Notes:- Facility Planning 6th Sem

CHAPTER 11 PROJECT MANAGEMENT

NETWORK ANALYSIS (PERT and CPM)

Introduction

PERT and CPM are two well known network techniques or models especially useful for planning, scheduling
and executing large time-bound projects which involve careful co-ordination of a variety of complex and
inter-related activities and resources. PERT is the abbreviated form for Program Evaluation and Review
Techniques and CPM for Critical Path Method. Both the techniques were developed in U.S.A. during the late
1950s. PERT was developed by US Navy Engineers to plan and control the huge Polaris Submarine Program.
CPM was developed by E.I. Dupont Nemours & Co., U.S.A. and the Univac Division of Remington Rand
Corporation in 1956 in connection with the periodic overhauling and maintenance of chemical plants. It
resulted in reducing the shut-down period from 130 hours to 90 hours and saving hours and saving the company
$1 million.

Both the techniques have been applied successfully to improve efficiency of execution of large projects within
pre-determined time and cost limits. Any new venture may be regarded as a project, such as constructing a new
plant, bridge, dam, shopping centre or residential complex, design of a new aircraft, manufacture of ships, R& D
projects, introduction of a new product, installing pipeline, floating a new issue of shares, major repairs and
overhaul of plant and machinery units, organizing a large conference/convention, handling an earthquake relief
work and so on.

PERT and CPM converge on several aspects, and are almost treated as twins; there are, however, some points
of difference between them which will be discussed later. The techniques recognize the systems or inter-related
nature of activities on large work projects and translate the job proposed into a model by drawing a network of
the activities involved. They are used in planning and controlling (monitoring) the projects. Planning in this
context implies developing the overall layout of the project with estimates of time, the resources required and
the detailed time scheduling and sequence of various jobs to be performed. The control, on the hand takes place
during the work on the project. Gradually as resources get used and completion times are obtained, project
management techniques can be used to reallocate, if necessary, the rescues, according to the revised criticality
rankings of the jobs remaining to be done. In general the application of PERT and CPM is intended to answer
the following:
1. The expected project completion date
2. The scheduled start and completion time for the different activities comprising the project
3. The key activities of the project which must be completed at the scheduled time (or else would result in
delaying the entire project completion time) and require close managerial attention, the time period by
which non-key activities may be delayed without causing a delay in the completion of the whole
project.

In fact, PERT and CPM are suitable for any situation where
a. The project consists of well-defined collection of activities or tasks
b. The activities can be started and terminated independently of each other, even if the resources
employed on the various activities are not independent.
c. The activities are ordered so that they can be performed in a technological sequence. Thus precedence
relations exist which preclude the start of certain activities until others are completed. For example, the
overhead water tank in a high-rise building cannot be installed until the top floor of the infrastructure
has been constructed.

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Advantages of using networking techniques (like PERT/CPM) as management tools of project control
 Compels management to plan a project before it begins.
 Requires an analytical approach to planning
 Separates the planning and scheduling functions.
 Permits the planner to concentrate on the relationship of items of work without considering their
occurrence in time.
 Allows the planner to develop a more detailed plan, since he is concerned with how the work will be
performed, not when.
 Results in a more realistic schedule.
 Clearly shows dependency between work tasks.
 Facilities control of a project.
 Simplifies maintenance of the plan and schedule.
 Informs of management‟s current status regarding the project.
 Focuses management‟s attention on critical items of work.
 Gives management the ability to assess consequences of anticipated changes to the plan.
 Makes it easy to relate other functions of project control to the basic planning and scheduling function.
 Meets contractual requirements of government, private industry and customers.

The application of PERT and CPM for project management involves the following steps:

1. Establishment of objectives: The first step in the development of a PERT network is the
establishment of objectives. There will be a major objective to be accomplished, linked by supporting
objectives. When these are identified, they must be linked together so as to enable to planner to see the
project in its true perspective.

