38 Project Planning: Project Evaluation and Review Technique

Sudhanshu Joshi

1.     Introduction

 

In 1957, a new managerial planning and control technique was developed, Program Evaluation and Review Technique (PERT) by the U.S. Navy Special Projects Office on the Polaris missile system to support the nuclear submarine projects. It is a technique for estimating and planning a large project. One of its most powerful concepts is the management of probabilities. PERT makes use of simple statistical mathematics in order to come up with a probability distribution for the completion dates of the project milestones, it was designed to provide: (1) Management information on actual and impending problems in completing a project; (2) A continuous status report on active projects for achieving established objectives, completion dates, and the probability of reaching both; and (3) Notation of most and least critical component activities within each project. PERT presented a comprehensive illustration of all major project activities and their interdependencies. In fact, it even provided time requirements needed for completing  each  component  activity.  It  focused  managerial  attention  on  those business activities most vital in meeting the project completion date and identified which resources could be used more effectively if transferred to other phases of a project.  Finally,  PERT  provided  a  scheme  of  the  project  as  it  occurred,  thereby illustrating the effects of managerial changes in the entire project. The ability of PERT to  predict  future  performance  and  potential  future  problems  through  frequency reporting, marked its major departure from previous planning and control techniques which relied heavily on historical data. The estimation of time for the completion of each activity is important in the network analysis; this can be done using three possible assumptions: (1) Most optimistic time (a): This time assumes that everything will go according to minimum amount of difficulties and such situation may occur approximately one percent of time; (2) Most pessimistic time (b): This time assumes that everything will not go according to plan and that the maximum potential difficulties will develop and may occur approximately one percent of time; and (3) Most likely or normal time (m): This is the time that would most often occur, should this effort be reported over again. The estimated time of an activity completion is given by using three estimates that are combined into an expected duration and a standard deviation. The expected completion duration (l) is assumed to be (1 · a +4 · m+ 1· b) ‚ 6, and the standard deviation (s) is assumed to be (b–a) ‚6.

 

2.   Major Features of PERT Analysis

The chief feature of PERT analysis is a network diagram that provides a visual depiction of the major project activities and the sequence in which they must be completed. Activities are defined as distinct steps toward completion of the project that consume either time or resources. The network diagram consists of arrows and nodes and can be organized using one of two different conventions. The arrows represent activities in the activity-on-arrow convention, while the nodes represent activities in the activity- on-node convention. For each activity, managers provide an estimate of the time required to complete it.

The sequence of activities leading from the starting point of the diagram to  the finishing point of the diagram is called a path. The amount of time required to complete the work involved in any path can be figured by adding up the estimated times of all activities along that path. The path with the longest total time is then called the “critical path,” hence the term CPM. The critical path is the most important part of the diagram for managers: it determines the completion date of the project. Delays in completing activities along the critical path necessitate an extension of the final deadline for the project. If a manager hopes to shorten the time required to complete the project, he or she must focus on finding ways to reduce the time involved in activities along the critical path.

The time estimates managers provide for the various activities comprising a project involve different degrees of certainty. When time estimates can be made with a high degree of certainty, they are called deterministic estimates. When they are subject to variation, they are called probabilistic estimates. In using the probabilistic approach, managers provide three estimates for each activity: an optimistic or best case estimate; a pessimistic or worst case estimate; and the most likely estimate. Statistical methods can be used to describe the extent of variability in these estimates, and thus the degree of uncertainty in the time provided for each activity. Computing the standard deviation of each path provides a probabilistic estimate of the time required to complete the overall project.

3.   Stages of PERT

The Program Evaluation and Review Technique (PERT) is a network model that allows for variations in activity completion times. In a PERT network model, each activity is represented by a line (or arc), and each milestone (i.e. the completion of an activity) is represented by a node.

