PERT and CPM

Introduction
Program Evaluation and Review Technique or PERT and Critical Path Method or CPM are two of the most widely used techniques in project management. The objectives of project management can be described in terms of a successful project which has been finished on time, within the budgeted cost and to technical specifications which satisfy the end users. A project is any human undertaking with a clear beginning and a clear ending. Planning, scheduling and controlling the work during any worth-while project is the main task for any project manager. Project planning calls for detailing the project into activities, estimating resource requirements and time for each activity, and describing activity inter-relationships. Scheduling requires the details of starting and completion dates for each activity. Control requires not only current status information but insight into possible trade-offs when difficulties arise. Normally for any project, we may be interested in answering questions such as When do we expect the project to be completed? If any activity is delayed, what effect will this have on the overall completion time of the project? If there are additional funds available to reduce the time to perform certain activities, how should they be spent? and What is the probability of completing the project by the scheduled date? Prior to the development of PERT and CPM, the most popular technique for project scheduling was the bar or Gantt Chart developed by Henry L. Gantt around 1900. These Charts show a graphic representation of work on a time scale. The primary limitation of this technique is its inability to show the inter-relationships and inter-dependencies among the many activities which control the progress of the project. Although it is possible to redraw the chart to show the inter-relationships, the confusion arises as the size of the project increases. To overcome such limitations, PERT/CPM were proposed in the late 1950s.

Project A Project B Project C Project D

Historically speaking, PERT and CPM developed independently out of research studies conducted by the U.S. Navy and DuPont Company. While PERT was an outgrowth of the U.S. Navys Polaris submarine-missile programme, CPM was developed for planning the construction of chemical plants. The difference between PERT and CPM arose primarily because of the original job for which each technique was developed. Initially the PERT technique was applied to research and development projects while the CPM was used toward construction projects. Both of them share the notion of a critical path and are based on the network analysis that determines the most critical activities to be controlled so as to meet completion dates. However, since the use of either technique is based on individual characteristics, the main difference is that PERT is particularly useful for non-repetitive and complex projects in which time estimates are uncertain . CPM is best utilized for repetitive and non-complex projects when time estimates can be made with some measure of certainty . The selection of the technique depends on the degree of uncertainty associated with time estimates and the cost of missing time estimates. Actually PERT restricted its attention to the time variable whereas CPM included time-cost trade-offs. We will however not differentiate between the two techniques but we can further define PERT and CPM as the process of employing network techniques to optimize the use of scarce project resources. NETWORK ANALYSIS A fundamental ingredient in both PERT and CPM is the use of network systems as a means of graphically depicting the current problems or proposed project . Because of its importance to a basic understanding of both PERT and CPM, the network concept is examined. When a network is being constructed, certain conventions are followed to represent a project graphically, for it is essential that the relationship between activities and events are correctly depicted. Some of the key concepts used in it are as under. Activity: All projects may be viewed as being composed of operations or tasks called activities, which require the expenditure of time and resources for their accomplishment. An activity is depicted by a single arrow ( ) on the project network. The activity arrows are called arcs. The activity arrow is not scaled; the length of the activity time is only a matter of convenience and clarity, and does not represent importance of time. The head of the arrow shows the sequence or flow of activities. An activity cannot begin until the completion of the preceding activities. It is important that activities be defined so that beginning and end of each activity can be identified clearly. Event: An event represents a specific accomplishment in the project and takes place at a particular instant of time, and does not, therefore, consume time or resources. An event in a network is a time oriented reference point that signifies the end of one activity and the beginning of another. Events are usually represented in the project network by circles (O). The event circles are called nodes . Therefore, the major difference between activities and events is that activities represent the passage of time whereas events are points in time. All activity arrows must begin and end with event nodes as shown below: Start Event Activity Finis h Event

Predecessor activity: Activities that must be completed immediately prior to the start of another activity are called predecessor activities. Successor activity: Activities that cannot be started until one or more of the other activities are completed, but immediately succeed them are called successor activities. Concurrent activity: Activities which can be accomplished concurrently are known as concurrent activities. It may be pointed out that an activity can be a predecessor or a successor to an event or it may be concurrent with one or more of the other activities. Dummy activity: In most projects many activities can be performed concurrently or simultaneously. It is possible that two activities could be drawn by the same beginning and end events. In situations where two or more activities can be performed concurrently, the concept of dummy activity is introduced to resolve this problem. Therefore there will be only one activity between two events. As a result of using the dummy activities, other activities can be identified by unique end events. Dummy activities consume no time or resources. By convention, dummy activities are represented by a dashed arrow on the project network. In the following diagram, both activities A and B have the same beginning and end events: A 1 B The above network diagram is incorrect because it breaks the rule of assigning unique numbers to each activity for the purpose of identification. The following network diagram demonstrates the principle of using a dummy activity for overcoming the problem of parallel activities with identical start and finish events. Figure 1 2
DUMMY

Therefore, a dummy activity is created to make activities with common starting and finishing events distinguishable, and also to identify and maintain the proper precedence relationship between activities.

