Page 232 - DMGT521_PROJECT_MANAGEMENT

Unit 13: PERT, CPM and Time Estimation

Self Assessment Notes

Fill in the blanks:
11. ………………… enables the optimum utilization of the resources by their transfer from
the slack to busy segments in the network in order to accomplish the stipulated goal.

12. A ………………… diagram can be created by hand or by using software such as Microsoft
Project.
13. PERT is useful for ………………… preparation, annual shutdown and overhauls to identify
the critical activities.

13.7 Project Uncertainty and Risk Management

13.7.1 Calculating Probabilistic Activity Times

First, it is necessary to define what is meant by the terms “pessimistic,” “optimistic,” and “most
likely” (or “normal”). Assume that all possible durations (or all possible costs) for some task can
be represented by a statistical distribution. The individual or group making the estimates is
asked for a task duration, a, such that the actual duration of the task will be lower or less than 1
percent of the time. Thus it is an optimistic estimate. The pessimistic estimate, b, is an estimated
duration for the same task such that the actual finish time will be b or greater less than 1 percent
of the time. (These estimates are often referred to as “at the .99 or the 99 percent level” or at the
“almost never level.”)

13.7.2 Extensions to PERT/CPM

There have been several extensions to both network and chart forms of project scheduling. At
times these extensions are quite sophisticated.

Example: The application of fuzzy set theory to aid in estimating activity durations in
cases where activity durations are difficult to estimate because project activities cannot be well
defined (McMahon, 1993). In this section we briefly discuss one significant extension of traditional
scheduling methods, precedence diagramming. Elihu Goldratt’s Critical Chain (1997) is also a
significant addition to traditional scheduling methods. It uses networks that combine project
scheduling with resource allocation.
We then comment on some of the managerial implications of the two fundamental approaches
to risk management taken in this unit, statistical analysis and simulation.

13.7.3 Precedence Diagramming

One shortcoming of the PERT/CPM network method is that it does not allow for leads and lags
between two activities without greatly increasing the number of sub-activities to account for
this. That is, our regular network methods described earlier assume that an activity can start as
soon as its predecessor activities are completed. Sometimes, however, the restrictions are more
complex.

Example: When a follow-on activity cannot begin until a certain amount of time.

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