2. Identification of all key activities and events or phases for completion of the project. In this
connection, the term activity is defined as an operation or job to be carried out which consumes time
and resources. In the AOA network diagram, activities are denoted by arrows (). An event is
defined as a beginning or completion of an activity. It is denoted by a circle (O). while identifying the
key activities, sequencing activities and estimating activity times, both technical and managerial
persons should work together.

3. Determination of sequence of activities and events in a project and arranging them in a network that
brings out their interrelationship to satisfy the technological sequencing requirements. The network
diagram so constructed is a beginning point for the project. For the sake of convenience, each event is
given a serial number. In a project, some activities have to be undertaken sequentially while others
may be carried out concurrently. All these form part of the project network. The network so formed,
shows a number of paths of activities and events from beginning to completion.

4. Determination and assignment of time for starting and completion of each activity in the network,
which will help to arrive at the total time required for completion of the project. In CPM only one time
rating per activity is used. In PERT, three estimates of time span for completion of each activity are
evaluated. They are optimistic time (shortest time denoted by t o), pessimistic time (longest time
denoted by tp) and normal time (most likely time denoted by t m). After these three time estimates have
been made, they are combined into a single workable time value known as expected time (denoted by
te). This is done algebraically by using a weighted average.
te = tp + 4tm + tp
6
where te is the expected time, to optimistic time, tp – pessimistic time and tm – normal time.

The three time estimates are used in PERT because the originators of PERT thought that the estimated
time for an activity is better described by a probability distribution than by a single estimate.

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5. Determination of the total period of time required for completion of project. This calls for
identification of the sequence of those activities, the completion of which is critical for the timely
completion of entire project. The line connecting the critical activities from start to finish of the project
is the critical path. The completion time of activities along the critical path cannot be delayed.
Any delay in completion of activities that lie on the critical path, will delay the entire project.
The critical path is the path with the longest duration (compared to all the other possible paths) running
through the network in a continuous manner from the beginning to the end. It is of the longest duration
since it allows for the fact that certain activities cannot be started unless certain other related activities
that precede them are completed. It also is the period of time required for completion of the project.
Other useful figures that may be calculated for control are event slacks, activity floats, variability
duration and the probability of completing the project or part of it by or within a particular time.

6. Implementing the network model created as a tool of control once the project commences. This
stage calls for periodic updating of the network amongst other tings to monitor the progress of the
project. This is done by comparing the actual activity completion times with their estimated times.
Necessary changes are made in schedules in case of intolerable deviations to ensure completion of the
project as close to the target time as possible.

7. Resource Allocation and Scheduling: Based on the network calculations and assessment of resources
required for each of the activities, the plan is translated into a time schedule. If it is possible to
expedite the activities by incurring additional cost, the economics of doing so are also examined before
finalising the schedule.

Each person who participates in the application of PERT to the control of the project should have some basic
familiarity with the general nature of the work and with the ultimate objective desired.

Types of network diagrams

In general there are two ways in which network diagrams may be constructed. CPM and PERT (which is what
is taught here), both use the Activity on Arrow (AOA) manner of representing networks. STUDENTS WILL
FOLLOW THIS AND ONLY THIS MANNER (AOA) OF DRAWING NETWORKS. SIMPLY
SPEAKING THESE DIAGRAMS REPRESENT THE ACTIVITY ON THE ARROW (AND THE
EVENT ON NODE) IN PRESENTING THE PROJECT LOGIC.

For information purpose only, there exists another manner called the Activity On Node (AON) diagram to
present the project logic. In this, the activities are represented on the node (and not the arrow) and the
precedence relationships are represented by the arrows. This technique of project networking was developed by
John W Fondahl in USA and by Bernard Roy in France, at about the same time when PERT and CPM came into
existence. All of these techniques were developed independent of each other. Fondahl called his technique of
AON diagram by the name “precedence diagram”. The AON diagram is claimed to have some merits as
compared to AOA diagram as it does not require dummy activities, and because it is considered to be simple
and easier to explain as well as to understand and facilitates revision and updating. Irrespective of these
advantages, the AOA diagrams continue to be more popular than the AON diagram and the AOA diagrams add
dynamism to the network. Both types have their relative advantages and disadvantages and have carved their
respective niches in terms of application and usage.

