Chapter (5)

PERT

Slide 1
 Chapter 5
PERT/CPM

 Project Scheduling with Known Activity Times

 Project Scheduling with Uncertain Activity Times
 Considering Time-Cost Trade-Offs

Slide 2
 PERT/CPM

 PERT stands for Program Evaluation Review

Technique.
 CPM stands for Critical Path Method.
 PERT/CPM is used to plan the scheduling of
individual activities that make up a project.
 PERT/CPM can be used to determine the
earliest/latest start and finish times for each activity,
the entire project completion time and the slack time
for each activity.

Slide 3
 Project Network

 A project network can be constructed to model the

precedence of the activities.
 The nodes of the network represent the activities.
 The arcs of the network reflect the precedence
relationships of the activities.
 A critical path for the network is a path consisting of
activities with zero slack.

Slide 4
 Determining the Critical Path

 Step 1: Make a forward pass through the network as

follows: For each activity i beginning at the Start
node, compute:
• Earliest Start Time = the maximum of the earliest
finish times of all activities immediately preceding
activity i. (This is 0 for an activity with no
predecessors.)
• Earliest Finish Time = (Earliest Start Time) + (Time
to complete activity i.
The project completion time is the maximum of the
Earliest Finish Times at the Finish node.

Slide 5
 Determining the Critical Path

 Step 2: Make a backwards pass through the network

as follows: Move sequentially backwards from the
Finish node to the Start node. At a given node, j,
consider all activities ending at node j. For each of
these activities, (i,j), compute:
• Latest Finish Time = the minimum of the latest
start times beginning at node j. (For node N, this
is the project completion time.)
• Latest Start Time = (Latest Finish Time) - (Time to
complete activity (i,j)).

Slide 6
 Determining the Critical Path

 Step 3: Calculate the slack time for each activity by:

Slack = (Latest Start) - (Earliest Start), or
= (Latest Finish) - (Earliest Finish).
A critical path is a path of activities, from the Start
node to the Finish node, with 0 slack times.

Slide 7
 Uncertain Activity Times

 In the three-time estimate approach, the time to

complete an activity is assumed to follow a Beta
distribution.
 An activity’s mean completion time is:
t = (a + 4m + b)/6
 An activity’s completion time variance is:
2 = ((b-a)/6)2
• a = the optimistic completion time estimate
• b = the pessimistic completion time estimate
• m = the most likely completion time estimate

Slide 8
 Uncertain Activity Times

 In the three-time estimate approach, the critical path is

determined as if the mean times for the activities were
fixed times.
 The overall project completion time is assumed to have
a normal distribution with mean equal to the sum of the
means along the critical path and variance equal to the
sum of the variances along the critical path.

Slide 9
 Example: ABC Associates

 Consider the following project:

Immed. Optimistic Most Likely Pessimistic
Activity Predec. Time (Hr.) Time (Hr.) Time (Hr.)
A -- 4 6 8
B -- 1 4.5 5
C A 3 3 3
D A 4 5 6
E A 0.5 1 1.5
F B,C 3 4 5
G B,C 1 1.5 5
H E,F 5 6 7
I E,F 2 5 8
J D,H 2.5 2.75 4.5
K G,I 3 5 7
Slide 10
 Example: ABC Associates

 PERT Network Representation

D J

H
A E

I
C F
Start Finish

K
B G

Slide 11
 Example: ABC Associates

 Activity Expected Time and Variances

t = (a + 4m + b)/6 2 = ((b-a)/6)2
Activity Expected Time Variance
A 6 4/9
B 4 4/9
C 3 0
D 5 1/9
E 1 1/36
F 4 1/9
G 2 4/9
H 6 1/9
I 5 1
J 3 1/9
K 5 4/9
Slide 12
 Example: ABC Associates

 Earliest/Latest Times
Activity ES EF LS LF Slack
A 0 6 0 6 0 *critical
B 0 4 5 9 5
C 6 9 6 9 0*
D 6 11 15 20 9
E 6 7 12 13 6
F 9 13 9 13 0*
G 9 11 16 18 7
H 13 19 14 20 1
I 13 18 13 18 0*
J 19 22 20 23 1
K 18 23 18 23 0*
• The estimated project completion time is the Max EF
at node 7 = 23. Slide 13
 Example: ABC Associates

