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  PERT and CPM get Cozy

PERT vs Critical Path Method (CPM) for PMP Certification Project Estimation and PERT (Part 7): If you have been following the series on PERT, then you have developed a good understanding of probability and statistical concepts as applied to projects. In this post, we are going to see how Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) come together in estimating the total project duration. PERT is a probabilistic method, whereas CPM is deterministic. PERT estimates the activity durations based on probability, whereas CPM assumes that the activity durations are fixed. We’ll take a sample project and work through it to understand the concepts.

Using PERT Estimate used to calculate Critical Path

We know that the activity duration is a random variable, and its values follow a probability distribution function and are NOT fixed. Using the PERT formula, we calculate the expected duration of each activity on the network diagram. However, in order to calculate the critical path of a project using the CPM, we need to treat the activity duration estimates as fixed. By assuming fixed activity durations, we can determine the critical path of the project using CPM.

Let's work with an example to understand how this works. Suppose we have 4 activities A, B, C and D on the critical path. For each of these activities, the Optimistic (O), the Most Likely (M), the Pessimistic (P) and the PERT estimates along with their Standard Deviations (σ) and Variances (σ^2) are shown in the following table. The durations are in days.

ActivityOMPPERTσσ^2
A7101310.01.0001.000
B68169.01.6662.777
C6121511.51.5002.250
D10173018.03.33311.111
    48.5 17.138


If you have been following the series on PERT, then you know the formulas by heart, but let me give you a quick recap:
Formula for PERT, Standard Deviation and Variance for Duration Estimate
The total expected project duration, 48.5 days, is calculated by adding the PERT estimates of the activities on the critical path. But wait, did you notice something strange here? If the duration of individual activities are random variables (not fixed), then how can the duration for the entire project be fixed? It has to be a random variable too and follow a probability distribution function. Don’t you think so?

In Probability and Statistics in Projects we learned that PERT assumes that the individual activity durations are random variables and follow the beta distribution. However, if all the activities on the critical path have the same distribution and are independent of each other, and the number of activities (on the critical path) are large enough (30+), we can apply the Central Limit Theorem (CLT) to simplify matters.

Standard Deviation of the Project

CLT says that even though the individual activity durations follow the beta distribution (or any other distribution), when they are added up, the resulting distribution (of project duration) is Normal. Moreover, the variance of the project durations can also be calculated by adding up the individual activity duration variances. By taking the square root of the variance of the the project duration, we can get the standard deviation of the project duration.
The standard deviation can be used to calculate the probability of completion of a project by a given date or in a given time.
In practice, applying the CLT to a project similar to our example project would be inappropriate, as the number of activities on the critical path are very few (only 4 in our case). For CLT to be applicable, we need at least 30 activities on the critical path. There are several other limitations of PERT that we’ll discuss in a follow-up article. For the sake of simplification, we’ll assume that CLT applies here. Therefore, the project duration can be assumed to follow the normal distribution with an expected value of 48.5 days, a total variance of 17.138, and a standard deviation of 4.14 (square root of 17.138).

Trivia: If the project duration is in days, then what is the unit of standard deviation and variance?

Note: Adding the individual expected activity durations gives the total expected duration of the project. Similarly, adding the individual activity duration variances gives the total project duration variance. BUT, adding the standard deviations of the individual activity durations does not give the standard deviation of the total project duration. The standard deviation of the project duration is calculated by taking the square root of the total project duration variance.

Let’s summarize the steps:
  1. Get the 3 point estimates - Optimistic, Most Likely, Pessimistic - for each activity on the network diagram.
  2. Determine the PERT estimate (expected duration) for each activity on the network diagram.
  3. Assuming that the PERT estimate of each activity is of fixed duration, identify the critical path of the project.
  4. Add the PERT estimate for each activity duration on the critical path to determine the expected project duration.
  5. Calculate the standard deviation of the duration of each activity on the critical path.
  6. Calculate the variance of the duration of each activity on the critical path, by squaring the standard deviations.
  7. Add the variance of the duration of each activity on the critical path to determine the variance of the expected project duration.
  8. Take the square root of the variance of the expected project duration to get the standard deviation of the expected project duration.
By using the standard deviation of the expected project duration, we can get the confidence level or probability of completing the project on a given date or in a given time. This is precisely the subject of the next article. Hasta la vista.