Assumptions of PERT/CPM

1. A project can be sub-divided into a set of predictable and independent activities.

2. The precedence relations of project activities can be completely represented be a non-cyclical network
graph in which each activity connects directly into its immediate successors.

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3. Activity items may be estimated either as single-point estimates or as three-point PERT estimates and
are independent of each other.

4. In CPM, the duration of an activity is linearly (and inversely) related to the cost of resources applied to
the activity. (This means less the time more the cost as it happens when crashing activity time).

5. In PERT model, activity duration is assumed to follow the beta distribution, the standard deviation of
the distribution is assumed to be 1/6th of its range, the mean is approximated by 1/6 th (to+4tm+tp) and the
variance in length of project is assumed to be equal to the sum of the variances of activities on the
critical path.

6. Cost time-trade off for deriving the cost curve slopes are subjective again and call for great deal of
expertise of the technology as well as genuine efforts to estimate.

Constructing the Network

A project network is a directed graph that consists of finite collection of elements called events (or nodes)
together with a subset of the ordered pairs (i, j,) of nodes called activities (or jobs or tasks or operations). In
other words, a network is the graphical representation of logically and sequentially connected arrows and nodes
representing activities and events of a project. (Also called arrow diagrams) diagrams show the
operations/activities to be performed to complete a job, the sequence and inter-relationship of various activities
involved.

In networks, an activity is a clearly identifiable and manageable operation or an element of work entailed in the
project and it is represented by an arrow. An event (or node), is the and/or finish of an activity or group of
activities. Others terms used are junction, milestone or stage. In general milestone is reserved for particularly
significant events that require special monitoring. An activity arrow (i, j,) extends between two nodes, the tail
node (or event), i, represents the start of an activity and the head node (event) j, represents the completion of an
activity as shown below:

Activity
(i) (j,)
Starting event completion event

Activities may also be termed jobs, tasks or operations. Activities which must be completed before a certain
other activity starts are called the predecessor activity starts are called successors activities.

Predecessor activity: Activities that must be completed immediately prior to the start of another activity called
predecessor activities.

Successor activities: Activities that cannot be started until one or more of the other activities are completed, but
immediately succeed them are called successor activities.

Concurrent activity: Activities which can be accomplished at the same time are known as concurrent activities.

Path: An unbroken chain of activity arrows connecting the initial event to the final event via other events is
called a path.

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Rules of Network Construction

Following are some of the rules that have to be followed while constructing a network:
1. Each defined activity is represented by one and only one arrow in the network. Therefore, no single
activity can be represented more than once in the network. These arrows should be kept straight and
not curved. Sometimes bending activity arrows so that the main portion of the arrows both straight and
parallel to the main horizontal axis of the diagram will improve the appearance of the network. This is
illustrated below:

2
1 1

Angles between arrows should be as large as possible. Arrows should not cross each other. Where crossing
cannot be avoided, the method shown below should be adopted.

3
1 2

2. Before an activity can be undertaken all activities preceding it must be completed. Thus, a network
should be developed on the basis of logical or technical dependencies between various activities of the
project. The discipline of networking requires that the project be considered in a thorough and analytic
manner and the predecessor-successor relationships between the various activities clearly laid.

3. The arrows depicting various activities are indicative of the local precedence only. The length and
bearing of the arrows are of no significance, although arrows in network diagrams should be drawn to
show time flow left to right i.e. in the forward direction.
4. The arrow direction indicates the general progression in time. Each activity must start and end in a
node (or event). The tail of an activity represents the point in time at which the “activity start” occurs
and the node marking this start is called the tail event for this event. The head of an activity represents
the point in time at which the “activity completion” occurs and the node marking this termination is
called the head event for that activity.

