction or avoidance benefits could
be gained with better inventory management.
• Also, increased flexibility would likely occur from a reduction in
the time normally taken to reorganize data manually for
different purposes.
• Further, improvements in management planning or control
should result from a broader range of analyses in the new
system. This analysis forecasts that benefits from the system
would be approximately $50,000 per year.

• Jim and Jackie also identified several intangible benefits of the
system. Although they could not quantify these benefits, they
will still be described in the final BPP. Intangible benefits refer to
items that cannot be easily measured in dollars or with
certainty. Intangible benefits may have direct organizational
benefits, such as the improvement of employee morale, or they
may have broader societal implications, such as the reduction
of waste creation or resource consumption. Potential tangible
benefits may have to be considered intangible during project
initiation and planning because you may not be able to
quantify them in dollars or with certainty at this stage in the life
cycle. During later stages, such intangibles can become
tangible benefits as you better understand the ramifications of
the system you are designing.
• Intangible benefits include:
― Competitive necessity
― Increased organizational flexibility
― Increased employee morale
― Promotion of organizational learning and understanding
― More timely information
• After determining project benefits, project costs must be
identified.

• Determining Project Costs An information system can have both
tangible and intangible costs. A tangible cost refers to an item
that you can easily measure in dollars and with certainty. From
a systems development perspective, tangible costs include
items such as hardware costs, labor costs, and operational
costs from employee training and building renovations.
• Alternatively, an intangible cost refers to an item that you
cannot easily measure in terms of dollars or with certainty.
Intangible costs can include loss of customer goodwill,
employee morale, or operational inefficiency.
• Besides tangible and intangible costs, you can distinguish
system-related development costs as either one-time or
recurring.
• A one-time cost refers to a cost associated with project
initiation and development and the start-up of the system.
These costs typically encompass the following activities:
― System development
― New hardware and software purchases
― User training
― Site preparation
― Data or system conversion

• A recurring cost refers to a cost resulting from the ongoing
evolution and use of the system. Examples of these costs typically
include:
― Application software maintenance
― Incremental data storage expense
― Incremental communications
― New software and hardware leases
― Consumable supplies and other expenses (e.g., paper, forms,
datacenter
• Both one-time and recurring costs can consist of items that are
fixed or variable in nature. Fixed costs refer to costs that are billed
or incurred at a regular interval and usually at a fixed rate (eg.
facility lease payment). Variable costs refer to items that vary in
relation to usage (Long-distance phone charges).
• The Time Value of Money Most techniques used to determine
economic feasibility encompass the concept of the time value
of money (TVM).
• TVM refers to comparing present cash outlays to future
expected returns.
• Because many projects may be competing for the same
investment dollars and may have different useful life
expectancies, all costs and benefits must be viewed in relation
to their present, rather than future value when comparing
investment options.

• A simple example will help you understand the concept of TVM.
Suppose you want to buy a used car from an acquaintance, and
she asks that you make three payments of $1,500 for three years,
beginning next year, for a total of $4,500.
• If she would agree to a single lump-sum payment at the time of sale
(and if you had the money!), what amount do you think she would
agree to?
• Should the single payment be $4,500? Should it be more or less? To
answer this question, we must consider the time value of money.
• Most of us would gladly accept $4,500 today rather than three
payments of $1,500, because a dollar today is worth more than a dollar
tomorrow or next year, because money can be invested.
• The interest rate at which money can be borrowed or invested, the
cost of capital, is called the discount rate for TVM calculations.
• Let’s suppose that the seller could put the money received for the sale of
the car in the bank and receive a 10% return on her investment. A simple
formula to figure out the present value of the three $1,500 payments:
where PVn is the present value of Y dollars n years from now, when i is the
discount rate.
where PV1, PV2, and PV3 reflect the present value of each $1,500 payment
in year 1, 2, and 3, respectively.
• To calculate the net present value (NPV) of the three $1,500
payments, simply add the present values calculated:
NPV = PV1 + PV2 + PV3

= 1,363.65 + 1,239.60 +1,126.95
= $3,730.20.
• In other words, the seller could accept a lump sum payment of

$3,730.20 as equivalent to the three payments of $1,500, given
a discount rate of 10 percent.