Milestones are numbered so that the end node of an activity has a higher number than the start node. Incrementing the numbers by 10 allows for additional nodes to be inserted without modifying the numbering of the entire network. The activities are labeled alphabetically, and the expected time required for each activity is also indicated. The critical path is the pathway through the project network that takes the longest to complete, and will determine the overall time required to complete the project. Bear in mind that for a complex project with many activities and task dependencies, there can be more than one critical path through the network, and that the critical path can change.

PERT planning involves the following steps:

  1. a) Identify activities and milestones – the tasks required to complete the project, and the events that mark the beginning and end of each activity, are listed in a
  2. b) Determine the proper sequence of the activities – this step may be combined with step 1, if the order in which activities must be performed is relatively easy to
  3. c) Construct a network diagram – using the results of steps 1 and 2, a network diagram is drawn which shows activities as arrowed lines, and milestones as Software packages are available that can automatically produce a network diagram from tabular information.
  4. d) Estimate the time required for each activity – any consistent unit of time can be used, although days and weeks are a common
  5. e) Determine the critical path – the critical path is determined by adding the activity times for each sequence and determining the longest path in the project. If the activity time for activities in other paths is significantly extended, the critical path may change. The amount of time that a non-critical path activity can be extended without delaying the project is referred to as its slack time

.       Update the PERT chart as the project progresses

As the project progresses, estimated times can be replaced with actual times. Because the critical path determines the completion date of the project, the project can be completed earlier by allocating additional resources to the activities on the critical path. PERT also identifies activities that have slack time, and which can therefore lend resources to critical path activities. One drawback of the model is that if there is little experience in performing an activity, the activity time estimate may simply be a guess. Another more serious problem is that, because another path may become the critical path if one or more of its associated activities are delayed, PERT often tends to underestimate the time required to complete the project.

 

underestimate the time required to complete the project.

PERT incorporates uncertainty by making it possible to schedule a project while not knowing precise details and durations of all activities. The time shown for each project activity when creating the network diagram is the time that the task is expected to take based on a range of possibilities that can be defined as:

  • The optimistic time – the minimum time required to complete a task
  • The pessimistic time – the maximum time required to complete a task
  • The most likely time – an estimate of how long the task will actually take

The expected time (the time that will appear on the network diagram) is defined as the average time the task would require if it were repeated a number of times over a period of time, and can be calculated using the following formula:

 

Expected time = (optimistic time + (4 x most likely time) + pessimistic time) / 6

The information included on the network diagram for each activity may include:

  • Activity Name (AN)
  • Expected Duration (ED)
  • Earliest start (ES)
  • Earliest Finish (EF)
  • Latest Start (LS)
  • Latest Finish (LF)
  • Slack (S)

In order to determine these parameters, the project activities must have been identified and the expected duration of each calculated. The earliest start (ES) for any activity will depend on the maximum earliest finish (EF) of all predecessor activities (unless the  activity is the first activity,  in which case the ES is zero).  The earliest finish for the activity is the earliest start plus the expected  duration.  The latest start (LS) for an activity will be equal to the maximum earliest finish of all predecessor activities.  The latest  finish (LF)  is  the latest   start plus   the expected   duration. The slack in any activity is defined as the difference between the earliest finish and the latest finish, and represents the amount of time that a task could be delayed without causing a delay in subsequent tasks or the project completion date. Activities on the critical path by definition have zero slack.

 

A PERT chart provides a realistic estimate of the time required to complete a project,

identifies the activities on the critical path, and makes dependencies (precedence relationships) visible. It can also identify the earliest and latest start and finish dates for a task, and any slack available. Resources can thus be diverted from non-critical activities to those that lie on the critical path should the need arise, in order to prevent project slippage. Variance in the project completion time can be calculated by summing the variances in the completion times of the activities in the critical path, allowing the probability of the project being completed by a certain date to be determined (this will depend on the number of activities in the critical path being great enough to allow a meaningful normal distribution to be derived).PERT charts can become unwieldy, however, if the number of tasks is too great. The accuracy of the task duration estimates will also depend on the experience and judgment of  the individual or group that make them.

