PERT

What does PERT stand for?

Program Evaluation and Review Technique

 How and why did it come about?
• For some projects time is critical but cost
is not
– Specifically for R&D projects in defence,
space related research etc
• Many of these projects are very unique in
nature
– There is no prior basis for estimating activity
duration
• Many of these projects are also extremely
complex
– Conventional PM tools do not fit the bill
Events leading up to the
development of PERT

• Russia launches the

Sputnik Space Missile
in 1957, before the
Americans

• The Americans are

embarrassed
 Events leading up to the
development of PERT
• The Americans
retaliate by planning
to launch the Polaris
Ballistic Missile

• They cannot be
embarrassed further
by delaying the
launch
 Events leading up to the
development of PERT
• Expected durations of activities were
largely unknown
• Project Planning and Control was initially
lacking on the Polaris project
• Actual costs and project durations in the
initial stages exceed estimates by as much
as 50%
 Events leading up to the
development of PERT
• United States Department of Defense hires Booz
Allen Hamilton, to develop a Project
Management Technique for this project
• Booz Allen Hamilton invents the PERT technique
in 1958.
 What is PERT?
• Technique to assist in project planning
when historical cost and time data are not
available or reliable

• Usually associated with R&D and new

product development projects where the
uncertainty is great
 What is PERT?
• PERT statistically treats uncertainty
– Estimates the likely duration time
– Estimates the likelihood of meeting certain
milestones
• Rarely used in construction
– Can be used on projects where quantity
and productivity uncertainties exist
 Comparing PERT and CPM
PERT CPM
• Assumes variability in • Assumes fixed (or
productivity rates and very mildly varying)
therefore variability in activity durations
activity times
• Milestone or event • Duration or activity
focused focused
• Probabilistic • Deterministic
calculations Calculations
 How PERT works
• Since activity times are uncertain, PERT uses
three time estimates for an activity
– An optimistic duration (assumes high productivity) - To
– A pessimistic duration (low productivity) - Tp
• Not based on disasters etc
• Based more on late material delivery, equipment
breakdowns, bad weather etc
– A “most likely” duration - Tm
• Not the average of the Optimistic and Pessimistic durations
• It is the amount of time the activity will require most of the
time, if repeated many times
 Probability Basics
• Concrete Placement Data for Columns in a
Building

0 1 1 4 6 9 12 16 10 4 1 0 0 0
Frequency
36 38 40 42 44 46 48 50 52 54 56 58 60 62
Minutes to
Place
Histogram
Continuous Distribution
Normal Distributions
 Normal Distribution
• Also called the “bell curve”
• Approximates many distributions we see in real
life and on construction sites
• It can be defined by a mean (μ) and a standard
deviation (σ)
• The normal probability density function is
characterized by a unit area, with a mean of 0
and a variance of 1

• F(x; μ, σ2) =

–∞<x<∞; σ2 is called the “variance”

 Unpacking the normal distribution
• Mean μ – average of all the values in the
distribution
– For a probability density function μ is the
mean, median and mode
• Standard Deviation σ – a measure of the
dispersion of the data

σ=
 Standard Deviation

• Approximately 68% of values lie within 1 σ from

the mean
• Approximately 95% of values lie within 2 σ from
the mean
• Approximately 99.7% of values lie within 3 σ
from the mean
Means and Standard Deviations
• μ1 = μ2 = μ3

• μ 4 < μ1
1

4 • σ1 < σ2 < σ3

2 • σ 4 > σ1; < σ2,

3 although μ1 = μ2
 The Central Limit Theorem
• Completion times for each activity could follow
a variety of distributions
• The sum of these distributions (i.e the
overall project time) will tend to follow a
normal distribution
• So we assume that
1. The mean of the sum is the sum of the means
2. The variance of the sum is the sum of the variances
3. The distribution of the sum is a normal distribution
regardless of the shape of individual distributions
 Cumulative Distribution Function
• Gives the probability that a random variable X is
less than a given value x
 Using the cumulative distribution
function
1. Convert the distribution into a standard normal
distribution (μ=0 and σ =1)
2. For a random variable X with a mean of μ and
a standard deviation of σ, the standardized
random variable is

3. Use the normal distribution table to find out the

probability of an event
Calculating the probability of an
event
• A project is normally distributed and has a
mean duration of 4 days and a standard
deviation of 2.