Full 9-part series on Project Estimation and PERT

  1. Get Intimate with PERT
  2. The Power of Three in Project Estimation
  3. Three-point estimates vs PERT - What's the difference?
  4. Say Hello to PERT
  5. The Magical Formula of PERT
  6. Probability and Statistics in Project Management
  7. PERT and CPM get Cozy (you are here)
  8. PMP Quiz Contest - Activity Duration Estimates
  9. Standard Deviation and Project Duration Estimates
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Image credit: Flickr / jelene

10 comments:

  1. There are not more then 2-5 questions in all the exam about PERT, is it worth to invest on learning and remember it? not sure

    ReplyDelete
  2. Hi Aviad,

    Thanks for your comments. You are right. It's not worth investing time in this if the goal is to just pass the PMP exam. I mentioned this caveat in the very first article of the series. It's similar to the way car owners treat their cars. Some people are only interested in driving their car and getting to their destination. But there are others who want to open the bonnet and dissect the engine. Both are right in their way. It's just a matter of interest.

    I was quite intrigued by the probability and statistical concepts involved in this field. I also saw similar interest from people in some forums. So, I decided to explore further. I spent weeks learning about this topic from books, websites, papers, blogs etc., and really glad I did that. But maybe it was not the best topic for this blog.

    I'm really glad to receive an honest feedback from you. I hope to get more feedback like this from other readers. It will help me make better topic selections in future.

    Stay in touch.

    Thanks again.

    ReplyDelete
  3. Sir, I want to know the exact use of standard deviation and variance. .
    for example in this case, the project is to be completed in 48.5 days +/- 4.14 days ?

    ReplyDelete
  4. Hi Sreekanth,

    That's a very good question. I'll be explaining exactly that in the next article, which should be published this weekend. Please stay tuned.

    Thanks.

    ReplyDelete
  5. For the beneficial of your readers I would like to add
    If the tasks are not on the critical path of the project, we cannot determine the PERT estimate for the duration of the project. The PERT estimate can only be calculated for the critical path of the project. May be you can add a question in quiz :)

    ReplyDelete
  6. Hi Anon.,

    Thanks for your comment.

    I'm not sure I understood your point clearly. The basis of CPM is the critical path. How do you calculate the project duration in CPM without knowing the estimate for the activities on the critical path?

    Moreover how do we know which activities are on the critical path without knowing the estimate for all the activities on the project first?

    Whether we use PERT or Monte Carlo or any other estimation technique is beside the point.

    BR.

    ReplyDelete
  7. Sorry I messed up raising my point. I was referring to the question in pmstudy.com which is given below

    ==>> Question edited out by blog author <<==

    Justification :
    Since the tasks are not on the critical path of the project, we cannot determine the PERT estimate for the duration of the project. The PERT estimate can only be calculated for the critical path of the project.

    ReplyDelete
  8. Hello again Anon.,

    I had to edit your comments to remove the question to avoid any copyright issues. In general, please avoid copying and pasting the questions in any forums, unless you have taken explicit permission from the author or publisher.

    Coming back to your comments, I see your point now. It was a trick question, and I hope the readers of this blog do not fall into such lame traps :) The question is really about CPM, not PERT.

    The statement "The PERT estimate can only be calculated for the critical path of the project" is really saying that in CPM, we calculate the critical path from the estimate of activities on the critical path (which is obvious if you understand CPM). Whether you use PERT estimation or any other estimation technique, is irrelevant here.

    Hope we are on the same page now.

    Thanks for highlighting this point though. I'm sure others can benefit from it too.

    ReplyDelete
  9. The submit button is not visible pert quiz .I would like to attempt and see

    ReplyDelete
  10. Hello Anon.,

    Thanks for bringing it to my notice. I can see the button, but it's quite possible that due to font size or some other issue, the button is hidden on your screen. Can you send me a screenshot of the page at harwinder dot bhatia at gmail dot com?

    Thanks.

    ReplyDelete

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