  1. Animation: Understanding PERT (U-tube)

https://www.youtube.com/watch?v=NrSJvp45xhE

 

5. Implementation of PERT

 

The first step to scheduling the project is to determine the tasks that the project requires and the order in which they must be completed. The order may be easy to record for some tasks (e.g. When building a house, the land must be graded before the foundation can be laid) while difficult for others (There are two areas that need to be graded,  but  there  are  only  enough  bulldozers  to  do  one).  Additionally,  the  time estimates usually reflect the normal, non-rushed time. Many times, the time required to execute the task can be reduced for an additional cost or a reduction in the quality.  In the following example there are seven tasks, labeled A through G. Some tasks can be done concurrently (A and B) while others cannot be done until their predecessor task is complete (C cannot begin until A is complete). Additionally, each task has three time estimates: the optimistic time estimate (O), the most likely or normal time estimate (M), and the pessimistic time estimate (P). The expected time (TE) is computed using the formula (O + 4M + P) ÷ 6.

 

Once this step is complete, one can draw a Gantt chart or a network diagram. It can be created by hand or by using diagram software. There are two types of network diagrams, activity on arrow (AOA) and activity on node (AON). Activity on node diagrams are generally easier to create and interpret. To create an AON diagram, it is recommended (but not required) to start with a node named start. This “activity” has duration of zero (0). Then you draw each activity that does not have a predecessor activity (a and b in this example) and connect them with an arrow from start to each node. Next, since both c and d list a as a predecessor activity, their nodes are drawn with arrows coming from a. Activity e is listed with b and c as predecessor activities, so nodee is drawn with arrows coming from both b and c, signifying that e cannot begin until both b and c have been completed. Activity f has d as a predecessor activity, so an arrow is drawn connecting the activities. Likewise, an arrow is drawn from e to g. Since there are no activities that come after f or g, it is recommended (but again not required) to connect them to a node labeled finish.

 

6 Advantages of using PERT

  • PERT chart explicitly defines and makes visible dependencies (precedence relationships) between the work breakdown structure (commonly WBS) elements.
  • PERT facilitates identification of the critical path and makes this visible.
  • PERT facilitates identification of early start, late start, and slack for each activity.
  • PERT provides for potentially reduced project duration due to better understanding of dependencies leading to improved overlapping of activities and tasks where feasible.
  • The large amount of project data can be organized & presented in diagram for use in decision making.
  • PERT can provide a probability of completing before a given time.

7.   Disadvantages of using PERT

  • There can  be  potentially  hundreds  or  thousands  of  activities  and  individual dependency relationships.
  • PERT is not easily scalable for smaller projects.
  • The network charts tend to be large and unwieldy requiring several pages to print and requiring specially sized paper.
  • The lack of a timeframe on most PERT/CPM charts makes it harder to show status although colours can help (e.g., specific colour for completed nodes).

Concepts and Terminology

 

ACI (Activity Critical Index): Criticality index is mainly used in risk analysis. The Criticality Index of an activity (task) can be expressed as a ratio (between 0 and 1) but is more often expressed as a percentage. During a ( e.g. Monte Carlo) simulation tasks can join or leave the critical path for any given iteration. The Criticality Index expresses how often a particular task was on the Critical Path during the analysis. Tasks with a high Criticality Index are more likely to cause delay to the project as they are more likely to be on the Critical Path. If a task does not exist for some iterations (e.g. it is probabilistic) then it is marked as not being critical. For example a task that existed for 50% of the iterations and was critical 50% of the time it existed would have a Criticality Index of 25%.

 

ADM (Arrow Diagram Method): Arrow diagramming method (ADM) is a network diagramming technique in which activities are represented by arrows. ADM is also known as the activity-on-arrow (AOA) method. ADM is used for scheduling activities in a project plan. Precedence relationships between activities are represented by circles connected by one or more arrows. The length of the arrow represents the duration of the relevant activity. ADM only shows finish-to-start relationships, meaning that each activity is completed before the successor activity starts.