1. What is the probability that the project will be

completed in 7 days?

2. In 3 days?
 Completing within 7 days

• μ=4, σ =2, X(variable)=7

• Z = (7-4)/2 = 1.5
• F(1.5) = 0.933
• P(completing within 7 days) = 93.3%
 Completing within 3 days
• μ=4, σ =2
• X(variable)=3
• Z = (3-4)/2 = - 0.5
• F(-z) = 1-F(z)
• F(-0.5) = 1-F(0.5)
• F(0.5) = 1-0.691 = 0.309
• P(completing within 3 days) = 30.9%
 Activity Properties in PERT
• Activities follow a Beta distribution
– Characterized by modal and extreme values
 Activity properties contd..
• Empirically it is accepted that
• Expected duration of an activity is
– Te = (To + 4Tm + Tp)/6
• Standard deviation for the activity is
– σ = (Tp - To)/6
• Variance is
– υ = σ2
 The PERT algorithm
1. For each activity, calculate the expected
duration, standard deviation and variance
2. Use the expected duration as the basis for
performing a forward and backward pass to
obtain critical path
3. Sum the variances to find the variance of the
entire project
4. Use the cumulative normal distribution table to
determine probability of event or project
completion
 Use in construction
• Can be used instead of CPM when
productivity is unknown or variable

• Time data is often collected based on

experience

• Can be used to predict the likelihood of

various events and milestones being met
 An example

D F
A

C
Start Finish

B E G
 Data table
Activity To Tm Tp
A 2 4 6
B 3 5 9
C 4 5 7
D 4 6 10
E 4 5 7
F 3 4 8
G 3 5 8

Find expected project duration.

What is the likelihood that the project will finish within 20 days?
 Step 1 - Calculate expected
duration and variances
Activity To Tm Tp Te σ υ
A 2 4 6 4 0.66 0.44
B 3 5 9 5.33 1 1
C 4 5 7 5.17 0.5 0.25
D 4 6 10 6.33 1 1
E 4 5 7 5.17 0.5 0.25
F 3 4 8 4.5 0.83 0.69
G 3 5 8 5.17 0.83 0.69
 Step 2 - Calculate Critical Path
0 0 0 0 0 0

A4 D 6.33 F 4.5
0 0 0 0 0 0

0 0 0 0 0 0

Start C 5.17 Finish

0 0 0 0 0 0

0 0 0 0 0 0

B 5.33 E 5.17 G 5.17

0 0 0 0 0 0
 Critical Path Calculations
0 4 4 10.3 10.3 14.8

A4 D 6.33 F 4.5
0 0 8.66 4.66 15 15 4.66 19.5
0

0 0 4 9.17 19.5 19.5

Start C 5.17 Finish

0 0 4 0 9.17 19.5 0 19.5

0 5.33 9.17 14.3 14.3 19.5

B 5.33 E 5.17 G 5.17

3.83 3.83 9.17 9.17 0 14.3 14.3 0 19.5
 Step 3 - Cumulative Progress
Activity To Tm Tp Te (ES) σ υ
A 2 4 6 4 0.66 0.44
B 3 5 9 5.33 1 1
C 4 5 7 9.17 0.5 0.69
D 4 6 10 10.33 1 1.44
E 4 5 7 14.34 0.5 0.94
F 3 4 8 14.83 0.83 2.13
G 3 5 8 19.51 0.83 1.63
 Probability of finishing in 20
days
• μ=19.51, σ2 = 1.63 (critical path variance)

• X(variable)=20

• Z = (20-19.51)/1.28 = 0.38

• F(0.38) = 0.648

• P(completing within 20 days) = 64.8%

Construction Project
Monitoring
Dr. Ashwin Mahalingam
 Elements of Project Control