GUIDELINES FOR CONSTRUCTION OF NETWORK DIAGRAM 1. 2. 3. 4. 5. Each activity is represented by one and only one arrow in the network. Therefore, no single activity can be represented twice in the network. No two activities can be identified by the same beginning and end events. In such cases, a dummy activity is introduced to resolve the problem. Two events are numbered in such a way that the event of higher number can happen only after the event of a lower number is completed. Dangling must be avoided in a network diagram. This happens when precedence and inter-relationships of the activities are not properly identified. To ensure the correct logical sequence and inter-relationships, one has to answer the following questions satisfactorily. i) Which activities precede this activity? That is, what other activities must be completed before this activity can be started? ii) Which activities follow this activity? Or, what activities cannot be started until this activity is completed? iii) Which activities can take place concurrently with this activity? Or, what activities can be worked on at same time when this one is being performed? DETERMINISTIC TIME ESTIMATES The main determinant of the way PERT and CPM networks are analysed and interpreted is whether activity time estimates are deterministic or probabilistic. If time estimates can be made with a high degree of confidence so that actual time will not differ significantly from estimates, we say the time estimates are deterministic. On the other hand if estimated times are subject to variation, we say the time estimates are probabilistic. First, the analysis of network with deterministic time estimates is described. DEVELOPING A PROJECT NETWORK Networks of PERT/CPM consist of two basic elements: activities and events. The network clearly shows the sequence and inter-relationships of all activities in the project. To illustrate how a project network can be developed, let us consider an example where a project involves several activities which are listed in the following table along with their predecessor activities: Table 1 Activity Predecessor Activity A B C A D A E B F C G D,E 4

All the activities associated with the project can be combined into an integrated network of events and activities as shown in the following network diagram. Figure II
C

2
A

D B

6
G

The above network diagram gives the complete description of the project. For example activities A and B have no predecessor activities, they can begin immediately and are shown coming out at the start event 1. Further the activity G has two predecessor activities D and E. Similarly other relationships are also satisfied. Problem 1 A car manufacturing company has decided to redesign its fuel pump for their new car model. This project involves several activities which are listed in the following table. First activity is that the engineering department must finish the design of fuel pump. Second, the marketing department must develop the marketing strategy for its promotion. Third, a new manufacturing process must be designed. Fourth, advertising media must be selected. Fifth, an initial production run must be completed. Finally, the fuel pump must be released to the market. Activity A B C D E F Description of activity Finish the design of fuel pump Develop marketing strategy Design manufacturing process Select advertising media Initial production run Release fuel pump to market Predecessor activity A A B C D,E Time estimate (weeks) 5 4 7 8 9 4

Draw a network diagram for the given project.

PROJECT DURATION AND CRITICAL PATH The longest path in the network in called the critical path . Identifying the critical path is of great importance as it determines the duration of the entire project. If any activity on the critical path is delayed, then the entire project will be delayed. Every network has a critical path. It is possible to have multiple critical paths if there are ties among the longest paths. For finding the project duration and critical path, consider the example discussed earlier (Table 1). For this example, the time estimates (in weeks) for each activity are as shown in Table 2. Predecessor activity A A B C D,E Time estimate (weeks) 4 3 2 7 6 4 2

A B C D E F G

In the network diagram, the time estimates (weeks) are specified inside the bracket along with the activity as shown below: Figure III 2
A (4) C (2)

4
F (4)

1
B (3)

D (7)

6
G (2)

E (6)

There are three possible paths for this network. For this simple network, the critical path is found by enumerating all of the possible paths to the completion time. These paths are listed below in Table 3: Table 3 Path i) A ii) A iii) B C D E F G G Length of time 4 + 2 + 4 =10 weeks 4 + 7 + 2 =13 weeks 3 + 6 + 2 =11 weeks

