URBS 609 PERT, Unit 2

PERT/CPM CALCULATIONS
Basic Techniques Using MS
Excel
And Manual Calculation
 About This Training Module
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This Unit of Instruction was crafted by Robert Hugg For Minnesota State University, Mankato Urban and Regional Studies
Institute - 2004

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 Training Module Preview
This module will provide:
Introduction to manually calculating key Project
Management functions (both PERT and CPM)
Introduction to using MS Excel to calculate key
functions (PERT and Risk analysis)
Step-by step instruction on building a PERT risk
analysis calculator using MS Excel
Use of PERT and CPM traditional techniques to
manually lay out a project
This module is constructed as the second
block in a building block approach

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 PERT Calculations -
Simplicity
Simple steps in a logical order
Step 1: Define tasks
Step 2: Place Tasks in a logical order, find the critical path
The longest time path through the task network. The series of
tasks (or even a single task) that dictates the calculated
finish date
Step 3: Generate estimates
Optimistic, pessimistic, likely and PERT- expected
Standard Deviation and variance
Step 4: Determine earliest and latest dates
Step 5:Determine probability of meeting expected date
Steps 1 and 2 are logic and legwork, not calculation
these require a clear goal

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 PERT Calculations Step 3
Assuming steps 1 and 2 have been completed begin
calculations use a table to organize your calculations
Simple calculations to estimate project durations
Based on input of 3 estimated durations per task
Most Optimistic (TO) best case scenario
Most Likely (TL) normal scenario
Most Pessimistic (TP) Worst case scenario
Formula derives a probability-based expected duration
(TE)
(TO x 1 + TL x 4 + TP x 1) / 6 = TE
Read this formula as the sum of (optimistic x 1 + likely x 4 +
pessimistic x 1) divided by 6 = expected task duration
Complete this calculation for all tasks

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 PERT Calculations Step 3

Standard deviation and variance

Standard deviation (SD) is the average
deviation from the estimated time
SD=(TP-T0)/6 {read as (pessimistic-
optimistic)/6}
As a general rule, the higher the standard
deviation the greater the amount of uncertainty
Variance (V) reflects the spread of a value
over a normal distribution
V=SD2 (Standard deviation squared)

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 PERT Calculations Step 3
When doing manual PERT Calculations it is
helpful to construct a table to stay organized
Consider the sample project in Unit 1
planting trees and flowers, set up using a list
Rough estimates and no risk analysis
No Range, simply rough estimates - unreliable?
PERT Analysis will better refine estimates
Start by setting up a table to organize data

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 Our Project A Refresher
TASK ID Description Duration (Days)
1 Mark Utilities
?
2 Dig Holes
?
Set up in tabular form, it 3 Buy Trees
?
might look like this 4 Buy Flowers
?
5 Plant Trees
?
6 Plant Flowers
?
7
7 Buy Edging
?
Buy Edging
8 Install Edging
?
3
Buy Trees

1 2 5 6 8
Start Mark Utilities Dig Holes Plant Trees Plant Flowers Install Edging Finish

4 Set up in visual form it

Buy Flowers might look like this

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 PERT Step 3 First Get Organized
In considering all tasks on the previous slide, a table might look
like this CRITICAL PATH TASKS (Longest Duration)
TASK TO TL TP TE
1
2
5
6
8
TOTAL
OTHER PROJECT TASKS
TASK TO TL TP TE
3
4
7
TOTAL

TO-Optimistic TM-Likely TP-Pessimistic TE-Expected (Derived by

PERT)
Remember tasks 3, 4 and 7 are concurrent and do not add to the
timeline
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 PERT Step 3 Durations
After generating estimates using the formula, the table might look
like this
CRITICAL PATH TASKS (Longest Duration)
TASK TO TL TP TE SD V
1 1 3 5 3 .67 .44
2 2 4 7 4.17 .83 .69
5 1 3 6 3.17 .83 .69
6 1 3 5 3 .67 .44
8 1 2 4 2.17 .5 .25
TOTAL 7 15 28 15.6 3.5 2.51
OTHER PROJECT TASKS
TASK TO TL TP TE SD V
3 .5 1 3 1.25 .42 .17
4 .5 1 3 1.25 .42 .17
7 .5 1 3 1.25 .42 .17
TOTAL 1.5 3 9 3.75 1.26 .51