• Creation of a Baseline Schedule

• Measurement of Performance

• Effective Corrective Actions

Planning Levels

Master Plan Major Milestones -> Quarters

Key resources

Activity Completion -> Monthly

Macro Plan Quantity Targets
Overall Resource
Requirements
Activity Completion -> Daily/Weekly
Micro Plan Quantity/Location Targets
Detailed Resource Requirements

Execution
Monitoring Levels

Master Plan
Monthly Reports
&
EVM Parameters.
Macro Plan
Weekly Reports
& Activity Targets
Productivity
Micro Plan Trends
Daily Progress Reports
Productivity
Measurement
Execution & Improvement
 Schedule Updating
1. Schedule durations and sequences often vary
from actual durations and sequences
– Subcontractors might use different methods
– Force Majeure events delay the project
– Etc
2. Participants would like to know how the
project is progressing
– Owners – When can I move in? How much should I
pay this month? What milestones have been met?
– Designers – When do I release drawings
– Subcontractors – when do I come on to the site?
 Usefulness of frequent schedule
updating
• Current state of the project is always
known
• Updates provide a valuable record of
project status at a given time
– Can document changes, responsibilities and
delays throughout the project
– Useful during claims proceedings
• Schedule is a document that can be
followed
 More on updates
• Schedules should be updated periodically
– Especially if a major event such as a logic
change occurs
• Updates should show
– New start and completion dates
– Completed activities
– Percentage progress on activities
Percentage Complete
Planned Vs. Actual
 Updating a Precedence Diagram
0 3 3 9 6 8
A 3 B (4)6 D 2
0 0 3 3 0 9 7 1 9
9 9
0 0 3 6 Finish
Start E 3 9 0 9
0 0 0 4 1 7

6 8
0 4
C 2
F (3)4
7 1 9
3 3 7
Project Monitoring
 Project Monitoring

• This graph shows Project Progress

Cost over-run with schedule

Time over-run
Cost

Ideal
Curve

Time
What is your feedback on this project ?
● At 2 Weeks

● At 8 Weeks

50
 ANSWER
Week 02 Bad ? Not really !!!

Week 08 Good ?

How much work was actually done ?

Progress Curve does not indicate this!!

Earned Value Analysis requires taking value

of work done into account!!!
51
In this case ?
RR

CSK

Optimistic ?!
 Example -2.1
What is % Complete of this
Piping Package
Activity Total Est. Qty Qty ? % Complete
(M) In-place (M)
Small Bore 1063 197 ? ?
Piping

Large bore 10,000 701 ? ?

piping

Total Piping ? ? ? ?

Do you have enough information ?

53
 Example -2.2
What is % Complete of this
Piping Package
Activity Total Est. Qty Est. Act. % Complete
Qty (M) In-place (M) Man Hours Man Hours
Mhrs

Small Bore 1063 197 1,350 300 ?

Piping

Large bore 10,000 701 10,200 1000 ?

piping

Total Piping ? ? ? ?

Do you have enough information ?

54
 Example-2.3
What is % Complete of this
Piping Package
Activity Total Est. Qty Planned Est. Act. % Complete
Qty (M) In-place Rate Man Hours Man Hours
(M) Mhr/M Mhrs

Small Bore 1063 197 1.27 1,350 300 ?

Piping

Large bore 10,000 701 1.02 10,200 1000 ?

piping

Total ? ? ? ? ?
Piping

Do You Have Too Much Information ? 55

 Example -2.4
What is % Complete of this
Piping Package
Activity Total Est. Qty Planned Est. Earned % Complete
Qty (M) In-place Rate Man Manhours
(M) Mhr/M Hours Mhr
Mhrs
Small Bore 1063 197 1.27 1,350 197*1.27
Piping =250 ?

Large bore 10,000 701 1.02 10,200 701*1.02

piping =715 ?

Total - - - 250+715
Piping 11,550 =965
?