The second path (A D G) is the critical path because it requires the longest period of time i.e. 13 weeks for completion of the project. For this network, the project duration time to complete the project is 13 weeks. The activities on the critical path are called critical activities because a delay in any of these results in any of these results in a delay of the entire project. In other words, there is no slack time in the activities on the critical path. Slack time is defined as the latest time an activity can be completed without delaying the project minus the earliest time the activity can be completed. Therefore slack time is the amount of time an activity can be delayed without delaying the entire project. For this small network, it is a simple process to identify the critical path by comparing all possible paths. As the number of activities increases, it may become very difficult and time consuming to find the critical path by complete enumeration or inspection. Therefore we need to develop an algorithm (a systematic approach) to determine the critical path. The critical path calculations proceed in two phases. The first phase or forward pass begins from left to right through the network. The calculation begins at the start event and moves towards the end event of the project network. The second phase or backward pass begins from right to left through the network. In this phase, the calculation begins from the end event and move backward to the start event. FORWARD PASS (EARLIEST EXPECTED TIME) In forward pass, we compute the earliest time an event can be expected to occur which in turn depends upon the latest completion time of an activity terminating at that point. Thus, the longest path, in terms of duration time, is the earliest expected time for that event to occur. During the forward calculations, we need to compute the earliest expected time (ET) for each of the events which can be calculated as follows: ETj = Max (ETi + dij) Where ETj = the earliest expected time of event j. ETi = the earliest expected time that an activity can be started leading to event j. dij = duration time of an activity from event i to event j. Max = maximum (of) The computational procedure to determine the earliest expected time for each event for the network diagram is shown in figure III. The use of this procedure suggests that the earliest expected time for a given event is primarily a function of the previous events plus the activity times of all prior activities. Applying this procedure, we get ET1 = 0 (starting event set at zero) ET2 = ET1 + d12 = 0 + 4 = 4 ET3 = ET1 + d13 = 0 + 3 = 3 ET4 = ET2 + d24 = 4 + 2 = 6 ET5 = Max [ET2 + d25, ET3 + d35] = Max [4+7, 3+6] = Max [11, 9 = 11] ET6 = Max [ET4 + d46, ET5 + d56] = Max [6+4, 11+2] = Max [10, 13 = 13] Note that the end event 6 occurs at the end of 13 week. 7

BACKWARD PASS (LATEST ALLOWABLE TIME) In backward Pass we computer the latest allowable time (LT). The LT for an event is the latest time that the event can be delayed without delaying the completion of the entire project. The procedure of computing LT is to start from the end event of the network and proceeding backward to the starting event. The latest allowable completion time (LT) for a given event is calculated by subtracting the duration times of all activities coming into the event. In case where two or more activities start from an event, we must select the smaller of LT values. The LT value for an event in a network can be calculated as follows: LTi = Min (LTj dij) Where LTi = the latest allowable time of event i. LTj = the latest allowable time of event j toward which activity (i, j ) is headed dij = duration time of an activity from event i to event j. Min = Minimum (of) Let us use this procedure to determine the LT value for each event in the network shown in Figure III. To find LT values we begin at the end event of the network. The expected completion time for the project is 13 weeks. In our example, since event 6 is project completion, it must occur no later than 13 weeks or else the project will be completed later then expected. Therefore for the end event, ET= LT= 13 weeks. The computations of other LT value are shown below: LT6 = 13 LT5 = LT6 d56 = 13-2 = 11 LT4 = LT6 d46 = 13-4 = 9 LT3 = LT5 d35 = 11-6 =5 LT2 = Min [LT4 d24, LT5 d25] = Min [9-2, 11-7] = Min [7,4] = 4 LT1 = Min [LT2 d12, LT3 d13] = Min [4-4, 5-3] = Min [0,2] = 0 It should be noted that at the beginning point of the network (i.e. event i), ET1 = LT1 = 0. Once the values of ET and LT for all the events are determined, we can easily identify the critical path. These values of ET and LT are listed around each event in Figure IV. If the value of ET and LT of an event are equal, then such an event is referred to as the critical event. If the value of ET and LT of an event are not equal, then such an event is referred to as noncritical events.