• Now that we know the relationship between time and money,
the next step in performing the economic analysis is to create a
summary worksheet that reflects the present values of all
benefits and costs.
• PVF’s Systems Priority Board feels that the useful life of many
information systems may not exceed five years.
• Therefore, all cost-benefit analysis calculations will be made
using a five-year time horizon as the upper boundary on all
time-related analyses.
• In addition, the management of PVF has set its cost of capital
to be 12 percent (i.e., PVF’s discount rate). The worksheet
constructed by Jim is shown in Figure 4-10.

Operational feasibility
• Operational feasibility is the process of examining the likelihood
that the project will attain its desired objectives.
• The goal of this study is to understand the degree to which the
proposed system will likely solve the business problems or take
advantage of the opportunities outlined in the system service
request or project identification study.
• In other words, assessing operational feasibility requires that you
gain a clear understanding of how an IS will fit into the current
day-to-day operations of the organization.

Technical feasibility
• The goal of technical feasibility is to understand the
development organization’s ability to construct the proposed
system.
• This analysis should include an assessment of the development
group’s understanding of the possible target hardware,
software, and operating environments to be used, as well as,
system size, complexity, and the group’s experience with similar
systems.

Technical feasibility
• Schedule feasibility considers the likelihood that all potential
time frames and completion date schedules can be met and
that meeting these dates will be sufficient for dealing with the
needs of the organization.
• For example, a system may have to be operational by a
― government-imposed deadline
― particular point in the business cycle (such as the beginning of the
season when new products are introduced), or
― the time a competitor is expected to introduce a similar system.

Legal and contractual feasibility
• Assessing legal and contractual feasibility requires that you gain
an understanding of any potential legal and contractual
ramifications due to the construction of the system.
• Considerations might include copyright or nondisclosure
infringements, labor laws, antitrust legislation (which might limit
the creation of systems to share data with other organizations),
foreign trade regulations (e.g., some countries limit access to
employee data by foreign corporations), and financial
reporting standards as well as current or pending contractual
obligations. Typically, legal and contractual feasibility is a
greater consideration if your organization has historically used
an outside organization for specific systems or services that you
now are considering handling yourself.
Political feasibility
• Assessing political feasibility involves understanding how key
stakeholders within the organization view the proposed system.
• Because an information system may affect the distribution of
information within the organization, and thus the distribution of
power, the construction of an IS can have political
ramifications.
• Those stakeholders not supporting the project may take steps to
block, disrupt, or change the project’s intended focus.

Reading Assignment
• CASE STUDY
• Building and reviewing the Baseline Project Plan (BPP)

System Planning and Selection: Planning tools & Techniques
 Scheduling projects
 involves breaking down the project to clearly defined simpler tasks.
 This is also known as the "work breakdown structure".
 This structure allows the team members to understand a complex
project in terms of simple achievable tasks.
 Scheduling also involves assigning these tasks to the relevant personnel
and establishing the time, money and other resource constraints for each
task.
 Common project scheduling techniques include:
Bar charts
o Gantt chart (simple, milestone)
Network Diagrams
o Critical Path Method (CPM)
o Program Evaluation & Review Technique (PERT)
Jun-23 IS: Ch-5A IS Dev't (Tools&Techniques) Fantahun B. (PhD) 56

 A Gantt chart is a simple horizontal bar chart that depicts project tasks
against a calendar.
 Each bar represents a named project task.
 The tasks are listed vertically in the left hand column.
 The horizontal axis is a calendar timeline.
 The Gantt chart was first conceived by Henry L. Gantt in 1917, and is the
most commonly used project scheduling and progress evaluation tool.
 Gantt charts give a clear, pictorial model of the project.
 They show progress and can be used for resource planning.
 They also show interrelationships and critical path.