TO-Optimistic TM-Likely TP-Pessimistic TE-Expected (Derived by

PERT)
SD=Standard Deviation V=Variance
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 PERT Step 4 Dates
For each task, determine the latest allowable time for moving to the
next task
The difference between latest time and expected time is called slack
time
Tasks with zero slack time are on the critical path
CRITICAL PATH TASKS (Longest Duration)
TASK TO TL TP TE ES EF LS LF Slack SD V
1 1 3 5 3 0 3 0 3 0 .67 .444
2 2 4 7 4.17 3 7.17 3 7.17 0 .83 .694
5 1 3 6 3.17 7 10.1 7 10.17 0 .83 .694
7
6 1 3 5 3 10 13 10 13 0 .67 .444
8 1 2 4 2.17 13 15.1 13 15.17 0 .5 .254
7
TOTAL 7 15 28 15.51 3.5 2.530
OTHER PROJECT TASKS
TASK TO TL TP TE ES EF LS LF FLOAT SD V
3 .5 1 3 1.25 0 1.25 3 4.25 3 .42 .17
4 .5 1 3 1.25 0 1.25 3 4.25 3 .42 .17
ES=Earliest
7 Start
.5 EF=
1 3Earliest
1.25 Finish
1.25 2.50LS=Latest
4.25 5.50 Start 3 .42 .17
TOTAL Finish
LF=Latest 1.5 3 9 3.75 1.26 .51

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 PERT Step 5 Probabilities
Manually computing probability using data compiled in your
table
Determine probability of meeting a date by using the table data
Denote the sum of all expected durations on the critical path as S
Denote the sum of all variances on the critical path as V
Select a desired completion time, denote this as D
COMPUTE: (D-S)/square root (V) = Z ( the number of std.
deviations that the due date is away from the expected date))
Enter a standard normal table to find a probability that
corresponds with Z or go online to:
http://math.uc.edu/statistics/statbook/tables.html ) to enter a z
number - the application will retrieve the probability from the lengthy
table
For our project, figure a probability based on the most likely
time, 15 days: (15-15.51)/square root(2.53) = (15-
15.51)/1.59=-.3207 (Z)
A corresponding probability is 37.7% (Rounded)
This process can be repeated for any date desired

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 PERT Step 5 Probabilities
Computing probability in Excel using data compiled in your
table

Excel has normal distribution functions

built in and can compute PERT
probabilities
By creating a table as a spreadsheet,
the addition of a few simple formulae
will do the rest of the work
Create a table as a template that can
be used over and over again simply
change the input
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PERT Step 5 Probabilities
Computing probability in Excel using data compiled in your
table

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 Constructing the
Spreadsheet
Step 1 - Create a spreadsheet that resembles the table
used earlier

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 Constructing the
Spreadsheet
Step 2 Use formulae as shown to calculate PERT
Expectations

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 Constructing the
Spreadsheet
Cell Formulae used for PERT Analysis- expected durations

Computing PERT Expected duration

For each task cell: (Optimistic + 4x
Typical + Pessimistic)/6
Adjust cell address for each task

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 Constructing the
Spreadsheet
Step 3 Use formulae as shown to calculate variances

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 Constructing the
Spreadsheet
Cell Formulae used for PERT Analysis Variances
Computing Variances
For each task cell:
((Pessimistic-Optimistic)/6)2
Adjust cell address for each task

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 Constructing the
Spreadsheet
Step 4 Use formulae as shown to calculate STD. Deviations

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 Constructing the
Spreadsheet
Cell Formulae used for PERT Analysis Standard Deviations
Computing Standard Deviations
For each task cell:
Square root of the variance for that task
Adjust cell address for each task

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 Constructing the
Spreadsheet
Step 5 Use formula as shown to sum PERT expectations

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 Constructing the
Spreadsheet
Cell Formula used for PERT Analysis Summing PERT

Sum Pert Expectations using either

Expectations

auto-sum feature or sum formula

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 Constructing the
Spreadsheet
Step 6 Use formula as shown to sum variances

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 Constructing the
Spreadsheet
Cell Formula used for PERT Analysis Summing Variances
Sum Variances using either auto-sum
feature or sum formula

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 Constructing the
Spreadsheet
Step 6 Use formula as shown to compute probability

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 Constructing the
Spreadsheet
Cell uses
Excel Formula used for PERT Analysis Completion Probability
a formula designed to compute the probability of placement of a combination
of elements in a normal distribution very accurate

NORMDIST(x,mean,standard_dev,cumulative)
X is the value for which you want the distribution (desired date)
Mean is the arithmetic mean of the distribution (summed PERT expected durations)
Standard_dev is the standard deviation of the distribution (square root of the summed variances)
Cumulative is a logical value that determines the form of the function. If cumulative is TRUE,
NORMDIST returns the cumulative distribution function (probability of completion on the date
entered)

