Project Scheduling

Probabilistic PERT

PERT Probability Approach to

Project Scheduling
Activity completion times are seldom known with cetainty.
PERT is a technique that treats activity completion times as random
variables.
Completion time estimates can be estimated using the Three Time
Estimate approach.
approach In this approach, three time estimates are
required for each activity:

a = an optimistic time to perform the activity P(Finish < a) < .01

Results from statistical studies
m =Subjective
the most best
likelyestimates
time to perform the activity (mode)
b = a pessimistic time to perform the activity P(Finish > b) < .01

3-Time Estimate Approach

Probability Distribution
With three time estimates, the activity completion time
can be approximated by a Beta distribution.
distribution
Beta distributions can come in a variety of shapes:

Mean and Standard Deviation for

Activity Completion Times
The best estimate for the mean is a weighted
average of the three time estimates with weights
1/6, 4/6, and 1/6 respectively on a, m, and b.
Since most of the area is with the range from a to
b (b-a), and since most of the area lies 3 standard
deviations on either side of the mean (6 standard
deviations total), then the standard deviation is
approximated by Range/6.
a + 4m + b
= the mean completion time =
6
b-a
= the standard deviation =
6

PERT Assumptions
Assumption 1
A critical path can be determined by using the mean
completion times for the activities.
The project mean completion time is determined solely
by the completion time of the activities on the critical
path.

Assumption 2
There are enough activities on the critical path so that
the distribution of the overall project completion time
can be approximated by the normal distribution.

Assumption 3
The time to complete one activity is independent of the
completion time of any other activity.

The Project Completion Time

Distribution
The three assumptions imply that the
overall project completion time is normally
distributed, with:

= Sum of the s on the critical path

2 = Sum of the 2 s on the critical path

The Probability Approach

(76 + 4(86) +120)/6

(120-76)/6

Activity Optimistic Most Likely Pessimistic

76
86
120
A
12
15
18
B
4
5
6
C
15
18
33
D
18
21
24
E
16
26
30
F
10
13
22
G
24
18
32
H
22
27
50
I
38
43
60
J

(7.33)2

90
15
5
20
21
25
14
28
30
45

7.33
1.00
0.33
3.00
1.00
2.33
2.00
1.33
4.67
3.67

53.73
1.00
0.11
9.00
1.00
5.43
4.00
1.77
21.81
13.47

Distribution For Klone Computers

The project has a normal distribution.
The critical path is A-F-G-D-J.
A F G D J
90 25 14 20 45
194
2 2A 2F G2 2D 2J
53.78 5.44 4 9 13.44

85.66

2 85.66
9.255

Standard Probability Questions

1.

What is the probability the project will be finished

within 194 days?

2.

P(X < 194)

Give an interval within which we are 95% sure of

completing the project.

3.

X values, xL, the lower confidnce limit, and xU, the upper
confidnce limit, such that P(X<xL) = .025 and P(X>xU) = .025

What is the probability the project will be completed

within 180 days?

4.

P(X < 180)

What is the probability the project will take longer

than 210 days.

5.

P(X > 210)

By what time are we 99% sure of completing the

project?

X value such that P(X < x) = .99

Excel Solutions
NORMDIST(194, 194, 9.255, TRUE)
NORMINV(.025, 194, 9.255)
NORMINV(.975, 194, 9.255)
NORMDIST(180, 194, 9.255, TRUE)

1 - NORMDIST(210, 194, 9.255, TRUE)

NORMINV(.99, 194, 9.255)

Using the PERT-CPM Template for

Probabilistic Models
Instead of calculating and by hand,
the Excel template may be used.
Instead of entering data in the and
columns, input the estimates for a, m ,
and b into columns C, D, and E.
The template does all the required
calculations
After the problem has been solved,
probability analyses may be performed.

Enter a, m, b instead of

Call Solver
Click Solve
Go to PERT OUTPUT worksheet

Call Solver
Click Solve

To get a cumulative
probability, enter
a number here

P(Project is completed in less than 180 days)

Cost Analysis Using the

Expected Value Approach
Spending extra money, in general should
decrease project duration.
But is this operation cost effective?
The expected value criterion can be used
as a guide for answering this question.

Cost Analyses Using Probabilities

Suppose an analysis of the competition
indicated:
If the project is completed within 180 days,
this would yields an
additional profit of $1 million.
If the project is completed in 180 days to
200 days, this would yield an additional
profit of $400,000.

KLONE COMPUTERS Cost analysis using probabilities

Completion time reduction can be achieved by
additional training.
Two possible activities are being considered.
Sales personnel training: (Activity H)
Cost $200,000;
New time estimates are a = 19, m= 21, and b = 23 days.

Technical staff training: (Activity F)

Cost $250,000;
New time estimates are a = 12, m = 14, and b = 16.

Which, if either option, should be pursued?

Analysis of Additional
Sales Personnel Training
Sales personnel training (Activity H) is
not a critical activity.
Thus any reduction in Activity H will not affect
the critical path and hence the distribution of
the project completion time.

This option should not be

pursued at any cost.

Analysis of Additional
Technical Staff Training
Technical Staff Training (Activity F) is on
the critical path so this option should be
analyzed.
One of three things will happen:
The project will finish within 180 days:
Klonepalm will net an additional $1 million

The project will finish in the period from 180

to 200 days
Klonepalm will net an additional $400,000

The project will take longer than 200 days

Klonepalm will not make any additional profit.

The Expected Value Approach

Find the P(X < 180), P(180 < X < 200), and
200) under the scenarios that

P(X >

No additional staff training is done

Additional staff is done

For each scenario find the expected profit:

Expected Additional Profit

1000000(P(X<180)) + 400000(P(180<X<200)) + 0(P(X>200))

Subtract the two expected values.

If the difference is less than the cost of
the training, do not perform the additional training.
Caution: These are expected values (long run average
values). But this approach serves as a good indicator for
the decision maker to consider.

The Calculations

The PERT-CPM template can be used to

calculate the probabilities.
No Additional
Training
= 194
= 9.255
P(X < 180)

.065192
.676398

X $0

.729561
$270,559

X $400000

P(X > 200)

$159,152

$ 65,192

X $1000000

P(180 <X < 200)

Additional
Training
= 189
= 9.0185
.159152

$291,824
.111287

.258410
$

Total = $335,751

Total = $450,976

Net increase = $450,976-$335,751 = $115,225

This is less than the $250,000 required for training.

Do not perform the

additional training!

Review
3-Time Estimate Approach for PERT
Each activity has a Beta distribution
Calculation of Mean of each activity
Calculation Variance and Standard Deviation
for each activity

Assumptions for using PERT approach

Distribution of Project CompletionTime
Normal
Mean = Sum of means on critical path
Variance = Sum of variances on critical path

Using the PERT-CPM template

Using PERT in cost analyses