Figure IV

2
A (4)

C (2)

4
F (4)

D (7) ET =0 LT =0

1
B (3) G (2)

6
ET=13 LT=13

3
ET =3 LT =5

E (6)

5
ET =11 LT =11

Critical activities can also be identified from the project network diagram. A critical activity is an activity which joins two critical events and has a duration which equals the difference between the times of these critical events. A critical path consists only of such critical activities. It may be pointed out again that critical activities are important because if they exceed their estimated duration, the whole project will be delayed to the extent. An event that is not critical is said to have slack. Slack is the calculated time span within which the event must occur. The term slack is used only for referring to events. Every event on the critical path has no slack time. The critical path is shown by thick lines in Figure IV. The importance of identifying the critical path is that it points out those activities and events which are critical and, as such must be carefully monitored and controlled. Problem 2 Consider the data of Problem 1. Compute the earliest expected time and latest allowable time for the events in the given project. Also determine the critical path and slack time. Interpret your slack time values. FLOAT The concept of float is of great importance for a project manager. It is the time available for an activity in addition to its duration time. Since both start and end events of an activity have earliest and latest times, an activity has four associated times. Thus, there are four possible types of float but in practice only three of these are used. Total float: This is the time by which an activity may be delayed or extended without affecting the total project duration. This is computed as follows: TFij = LTj ETi - dij 9

Where

TFij = total float for activity (i, j) LTj = latest allowable time for event j ETi = earliest expected time for event i dij = the time duration for activity (i, j)

Free float: This is the time by which an activity may be delayed or extended without delaying the start of any succeeding activity. This is calculated as follows: EFij = ETj ETi - dij Where EFij = free float for activity (i, j) ETj = the earliest expected time for event j ETi = the earliest expected time for event i dij = the time duration for activity (i, j)

Independent float: This is the time by which an activity may be delayed or extended without affecting the preceding or succeeding activities in any way. This is obtained as follows: IFij = ETj LTi - dij Where IFij = Independent float for activity (i, j) ETj = the earliest expected time for event j LTi = the latest allowable time for event i dij = the time duration for activity (i, j)

Problem 3 Compute total float, free float and independent float from the results you obtained from problem 2 PROBABILISTIC TIME ESTIMATES So far we have assumed values with certainty for duration times of various activities. It is obvious that for most projects these activity times are random variables. PERT is more effective in handing cases in which activity duration times are uncertain. The PERT technique makes the following basic assumptions: 1. 2. 3. Activity times are statistically independent and usually associated with a beta distribution. There are enough activities involved in the network that the total of activity times based on their means and variances will be normally distributed. The three estimates of the activity duration can be obtained for each activity.

The three time estimates are referred to as i) Optimistic estimate denoted by a ii) Most likely estimate denoted by m iii) Pessimistic time estimate denoted by b 10

The useful property of the beta distribution is that if we know the three time estimates (a, m and b) for an activity, we can compute mean or expected duration time (t e) and the variance of duration ( te2) as follows:
te = a + 4m + b b a and te2 = 6 6 2

The shape of beta distribution is skewed. It can either be skewed left or skewed right. The following figure depicts a beta distribution with is skewed to the right. Figure V

To demonstrate the use of PERT, let us continue with the same example. Instead of activity times to be known with certainty, let the three time estimates be as shown in Table 4: Table 4 Activity A B C D E F G Time Estimates (weeks) Predecessor Optimistic Most likely activity a m 2 3 2 3 A 1 2 A 4 6 B 4 5 C 3 4 D,E 1 1 Pessimistic b 10 4 3 14 12 5 7

In order to find the critical path, we need to determine the mean or expected duration for each activity. Once this is done, the procedures already explained can be applied to find critical path. The expected time (te), is shown in table 5:

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Table 5 Activity Predecessor activity A B C A D A E B F C G D,E Time (weeks) a m 2 2 1 4 4 3 1 3 3 2 6 5 4 1 b 10 4 3 14 12 5 7 te= (a+4m+b)/6 4 3 2 7 6 4 2

Note that the expected time (te) for each activity turned out to be the same as the single time estimate used earlier in this example. Obviously no coincidence, this was intentionally done for the sake of simplicity. The calculations for standard deviation and variance are shown in Table 6. Table 6 Activity A* B C D* E F G* *Critical activity Expected (mean) time (te) 4 3 2 7 6 4 2 Standard Deviation ( te)= b-a/6 8/6=4/3 2/6=1/3 2/6=1/3 10/6=5/3 8/6=4/3 2/6=1/3 6/6=1 Variance

2 te

16/9 1/9 1/9 25/9 16/9 1/9 1

The distribution of each activity completion time is normally distributed. Thus, the expected activity times for critical activities are also normally distributed. The following table shows the critical activities along with expected time (t e), standard deviation ( te) and variance ( t2e). Table 7 Critical Expected time Standard Variance Activity (te) Deviation ( te2)

te

A D G

4 7 2 te= 13
50 / 9

4/3 5/3 1

16/9 25/9 1 2 et =50/9

te=

t2e =

= 2.357 12

PROBABILITY OF PROJECT COMPLETION BY A TARGET DATE Sometimes, the management would also like to know the probability of completing the project by a particular date. Let us assume that in our example, we are required to complete the project within 11 weeks. We know that the expected activity times for critical activities are also normally distributed (central limit theorem). Therefore in order to find the probability of project completion by a target date, we can use the following formula:
Z = x te te

