PROJECT EVALUATION AND REVIEW TECHNIQUE /

CRITICAL PATH METHOD

PERT / CPM

Complex projects require a series of activities, some of which must be performed

sequentially and others that can be performed in parallel with other activities. This
collection of series and parallel tasks can be modeled as a network.

In 1957 the Critical Path Method (CPM) was developed as a network model for
project management. CPM is a deterministic method that uses a fixed time estimate
for each activity. While CPM is easy to understand and use, it does not consider the
time variations that can have a great impact on the completion time of a complex
project.

The Program Evaluation and Review Technique (PERT) is a network model that
allows for randomness in activity completion times. PERT was developed in the late
1950's for the U.S. Navy's Polaris project having thousands of contractors. It has the
potential to reduce both the time and cost required to complete a project.

The Network Diagram

In a project, an activity is a task that must be performed and an event is a milestone
marking the completion of one or more activities. Before an activity can begin, all of
its predecessor activities must be completed. Project network models represent
activities and milestones by arcs and nodes. PERT originally was an activity on arc
network, in which the activities are represented on the lines and milestones on the
nodes. Over time, some people began to use PERT as an activity on node network.
For this discussion, we will use the original form of activity on arc.

The PERT chart may have multiple pages with many sub-tasks. The following is a
very simple example of a PERT diagram:

PERT Chart

The milestones generally are numbered so that the ending node of an activity has a
higher number than the beginning node. Incrementing the numbers by 10 allows for
new ones to be inserted without modifying the numbering of the entire diagram. The
activities in the above diagram are labeled with letters along with the expected time
required to complete the activity.
Steps in the PERT Planning Process
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.

1. Identify Activities and Milestones

The activities are the tasks required to complete the project. The milestones are the
events marking the beginning and end of one or more activities. It is helpful to list
the tasks in a table that in later steps can be expanded to include information on
sequence and duration.

2. Determine Activity Sequence

This step may be combined with the activity identification step since the activity
sequence is evident for some tasks. Other tasks may require more analysis to
determine the exact order in which they must be performed.

3. Construct the Network Diagram

Using the activity sequence information, a network diagram can be drawn showing
the sequence of the serial and parallel activities. For the original activity-on-arc
model, the activities are depicted by arrowed lines and milestones are depicted by
circles or "bubbles".

If done manually, several drafts may be required to correctly portray the

relationships among activities. Software packages simplify this step by automatically
converting tabular activity information into a network diagram.

4. Estimate Activity Times

Weeks are a commonly used unit of time for activity completion, but any consistent
unit of time can be used.

A distinguishing feature of PERT is its ability to deal with uncertainty in activity

completion times. For each activity, the model usually includes three time estimates:

• Optimistic time - generally the shortest time in which the activity can be
completed. It is common practice to specify optimistic times to be three
standard deviations from the mean so that there is approximately a 1%
chance that the activity will be completed within the optimistic time.
 • Most likely time - the completion time having the highest probability. Note
that this time is different from the expected time.

• Pessimistic time - the longest time that an activity might require. Three
standard deviations from the mean is commonly used for the pessimistic
time.

PERT assumes a beta probability distribution for the time estimates. For a beta
distribution, the expected time for each activity can be approximated using the
following weighted average:

Expected time = ( Optimistic + 4 x Most likely + Pessimistic ) / 6

This expected time may be displayed on the network diagram.

To calculate the variance for each activity completion time, if three standard
deviation times were selected for the optimistic and pessimistic times, then there are
six standard deviations between them, so the variance is given by:

[ ( Pessimistic - Optimistic ) / 6 ]2

5. Determine the Critical Path

The critical path is determined by adding the times for the activities in each
sequence and determining the longest path in the project. The critical path
determines the total calendar time required for the project. If activities outside the
critical path speed up or slow down (within limits), the total project time does not
change. The amount of time that a non-critical path activity can be delayed without
delaying the project is referred to as slack time.

If the critical path is not immediately obvious, it may be helpful to determine the
following four quantities for each activity:

• ES - Earliest Start time

• EF - Earliest Finish time

• LS - Latest Start time

• LF - Latest Finish time

These times are calculated using the expected time for the relevant activities. The
earliest start and finish times of each activity are determined by working forward
through the network and determining the earliest time at which an activity can start
and finish considering its predecessor activities. The latest start and finish times are
the latest times that an activity can start and finish without delaying the project. LS
and LF are found by working backward through the network. The difference in the
latest and earliest finish of each activity is that activity's slack. The critical path then
is the path through the network in which none of the activities have slack.

The variance in the project completion time can be calculated by summing the
variances in the completion times of the activities in the critical path. Given this
variance, one can calculate the probability that the project will be completed by a
certain date assuming a normal probability distribution for the critical path. The
normal distribution assumption holds if the number of activities in the path is large
enough for the central limit theorem to be applied.

Since the critical path determines the completion date of the project, the project can
be accelerated by adding the resources required to decrease the time for the
activities in the critical path. Such a shortening of the project sometimes is referred
to as project crashing.

6. Update as Project Progresses

Make adjustments in the PERT chart as the project progresses. As the project
unfolds, the estimated times can be replaced with actual times. In cases where there
are delays, additional resources may be needed to stay on schedule and the PERT
chart may be modified to reflect the new situation.

Benefits of PERT
PERT is useful because it provides the following information:

• Expected project completion time.

• Probability of completion before a specified date.

• The critical path activities that directly impact the completion time.

• The activities that have slack time and that can lend resources to critical path
activities.

• Activity start and end dates.

Limitations
The following are some of PERT's weaknesses:

• The activity time estimates are somewhat subjective and depend on

judgement. In cases where there is little experience in performing an activity,
the numbers may be only a guess. In other cases, if the person or group
performing the activity estimates the time there may be bias in the estimate.

• Even if the activity times are well-estimated, PERT assumes a beta

distribution for these time estimates, but the actual distribution may be
different.

• Even if the beta distribution assumption holds, PERT assumes that the
probability distribution of the project completion time is the same as the that
of the critical path. Because other paths can become the critical path if their
associated activities are delayed, PERT consistently underestimates the
expected project completion time.
The underestimation of the project completion time due to alternate paths becoming
critical is perhaps the most serious of these issues. To overcome this limitation,
Monte Carlo simulations can be performed on the network to eliminate this optimistic
bias in the expected project completion time.