 Critical Path (A-C-F-I-K)

D 6 11 J 19 22
5 15 20 3 20 23
H 13 19
A 0 6 E 6 7 6 14 20
6 0 6 1 12 13
I 13 18
Start
C 6 9 F 9 13 5 13 18 Finish
3 6 9 4 9 13
K 18 23
B 0 4 G 9 11 5 18 23
4 5 9 2 16 18

Slide 14
 Example: ABC Associates

 Probability the project will be completed within 24 hrs

2 = 2A + 2C + 2F + 2H + 2K
= 4/9 + 0 + 1/9 + 1 + 4/9
=2

 = 1.414

z = (24 - 23)/(24-23)/1.414 = .71

From the Standard Normal Distribution table:
P(z < .71) = .5 + .2612 = .7612

Slide 15
 PERT/Cost

 PERT/Cost is a technique for monitoring costs during a

project.
 Work packages (groups of related activities) with
estimated budgets and completion times are evaluated.
 A cost status report may be calculated by determining
the cost overrun or underrun for each work package.
 Cost overrun or underrun is calculated by subtracting
the budgeted cost from the actual cost of the work
package.
 For work in progress, overrun or underrun may be
determined by subtracting the prorated budget cost
from the actual cost to date.

Slide 16
 PERT/Cost

 The overall project cost overrun or underrun at a

particular time during a project is determined by
summing the individual cost overruns and underruns
to date of the work packages.

Slide 17
 Example: How Are We Doing?

 Consider the following PERT network:

G I
A 3 4
9
F H
B 4 5
Start Finish
8
D
3
J
E 8
4

C
10

Slide 18
 Example: How Are We Doing?

 Earliest/Latest Times
Activity ES EF LS LF Slack
A 0 9 0 9 0
B 0 8 5 13 5
C 0 10 7 17 7
D 8 11 22 25 14
E 8 12 13 17 5
F 9 13 13 17 4
G 9 12 9 12 0
H 12 17 12 17 0
I 12 16 21 25 9
J 17 25 17 25 0
Slide 19
 Example: How Are We Doing?

 Activity Status (end of eleventh week)

Activity Actual Cost % Complete
A $6,200 100
B 5,700 100
C 5,600 90
D 0 0
E 1,000 25
F 5,000 75
G 2,000 50
H 0 0
I 0 0
J 0 0

Slide 20
 Example: How Are We Doing?

 Cost Status Report

(Assuming a budgeted cost of $6000 for each activity)
Activity Actual Cost Value Difference
A $6,200 (1.00)x6000 = 6000 $200
B 5,700 (1.00)x6000 = 6000 - 300
C 5,600 (.90)x6000 = 5400 200
D 0 0 0
E 1,000 (.25)x6000 = 1500 - 500
F 5,000 (.75)x6000 = 4500 500
G 2,000 (.50)x6000 = 3000 -1000
H 0 0 0
I 0 0 0
J 0 0 0
Totals $25,500 $26,400 $- 900
Slide 21
 Example: How Are We Doing?

 PERT Diagram at End of Week 11

The activity completion times are the times remaining
for each activity.
G 11 I 12.5
A 11 1.5 12.5 4 16.5
0 11
F 11 H 12.5
B 11 1 12 5 17.5
Start Finish
0 11
D 11
3 14
J 17.5
E 11 8 25.5
3 14

C 11
1 12

Slide 22
 Example: How Are We Doing?

 Corrective Action
Note that the project is currently experiencing a
$900 cost underrun, but the overall completion time is
now 25.5 weeks or a .5 week delay. Management
should consider using some of the $900 cost savings
and apply it to activity G to assist in a more rapid
completion of this activity (and hence the entire
project).

Slide 23
 Critical Path Method

 In the Critical Path Method (CPM) approach to project

scheduling, it is assumed that the normal time to
complete an activity, tj , which can be met at a normal
cost, cj , can be crashed to a reduced time, tj’, under
maximum crashing for an increased cost, cj’.
 Using CPM, activity j's maximum time reduction, Mj ,
may be calculated by: Mj = tj - tj'. It is assumed that its
cost per unit reduction, Kj , is linear and can be
calculated by: Kj = (cj' - cj)/Mj.

Slide 24
The End

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