Do You Have Too Much Information ? 56

 Example -2.4
What is % Complete of this
Piping Package
Activity Total Est. Qty Planned Est. Earned % Complete
Qty (M) In-place Rate Man Manhours
(M) Mhr/M Hours Mhr
Mhrs
Small Bore 1063 197 1.27 1,350 197*1.27 250/1350
Piping =250 =18.5%

Large bore 10,000 701 1.02 10,200 701*1.02 715/10,200

piping =715 =7.0%

Total - - - 250+715 965/11550

Piping 11,550 =965 =8.4%
Questions & Comments ? 57
 MANHOURS & MONEY

TWO RESOURCES AS THEY ARE THE

COMMON TO ALL ACTIVITIES

THE EARNED VALUE CONCEPT USES

THESE FACTORS TO MONITOR
PROGRESS
58
 Earned Value
Process
Planning Phase

1. Establish the Work Breakdown Str. (WBS)

2. Identify the activities to be scheduled within

WBS.

3. Allocate resources to be expended on each

activity, – calculate costs

4. Schedule the activities over time. –Level

resources- Plot relevant S curve.

5. Confirm that the plan is acceptable.

 Earned Value Process
Monitoring Phase
1. Update the schedule by reporting activity
progress. Typically % Complete (Physically or
Estimate)

2. Enter the actual costs on the activities.

3. Execute the Earned Value calculations, print and

plot the reports and charts.

4. Analyze the data and write the performance

narrative, stabilize Base Plan
Concepts of Earned Value
Evaluating Progress on an Activity
• Units completed
– Length of pipe laid, length of trench dug
• Effort expended
– Plastering = 50%, Painting = 50% effort
– 3 walls plastered, two painted out of 4 walls
– Percentage complete = (3x0.5+2x0.5)/4 = 62.5%
• Expert opinion
• Amount spent
• Time taken (?)
 Concept of Earned Value

• Consider the following example:

– Wall construction
Wall is divided into 4 sections
For 4-sections - 100 man-hours are required
Hence if 2-sections are completed,
(2/4) × 100
= 50 man-hours
– We say that 50 man-hours have been EARNED
• The actual man-hours spent to construct these two
sections can be more than or less than the Earned
Value of man-hours
 Concept of Earned Value

– Wall construction

If 4 sections cost Rs. 1000/-

then the cost of constructing 2 sections = Rs. 500/-

We say that Rs. 500/- is the EARNED value of money

The actual cost incurred in constructing these two sections can
be more than or less than the Earned Value of money

It is important to note that Earned Value is based on the Actual

quantities installed or Actual quantity of work done

Hence output is considered in the Earned Value concept

 Concept of Earned Value

• Calculation of Earned Value

– Earned Value of man-hours or money for an activity can be
calculated as follows:
Components of Earned Value
 Components of Earned value Analysis

• Budgeted Cost of Work Scheduled (BCWS)

– It is the budgeted cost of work scheduled to be performed
– It is also called the Planned Value (PV)
– It tells how much work have been completed
 Components of Earned value Analysis

• Budgeted Cost of Work Performed (BCWP)

– It is the budgeted cost of work actually performed
– The Earned Value for the work actually completed
– It tells how much work is actually completed
 Components of Earned value Analysis

• Actual Cost of Work Performed (ACWP)

– It is the amount actually spent on the work completed
– This could be more or less than the Earned Value
 Components of Earned value Analysis

• Scheduled Variance (SC)

– It compares work completed vs work planned

– It helps to identify whether the project is ahead or behind
schedule
– Negative value indicated that the project is behind schedule
 Components of Earned value Analysis

• Scheduled Performance Index (SPI)

– It helps to identify whether the project is ahead or behind

schedule
– Less than 1 indicates that the project is behind schedule
– It can be used to forecast how long it will take for the project to
complete
 Components of Earned value Analysis

• Cost Varience (CV)

– It compares what was planned to be spent on the work

completed vs. what was actually spent
– It helps to identify whether the project is ahead or behind
schedule
– Negative value indicates that the project is over budget
 Components of Earned value Analysis