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 Constructing the
Spreadsheet
Cell Formula used for PERT Analysis Hints and Tips
Be sure to adjust formulae as necessary when
adding additional tasks
If a error message shows up check cell addresses in
the formulae first formulae must reflect intent
This set of formulae mirrors the manual
calculations but takes less time for the user
Because PERT is a probabilistic approach, these
formulae can deliver a 100% probability but
no plan is perfect these are always estimates
Never feel there is a 100% probability of a
project completing on the estimated date

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 PERT Analysis
Thoughts, Philosophy and Lessons Learned

All Plans are estimates and are only as good as the task
estimates unrealistic estimates equal unrealistic plans
If the scope of a plan changes, all estimates must
change adding tasks equals added time and cost
PERT Analysis is a good way to what if before a
project is launched helps determine if it is needed at
all
What tasks will it take to do the project?
What is the optimum order of the project tasks?
How long will it take to do the project?
How likely is the project to succeed?
What if The Boss wants it earlier, what is the likelihood then?
A great way to get organized and stay organized

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 CPM Analysis

In comparison to PERT, CPM analysis is simple

CPM Analysis is a series of easy steps
1. Develop time and cost data ("normal" and "crashed") for all
tasks
2. Develop cost-per-week for crashing ( crashed costs divided by
time saved)
3. Develop project network (PERT)
4. Crash the activity on the critical path with the lowest cost-for-
crashing
5. Recalculate the project network (the critical path might change!)
Repeat steps 4 & 5 until all the paths have been
crashed.
Ease up on all non-critical paths, just to the point that all
paths are critical.

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 CPM Analysis
A typical CPM table might have
the following structure:
Time Time Cost
Begi Cost Time Cost Cost /
Activity End (Crashed (Normal (Crashed
n (Normal) Saved Increase Week
) ) )

Foundatio
1 2 1 2 4000 3000 1 1000 1000
n

Frame 2 3 1 4 8000 4000 3 4000 1333

cost-per-week for crashing = crashed costs divided by time sav

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 CPM Analysis
Thoughts, Philosophy and Lessons Learned

All Plans are estimates and are only as good as the

task estimates unrealistic estimates equal
unrealistic plans
If the scope of a plan changes, all estimates must
change adding tasks equals added time and cost
CPM Analysis is a good way to what if before a
project is launched helps control expectations
How much will it cost?
How long will it take?
How long will it take if it needs to be done sooner?
How much will it cost if it needs to be done sooner?
A great way to get organized and stay organized

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 Use PERT and CPM Together
PERT & CPM are totally
complementary - both require the
1. Define the Project and all of its significant activities or tasks.
same preparation:
The Project should have only a single start activity and a
single finish activity.
2. Develop the relationships among the activities; decide which
activities must precede and which must follow others.
3. Draw a Network Diagram connecting all the activities (each
activity should have a unique number).
4. Assign time and/or cost estimates to each activity.
5. Compute the longest time path through the network. (The
critical path)
6. Use the Network to help plan, schedule, monitor & control the
project.

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 PM Calculations Overview
PERT and CPM can be used together
Calculations are based on a few simple
formulae:
PERT Derived duration estimates
Standard Deviation
Variance
Probability of meeting expectation
Crash costs and time & normal costs and time
Calculations can be done manually or using
Excel same formulae, different tools

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 Resources Used in This Unit
Bonini, Charles, et al, Quantitative
Analysis for Management,
Columbus: McGraw Hill, 1997
Dr. Anthony Filipovitch
Goldratt, Eli, Dr., The Goal: A
Process of Ongoing Improvement,
Great Barrington: New River Press,
1996
Mednick, Barry, PERT-CPM on
Excel,Fullerton: Cal State, 2000
MS Project, by Microsoft
Corporation
MS Excel, by Microsoft Corporation
PM Body of Knowledge (PMBOK),
Philadelphia: PMI, 2000
Urban and Regional Studies
Project Management Institute
(PMI) Resource Center
Project Management Institute Webs
ite
ProjeX, by WAA, Inc
Systema, Sid, Probabilistic
Solutions to Project Scheduling,
Ferris State, 1999
US National Performance Survey,
The Standish Group, 1998
Verma, Vijay K., Managing the
Project Team: The Human Aspects
of Project Management,
Philadelphia: PMI, 1997
Wiest, Jerome D., and Levy,
Ferdinand K., A Management
Guide to PERT/CPM, New Delhi:
Prentice-Hall of India Private
Limited, 1974
35
 You have completed
URBS 609 PERT Unit 2
Please proceed to
URBS 609 Project Management Using
MS Project Block
This Unit of Instruction was crafted by Robert Hugg For Minnesota State University, Mankato Urban and Regional Studies
Institute - 2004

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