Where X = target project completion time te = expected project completion time te = standard deviation of activities on the critical path In our example expected activity times follow a normal distribution with mean time te = 13 weeks and standard deviation te = 2.357 weeks. The target due date is 11 weeks. Using the formula, we get Z=
11 13 = - 0.85 2.357

We can find the probability to any value of Z from standard normal distribution table. The probability for the value of Z = - 0.85 is 0.8023. Since Z= - 0.85, we must subtract 0.8023 form 1.0. Thus we obtain 1 0.8023 = 0.1977. Therefore the required probability of completing the project within 11 weeks is 0.1977 or 19.77 per cent. Suppose now we are interested in finding the probability of completing the project in 16 weeks. Again using the formula, we get Z=
16 13 = 1.27 2.357

Thus the probability of completing the project is 0.8980 or 89.8 per cent. Problem 4 Consider a project having the activities and their associated time estimates as given in following table. a) b) c) d) Draw the project network diagram. Identify the critical path and compute the expected project completion time. What is the probability that the project will be completed on or after 55 days? What is the probability that the project will be completed after 70 days?

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Activity A B C D E F G H KEY WORDS

Predecessor activity A A B B,C E D F,G

Time (days) Optimistic Most likely 2 8 14 4 6 6 18 8 4 12 16 10 12 8 18 14

Pessimistic 6 16 30 16 18 22 30 32

Activity: A clearly definable portion of a project that requires for its completion, the consumption of resources, and time in particular. Critical activity: An activity becomes critical, if delay in its estimated times duration delays the whole project to that extent. Critical path: The longest path through the network, consisting of critical activities. The length of the critical path is the shortest time allowable for project completion. Dummy activity: Dummy activity is an activity which does not consume resource or time. It is used in network to show logical links between other real activities. Event: An event represents a specific accomplishment in the project and takes place at a particular instant of time and therefore does not consume resources or time. Earliest expected time: The earliest time that an event can occur is on its latest time. Float: It is the amount of time available for an activity in addition to its duration time. Float is computed in relation to activity. Latest allowable time: The latest time that the event can be delayed without delaying the completion of the entire project. Slack: The amount of time by which the start of an activity may be delayed without affecting the overall duration of the project. Slack is computed in relation to events. PROBLEMS 1. How does network analysis help in large complex project? 2. What purpose is served by including dummy activities in network diagram? 3. Explain PERT and its importance in network analysis. What are the requirements for applications of PERT techniques? 4. Illustrate with examples the essential difference between PERT and CPM techniques. 5. Find the critical path and project duration for the following project network.

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3
E (10) B (4)

D (7)

DUMMY

A (4)

C (6)

4
(0)

F (9)

H (3)

G (8)

5 6. Job processing a job at a data-processing centre, certain steps need to be taken. These jobs can be described as follows: Job A B C D E F G Description Design flowchart and write Fortran statements Punch control cards Punch comment cards Punch programme cards Obtain brown folder Put deck together Submit deck Immediate Predecessors A A A B,C,D B,C,D E,F Time (minutes) 180 30 20 60 10 20 10

Draw a critical path arrow diagram and indicate the critical path. What is the minimum time required for completion? What is the free float of job C?

7. Draw the arrow diagram, identify the critical path and compute total and free floats for the activities in the project of planning a rural piped-water supply. Activity identific ation a b c d e f g h i Activity Description Excavation of well Collection of 10% popular contribution Completion of well Detailed plans of supply system Pump house construction Stand post construction Construction of reservoir Laying of pipelines Roadside taps Immediate predecessor (s) a b a c, d e d e, g h, f Expected duration (weeks) 8 9 7 15 4 1 4 5 4

8. A project comprises eight independent activities. Diagram the project and identify its critical path. What is the expected time to complete the project? Calculate the total 15

and free floats for non-critical activities. What is the probability of completing the project in 20 weeks or less? Time estimates (in weeks) are as follows where a = most optimistic time, m=most likely time, b=most pessimistic time. Activity A B C D E F G H Activity Prescription A C B,D,E A C a 1 2 3 2 4 5 2 1 m 3 3 4 9 5 6 4 3 b 5 4 5 10 6 13 6 6

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