• Cost Performance Index (CPI)

– It helps to identify weather the project is above or below budget

– Less than 1 means the project is over budget
– It can be utilised to forecast how much amount will be required to
complete the project
 Components of Earned value Analysis

• Budget at Completion (BAC)

– It is the amount that was originally budgeted to complete the
project
 Components of Earned value Analysis

• Estimate at Completion (EAC)

– It is the estimated amount required to complete the project
Components of Earned value Analysis

http://www.iceincusa.com/16CSP/content/4_ev/gifs/image1.gif (17.01.2007)
Example 1
 Example 1

• Determination of planned % complete:

• Consider the following example

300 700 (man-hours)

Excavation
5000 5000 (money)

500 800 (man-hours)

Transportation
10000 70000 (money)

Draw % complete with respect to man-hours and money.

 Example 1

• Determination of planned % complete based on man-hours.

300 700 (man-hours)

Excavation
5000 5000 (money)

500 800 (man-hours)

Transportation
10000 7000 (money)

Daily Cumulative 300 1200 800

Total Cumulative 300 1500 2300

% Complete 300 1200 300
2300 2300 2300

= 0.13 = 0.65 = 1.0

 Example 1

• Determination of planned % complete based on money.

300 700 (man-hours)

Excavation
5000 5000 (money)

500 800 (man-hours)

Transportation
10000 10000 (money)

Daily Cumulative 5000 15000 7000

Total Cumulative 5000 20000 27000

% Complete 5000 20000 90000
27000 27000 27000

= 0.185 = 0.741 = 1.0

Percentage
Example 1

Stages
 Example 1

BCWS – Man-hours
Stages 1 2 3 Total
Excavation 300 700 0 1000
Transportation 0 500 800 1300 2300
Stage Total 300 1200 800
Cumulative Total 300 1500 2300
Project % Complete 0.13 0.65 1.0
 Example 1

BCWS – Money
Stages 1 2 3 Total
Excavation 5000 5000 0 10000
Transportation 0 10000 7000 17000 27000
Stage Total 5000 15000 7000
Cumulative Total 5000 20000 27000
Project % Complete 0.185 0.741 1.0
 Example 1

• Determination of Earned Value of Man-hour.

– Consider the previous problem (man-hours)

Excavation 300 700

Transportation 500 800 scheduled

% Complete

Excavation 0.25 0.95 1.0

Transportation 0.6 0.95

 Example 1

• Determination of Earned Value of Man-hour.

– Stage 1:
EMh (Excavation)

EMh (Transportation)

% complete of project:
% complete = 250 / 2300
Total Man-hours = 2300
% complete = 0.11
 Example 1

• Determination of Earned Value of Man-hour.

– Stage 2:
EMh (Excavation)

EMh (Transportation)

% complete of project:
% complete = 1730 / 2300
Total Man-hours = 2300
% complete = 0.752
 Example 1

• Determination of Earned Value of Man-hour.

– Stage 3:
EMh (Excavation)

EMh (Transportation)

% complete of project:
% complete = 2235 / 2300
Total Man-hours = 2300
% complete = 0.97
 Example 1

• Determination of Earned Value of Man-hour:

250 700 50 Man-hours

Excavation 300 700

Earned Value
780 455 (man-hours)
Man-hours

Transportation 500 800 scheduled

% Complete

Excavation 0.25 0.95 1.0

Transportation 0.6 0.95

Project - % Complete 0.108 0.752 0.971

 Example 1

• Determination of Earned Value of Man-hour.

