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PERT & CPM

4. Network Techniques for Project Cost and Time Management (PERT & CPM)

Network techniques, particularly PERT (Program Evaluation and Review Technique) and CPM (Critical Path Method), are powerful tools for planning, scheduling, and controlling projects, especially concerning time and cost management. They provide a visual representation of the project's activities and their interdependencies, enabling project managers to identify critical activities, estimate project duration, and allocate resources effectively.

  • Key Concepts:

    • Activity: A specific task or job that needs to be completed as part of the project.
    • Event: A point in time that marks the start or end of an activity.
    • Network Diagram: A graphical representation of the project's activities and their dependencies, showing the sequence in which they must be performed.
    • Path: A sequence of activities that leads from the start of the project to the end.
    • Critical Path: The longest path through the network diagram, which determines the minimum project duration. Any delay in an activity on the critical path will delay the entire project.
    • Slack (or Float): The amount of time that an activity can be delayed without delaying the entire project. Activities on the critical path have zero slack.

  • PERT (Program Evaluation and Review Technique):

    • Origin: Developed by the U.S. Navy in the 1950s for managing complex projects, particularly in research and development.
    • Focus: Emphasizes probabilistic time estimates, recognizing the uncertainty inherent in project activities.
    • Time Estimates: Uses three time estimates for each activity:
      • Optimistic Time (a): The shortest possible time to complete the activity, assuming everything goes perfectly.
      • Pessimistic Time (b): The longest possible time to complete the activity, assuming everything goes wrong.
      • Most Likely Time (m): The most realistic time to complete the activity, under normal conditions.
    • Expected Time (te): The weighted average of the three time estimates, calculated as: te = (a + 4m + b) / 6
    • Variance (σ^2): A measure of the uncertainty in the activity time estimate, calculated as: σ^2 = [(b - a) / 6]^2
    • Project Duration: The sum of the expected times for the activities on the critical path.
    • Probability of Completion: PERT allows you to calculate the probability of completing the project within a specific timeframe, using the normal distribution.

  • CPM (Critical Path Method):

    • Origin: Developed by DuPont in the 1950s for managing industrial projects.
    • Focus: Emphasizes deterministic time estimates, assuming that activity times are known with reasonable certainty.
    • Time Estimates: Uses a single time estimate for each activity.
    • Critical Path: Identifies the critical path and calculates the slack for each activity.
    • Cost Optimization: CPM can also be used to optimize project costs by trading off time and cost. Activities can be expedited (crashed) by spending more money, but this can increase overall project costs.

  • Key Differences between PERT and CPM:

    Feature PERT CPM
    Time Estimates Probabilistic (three estimates) Deterministic (single estimate)
    Uncertainty Handles uncertainty well Assumes certainty
    Suitable For Research and development projects Construction and manufacturing projects
    Focus Time management Time and cost management

  • Steps in PERT/CPM Analysis:

    1. Define Activities: List all the activities required to complete the project.
    2. Determine Dependencies: Identify the dependencies between activities (i.e., which activities must be completed before others can start).
    3. Estimate Activity Times: Estimate the time required to complete each activity (using three estimates for PERT and a single estimate for CPM).
    4. Construct Network Diagram: Draw a network diagram showing the activities and their dependencies.
    5. Identify Critical Path: Identify the critical path by finding the longest path through the network diagram.
    6. Calculate Slack: Calculate the slack for each activity.
    7. Analyze and Optimize: Analyze the network diagram to identify opportunities to reduce project duration or costs.

  • Benefits of PERT/CPM:

    • Improved project planning and scheduling
    • Better resource allocation
    • Reduced project duration
    • Lower project costs
    • Enhanced communication and coordination
    • Better risk management

PERT and CPM are valuable tools for managing complex projects. By providing a visual representation of the project's activities and their interdependencies, they enable project managers to make informed decisions about resource allocation, scheduling, and risk management. Although CPM and PERT were initially distinct techniques, they are now often used in combination.

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