 Gantt Chart Methodology
 List vertically all tasks to be performed
 Tasks identified by number and name
 Horizontally indicate duration, resources and any other relevant
information
 Graphical part shows horizontal bar for each task connecting start and
end duration
 Relationships can be shown by lines joining tasks – can make diagram

 Gantt chart example:

Network Diagrams
 Network diagram refers to a graphical representation of the
tasks/activities necessary to complete a project.
 Network visualizes the flow of tasks & their relationships.
 In network diagram, each task is labeled with an identifier (usually by a
letter),
 Task duration expressed in standard unit like days and time goes from left
to right.
 You would use a network diagram when tasks:
 are well defined and have a clear beginning and end point
 can be worked on independently of other tasks.
 are ordered
 serve the purpose of the project

Network Diagrams
 The two common known Network Diagrams are:
a) Project Evaluation and Review Technique (PERT)
 developed by U.S. Navy (1958) for missile program
 handles multiple task time estimates (probabilistic nature)
 especially good for non-repetitive jobs (R & D work)
 used to manage uncertain (i.e., time is not known) activities of any project.
b) Critical Path Method (CPM)
 developed by Du Pont in 1957 for construction of new chemical plant and
maintenance shut-down
 handles deterministic task times
 good for jobs having repetitive nature. E.g. Construction
 used to manage only certain (i.e., time is known) activities of any project.

Network Diagrams
 CPM/PERT can answer the following important questions:
 How long will the entire project take to be completed? What are the
risks involved?
 Which are the critical activities or tasks in the project which could
delay the entire project if they were not completed on time?
 Is the project on schedule, behind schedule or ahead of schedule?
 If the project has to be finished earlier than planned, what is the best
way to do this at the least cost?

Network Diagrams (PERT)
 PERT is based on the assumption that an activity’s duration follows a
probability distribution instead of being a single value.
 Three time estimates are required to compute the parameters of an
activity’s duration distribution:
 Pessimistic time (p) - the time the activity would take if things did not go well.
(E.g. likely occur 1 in 20)
 Most likely time (r) - the consensus best estimate of the activity’s duration.
(E.g. Modal value)
 Optimistic time (o) - the time the activity would take if things did go well. (E.g.
Would be exceeded only one time in 20)
 This equation is given by: ET = (o+4r+p)/6, where
 ET: is expected time for the completion of an activity,
 o: optimistic completion time for an activity,
 r: realistic completion time for an activity and
 p: pessimistic completion time for an activity
Network Diagrams (PERT): Example
 Suppose that your instructor asked you to calculate an expected time for
the completion of an upcoming MIS assignment. For this assignment, you
estimate an optimistic time of 2 hours, a pessimistic time of 8 hours, and a
most likely time of 6 hours. Using PERT, what is the expected time for
completing this assignment ?
 Solution:
 Given
 Optimistic (o) =2 hours
 Pessimistic (p) =8 hours
 Realistic(r) = 6hours
 To find expected time (ET)
ET = (o+4r+p)/6
= [2hrs+4(6)hrs+8hrs]/6
= 5.67 hours
 PERT example, ET solved for activities in a hypothetical IS
development project
In addition to tasks and their duration, a PERT chart shows task dependencies.

 PERT example

Network Diagrams (PERT)
 PERT planning involves the following steps:
1. Identify the specific activities and milestones.
2. Determine the proper sequence of the activities.
3. Construct a network diagram.
4. Estimate the time required for each activity.
5. Determine the critical path.
6. Update the PERT chart as the project progresses.