BCWP

Stages 1 2 3
% complete
Excavation 0.25 0.95 1.0
Transportation 0 0.6 0.95
Earned Value (man-hours)
Excavation 250 700 50
Transportation 0 780 455
Stage total 250 1480 505
Excavation (cum) 250 950 1000
Transportation 0 780 1235
(cum)
Total cumulative 250 1730 2235
Project % complete 0.109 0.752 0.972
 Example 1

• Determination of Earned Value of Man-hour:

ACTUAL MAN-HOURS

400 500 100 Man-hours

Excavation 300 700

Actual
450 1000 (man-hours)
Man-hours

Transportation 500 800 scheduled

 Example 1

• Determination of Earned Value of Man-hour:

ACWP

Stages 1 2 3
Excavation 400 500 100
Transportation 0 450 1000
Stage Total 400 950 1100
Cumulative Total 400 1350 2450
 Example 1

• Determination of Earned Value of Man-hour:

Stage 1 Stage 2 Stage 3

BCWS SCHEDULED MAN-HOUR (Cumulative) 300 1500 2300

BCWP EARNED MAN-HOUR (Cumulative) 250 1730 2235
ACWP ACTUAL MAN-HOUR (Cumulative) 400 1350 2450
SV BCWP-BCWS -50 230 -65
CV BCWP-ACWP -150 380 -215
SPI BCWP/BCWS 0.83 1.15 0.97
CPI BCWP/ACWP 0.63 1.28 0.9122
 Example 1

• Determination of Earned Value of Man-hour:

Earned Value
Man-hour

Stages
 Example 1

• Determination of Earned Value of Money

– Consider the previous problem (money)

Excavation 5000 5000

Transportation 10000 7000 scheduled

% Complete

Excavation 0.25 0.95 1.0

Transportation 0.6 0.95

 Example 1

• Determination of Earned Value of Money.

– Stage 1:
EMh (Excavation)

EMh (Transportation)

% complete of project:
% complete = 2500 / 27000
Total Man-hours = 27000
% complete = 0.093
 Example 1

• Determination of Earned Value of Money.

– Stage 2:
EMh (Excavation)

EMh (Transportation)

% complete of project:
% complete = 19700 / 27000
Total Man-hours = 27000
% complete = 0.730
 Example 1

• Determination of Earned Value of Money.

– Stage 3:
EMh (Excavation)

EMh (Transportation)

% complete of project:
% complete = 26150 / 27000
Total Man-hours = 27000
% complete = 0.969
 Example 1

• Determination of Earned Value of Money.

2500 7000 500 Money

Excavation 5000 5000

Earned Value
10200 5950 (money)
Money

Transportation 10000 7000 scheduled

% Complete

Excavation 0.25 0.95 1.0

Transportation 0.6 0.95

Project - % Complete 0.093 0.730 0.969

 Example 1

• Determination of Earned Value of Money.

BCWP

Stages 1 2 3
% complete
Excavation 0.25 0.95 1.0
Transportation 0 0.6 0.95
Earned Value (money)
Excavation 2500 7000 500
Transportation 0 10200 5950
Stage total 2500 17200 6450
Excavation (cum) 2500 9500 10000
Transportation (cum) 0 10200 16150

Total cumulative 2500 19700 26150

Project % complete 0.093 0.730 0.969
 Example 1

• Determination of Earned Value of Money.

ACTUAL MONEY

4500 6000 5000 Money

Excavation 5000 5000

Actual
8500 7500 (money)
Money

Transportation 10000 7000 scheduled

 Example 1

• Determination of Earned Value of Money.

ACWP

Stages 1 2 3
Excavation 4500 6000 5000
Transportation 0 8500 7500
Stage Total 4500 14500 12500
Cumulative Total 4500 19000 31500
 Example 1

• Determination of Earned Value of Money.

Stage 1 Stage 2 Stage 3

BCWS SCHEDULED MONEY (Cumulative) 5000 20000 27000

BCWP EARNED MONEY (Cumulative) 2500 19700 26150
ACWP ACTUAL MONEY (Cumulative) 4500 19000 31500
SV BCWP-BCWS -2500 -300 -850
CV BCWP-ACWP -2500 700 -5350
SPI BCWP/BCWS 0.5 0.99 0.97
CPI BCWP/ACWP 0.56 1.04 0.83
 Example 1

• Determination of Earned Value of Money.

Earned Value
Money

Stages
Thank You