**Project Estimation and PERT (Part 4)**: In the previous article, we learned about the advantages of 3-point estimation. In this post, we’ll carry the concept forward and talk about a special type of 3-point estimation technique called Program Evaluation and Review Technique (PERT). PERT was developed jointly by the U.S. Navy, Lockheed Martin, and the consulting firm of Booz, Allen and Hamilton working on the Polaris nuclear submarine project, in the 1950s. PERT is one of the most commonly used techniques used along with Critical Path Method (CPM) to estimate the minimum time needed to complete a project. Let’s learn more about PERT in this post.

#### How to convert 3-point estimates into a single estimate?

After reading The Power of Three in Project Estimation, can I say that we all agree that 3-point estimates are better than a single fixed estimate? As a project manager, I go around to project team members, collecting 3-point estimates for all the activities on the network diagram. But wait a minute, in order to calculate the critical path using the Critical Path Method (CPM), I need to get a single fixed time estimate for each activity on the network diagram. If you are familiar with CPM, you know that the critical path is the path with the longest duration in the network diagram, and each activity in the network diagram has a fixed estimate. Therefore, we need to somehow convert the 3-point estimates for each activity to a single estimate.A simple way to do this is to take a simple average (mean) of the three estimates. Simple average estimation formula is:

Mean = (O + M + P) / 3

where O is the Optimistic estimate, M is the Most likely estimate, and P is the Pessimistic estimate.

If you have read Three-Point estimates vs PERT: What's the difference?, you understand that PERT is a weighted average estimation technique. PERT combines probability theory and statistics to derive a formula for the average (mean) activity duration from the 3-point estimates. It gives 4 times more weightage to the Most likely (M) estimate than the Optimistic and Pessimistic estimates. The formula for PERT estimate is:

PERT estimate = (O + 4M +P) / 6

**Note**: PERT estimate is also known as the Expected Activity Duration or EAD or simply Expected Duration.

#### What is the formula to calculate Standard Deviation of an activity?

PERT also provides a formula for the standard deviation of an activity.Standard Deviation, σ = (P - O) / 6

Most of us have seen these formulas in the study guides, but do you know how these formulas were derived? Why was the factor of 4 applied to the Most Likely estimate? What has the probability theory and statistics (which I mentioned above) got to do with these formulas? What is standard deviation? What does it signify? To find out these answers, and many more, read the next article of this series.

#### Full 9-part series on Project Estimation and PERT

- Get Intimate with PERT
- The Power of Three in Project Estimation
- Three-point estimates vs PERT - What's the difference?
**Say Hello to PERT**(you are here)- The Magical Formula of PERT
- Probability and Statistics in Project Management
- PERT and CPM get Cozy
- PMP Quiz Contest - Activity Duration Estimates
- Standard Deviation and Project Duration Estimates

Image credit: Flickr / leonardlow

## 0 comments:

## Post a Comment

Please do not include URLs (links) in your comments as any comment with links would be deleted automatically.