Network Diagrams (CPM)
 CPM is a network diagramming technique used to predict total project
duration based on critical path. It is commonly used with all forms of
projects, including:
 construction, software development, research projects, product
development, engineering, etc.
 The critical path is the longest path in a network (path with highest length)
 CMP Inputs:
 Activities from work breakdown structure
 Precedence relationships among activities
 One time estimate for each activity
 CPM Outputs:
 Start and end times for each activity
 Project completion time
 Critical path: activities that must be finished on time so that the project will
be completed on timeIS: Ch-5A IS Dev't (Tools&Techniques) Fantahun B. (PhD)
Jun-23 68
 Activity List
 The initial step in applying CPM is to break the project down into its
component operations to form a complete list of essential activities.
 An activity is a task with a distinct beginning and endpoint
 Some easily identified characteristic should be associated with each start
and finish point
 A network is a composite picture of an entire undertaking; the
activity list needs to be reviewed by Suppliers, cooperating
departments, subcontractors and any other stakeholder
 Establishes the precedence of activities
 Uses the rough sequence generally arising from the activity list
 Each activity bracketed by the activities which must immediately precede it,
the prerequisite, and the Activity that must immediately follow it, the post
requisite.

 Example:

 The critical path is of great interest to project managers.
 The activities on the critical path are the ones which absolutely must
be done on time in order for the whole project to complete on time.
 If any of the activities on the critical path are late, then the entire
project will finish late!
 The non-critical activities have some leeway to be late without
affecting the overall project completion time.
 Steps to find the critical path and calculate other useful information
about the project:
 Step 1: Calculate the earliest time (TE)
 Step 2: Calculate the latest time (TL)
 Step 3: Calculate the node slack time (SN)

Step 1: Calculate the earliest time (TE):
 Make a forward pass through the diagram for each event (node).
 In other words, what is the earliest time at which all of the activities
entering a node will have finished?
 To find TE, look at all of the activities which enter a node.
 TE is the latest of the arrival times for entering arcs,
i.e. TE = max [(TE of node at tail of arc) + (arc duration)] over all of the
entering arcs.
 By definition, TE of the starting node is zero.

Step 2: Calculate the latest time (TL)
• Make a backward pass through the diagram for each event (node).
• In other words, what is the latest time that the outflow activities can
begin without causing a late arrival at the next node for one of
those activities?
 To find TL, look at all of the activities which exit a node. TL is the earliest
of the leaving times for the exiting arcs,
i.e. TL = min [(TL of node at head of arc) − (arc duration)] over all of
the exiting arcs.
 By definition, the TL of the ending node equals its TE.

Step 3: Calculate the node slack time (SN) for each node (event).
• This is the amount of time by which an event could be adjusted later
than its TE without causing problems downstream.
SN = TL − TE for each node.
• By definition the TE of the starting node(node A) is 0.

• To calculate TE at any node, follow step-1. Accordingly,
TE (B) = TE (A) + (duration of A-B) = 0 + 4 = 4.
• The complete set of TE calculations is given in the table below.

• The shortest time in which the project can be completed is now known: it
is the same as the TE of the ending node, node H, i.e. 29 days.
• To calculate the latest time (TL), we have to follow step2
• The backwards pass in Step 2 begins with the ending node H.
• By definition, the TL of the ending node is equal to its TE so TE (H) = 29.

• To find node slack time (SN), use SN=TL-TE
Node TL TE SN=TL-TE
A 0 0 0
B 4 4 0
C 10 9 1
D 9 9 0
E 16 16 0
F 26 26 0
G 24 23 1
H 29 29 0

• Critical path does not include nodes with none zero slack (SN)
• According to our calculations, the critical path is shown in the following
diagram.

Review Questions.
1. Describe the steps involved when identifying and selecting projects and
initiating and planning projects.
2. Explain the need for and the contents of a project scope statement and
a baseline project plan.
3. List and describe various methods for assessing project feasibility.
4. Describe the differences between tangible and intangible benefits and
costs, and the differences between one-time and recurring costs.
5. Perform cost-benefit analysis and describe what is meant by the time
value of money, present value, discount rate, net present value, return
on investment, and break-even analysis.
6. Describe the activities and participant roles within a structured
walkthrough.
7. Implement the CPM

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Ch-2A System Planning and Selection

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Common Characteristics of Alternative Methods for Making Information

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Possible Evaluation Criteria When Classifying and Ranking Projects

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Activities Performed during Project Initiation

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NPV = PV1 + PV2 + PV3

• In other words, the seller could accept a lump sum payment of

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