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Unit 13: PERT, CPM and Time Estimation

13.4 Types of Network Notes

1. AOA Network: Activity on Arrow Network.
2. PDM/AON Network: Precedence Diagram Method/Activity on Node Network.

13.4.1 CPM

The PERT model was developed for projects characterized by uncertainty and the CPM model
was developed for projects which are relatively risk-free. While both the approaches ‘begin
with the development of the network and a focus on the critical path, the PERT approach is
‘probabilistic’ and the CPM approach is ‘deterministic’. This does not, however, mean that in
CPM analysis we work with single time estimates. In fact, the principal focus of CPM analysis is
on variations in activity times as a result of changes in resource assignments. These variations
are planned and related to resource assignments and are not caused by random factors beyond
the control of management as in the case of PERT analysis. The main thrust of CPM analysis is on
time cost relationships and it seeks to determine the project schedule which minimizes total cost.

Assumptions

The usual assumptions underlying CPM analysis are:
1. The costs associated with a project can be divided into two components: direct costs and
indirect costs. Direct costs are incurred on direct material and direct labour. Indirect costs
consist of overhead items like indirect supplies, rent, insurance, managerial services, etc.
2. Activities of the project can be expedited by crashing which involves employing more
resources.

3. Crashing reduces time but enhances direct costs because of factors like overtime payments,
extra payments, and wastage. The relationship between time and direct activity cost can
be reasonably approximated by a downward sloping straight line.
A typical cost time line is shown in Figure 13.1.

Figure 13.1: A Typical Cost time Line

4. Indirect costs associated with the project increase linearly with project duration. A typical
line for indirect costs is shown in Figure 13.2.

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