Use  of  ADM  as  a  common  project  management  practice  has  declined  with  the adoption of computer-based scheduling tools. In addition, the precedence diagram method (PDM), or activity-on-node (AON), is often favored over ADM. ADM network drawing technique the start and end of each node or event is connected to an arrow. The start of the arrow comes out of a node while the tip of the arrow goes into a node. Between the two nodes lies an arrow that represents the activity.

 

The event represented by the circular node consumes neither time nor resources.

  • A node is a specific, definable achievement in the project.
  • It has zero duration and consumes nil resources.
  • All activities that lead into a node must be completed before the activity lines following this node can start.

    CPM (Critical Path Method):

The Critical Path Method (CPM) is one of several related techniques for doing project planning. CPM is for projects that are made up of a number of individual “activities.” If some of the activities require other activities to finish before they can start, then the project becomes a complex web of activities.

 

DSS (Decision Support Systems):A decision support system (DSS) is a computer- based information  system that  supports  business  or  organizational decision- making activities. DSSs serve the management, operations, and planning levels of an organization (usually mid and higher management) and help people make decisions about problems that may be rapidly changing and not easily specified in advance—i.e. Unstructured and Semi-Structured decision problems. Decision support systems can be either fully computerized, human-powered or a combination of both. While academics have perceived DSS as a tool to support decision making process, DSS users see DSS as a  tool  to  facilitate  organizational  processes. Sprague  (1980)  defines  DSS  by  its characteristics:

  1. DSS tends to be aimed at the less well structured, underspecified problem that upper level managers typically face;
  2. DSS attempts  to  combine  the  use  of  models  or  analytic  techniques  with traditional data access and retrieval functions;
  3. DSS specifically  focuses  on  features  which  make  them  easy  to  use  by  non computer people in an interactive mode; and
  4. DSS emphasizes flexibility and adaptability to      accommodate                                               changes            in the environment and the decision making approach of the user.

LOB(Line Of Balance):

The Line Of Balance (LOB) process is employed when a repetitive process exists within the contract’s work scope. The manufacturing of parts and the assembly of units in the factory are two candidates for the use of LOB. Line Of Balance (LOB) is a management control process for collecting, measuring and presenting facts relating to time, cost and accomplishment – all measured against a specific plan. It shows the process, status, background, timing and phasing of the project activities, thus providing management with measuring tools that help:

  1. Comparing actual progress with a formal objective plan.
  2. Examining only the deviations from established plans, and gauging their degree of severity with respect to the remainder of the project.
  3. Receiving timely information concerning trouble areas and indicating areas where appropriate corrective action is required.
  4. Forecasting future performance.

The “Line of Balance” itself is a graphic device that enables a manager to see at a single glance which of many activities comprising a complex operation are “in balance” – i.e., whether those which should have been completed at the time of the review actually are completed and whether any activities scheduled for future completion are lagging behind schedule. The Line of Balance chart comprises only one feature of the whole philosophy which includes numerous danger signal controls for all the various levels of management concerned.

MC (Monte Carlo) Method: Monte Carlo methods (or Monte Carlo experiments) are a broad class of computational algorithms that rely on repeated randomsampling to obtain numerical results. They are often used in physical and mathematical problems and are most useful when it is difficult or impossible to use other mathematical methods. Monte Carlo methods are mainly used in three distinct problem classes:[1]optimization, numerical integration, and generating draws from a probability distribution.

In physics-related problems, Monte Carlo methods are quite useful for simulating systems with many coupled degrees of freedom, such as fluids, disordered materials, strongly coupled solids, and cellular structures (see cellular Potts model, interacting particle systems, McKean-Vlasov processes, kinetic models of gases). Other examples include  modeling  phenomena  with  significant  uncertainty in  inputs  such  as  the

calculation of risk in business and, in math, evaluation of multidimensional definite integrals with complicated boundary conditions. In application to space and oil exploration problems, Monte Carlo–based predictions of failure, cost overruns and schedule overruns are routinely better than human intuition or alternative “soft” methods

 

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