5. When a number of activities terminate at one event, it indicates that no activity emanating from that
event may start unless all activities terminating there have been completed.

3 3

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4 6 7 1 2 4

5
5

Fig.(I) Fig.(ii)

6. Events are identified by numbers. Each event identified by a number higher than that allotted to the
event immediate preceding one. I.e., events should be numbered such that for every arrow (i,j) (i, < j).
In assigning numbers to the events, care should be taken that there is no duplication of event numbers
in a network. The event numbered 1 denotes start of the project and is called initial node (or event)
while the event carrying the highest number denotes the final event in the network. A network should
have only one initial and one terminal node. (Students are advised to keep the project start event and
the project completion event in a straight line for a more aesthetic looking network diagram).

7. The activities are identified by the numbers of their starting and the ending events. They are expressed
as i,j, where i represents the starting event, or the tail node number, and j represents the ending event or
the head node number. Naturally head nodes always have a higher number than tail nodes. No two
activities may be described by the same set of ordered pairs. All activities emerging (or taking off)
from event 1 should not be preceded by any other activity or activities. In fig.I activities B, C, D and E
can be expressed as 3-6, 4-6, 5-6 and 6-7 respectively. Event 3 represents the beginning of the activity
B while event 6 represents the completion of activities B, C and D, and the beginning of the activity E.

8. An event which represents the joint completion of more than one activity is known as a merge event,
while an event which portrays the initiation of more than one activity is called the burst event. In
Fig.(I) above event 6 and event 2 in Fig (ii) is a burst event.

9. Parallel activities between two events, without intervening events, are prohibited. Thus two or more
activities cannot be identified by the same beginning and ending events. By implication, any two
events should not be connected with more than one arrow. When two or more activities in a project
have the same head and tail events, dummy activities are needed in constructing the network. The
figure on the left is the wrong way to represent the two activities while the figure on the right shows the
correct representation of the two activities using a dummy.

WRONG
2

1 2
1
3
RIGHT

A dummy used in this manner is called an identity dummy. Dummies do not consume time or
resources. As a result of using dummy activities, other activities can be identified by unique end-
events. Dummy activities are usually shown by arrows with dashed lines.

Dummy activities are also very useful in establishing proper logical relationships in the networks
which cannot, otherwise, be adequately represented. Known as logic dummies they are used when two
chains of activities have a common event, although they are in themselves wholly or partly independent

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 Notes:- Facility Planning 6th Sem
of each other. Thus, when two or more activities have some, but not all, of their inputs in common, the
use of a logic dummy resolves the problem of representation.

Dummy

If a dummy is the only activity emanating from a node, it can be eliminated. If a dummy activity converging to
its final node, it can be eliminated. Dummy activities which portray predecessor relations that are already
implied by other activities may be removed as redundant.

A third reason to use dummies is to improve the layout of a network when they may not be strictly necessary to
represent the logic involved. This often happens at the start or finish of a network where a number of activities
either start from a certain point, or coverage to a particular point. In this way, the need for „curved‟ activities is
avoided.

10. Looping is not permitted.

3

1 2 loop 5 6

Note: 2-3-5-4 forms loop which is not allowed in drawing networks.

11. Dangling is not permitted.

3

1 2 6 7

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In this network activity 4-5 dangles which is not permitted when drawing network diagrams.

Numbering the events (Fulkerson‟s Rule)

After the network is drawn in a logical sequence, every event is assigned a number which is placed inside the
node circle. The number sequence should be such so as to reflect the flow of the network. The rule devised D R
Fulkerson is used for the purpose of numbering and involves the following steps.

1. The initial event has all outgoing arrows with no incoming arrow is numbered 1.
2. Delete all the arrows coming out of node 1. This will convert some more nodes (at least one) into
initial events. Number these events 2,3 …
3. Delete all the arrows going out from these numbered events to create more initial events. Assign the
next numbers to these events.
4. Continue until the final or terminal node, which has all arrows coming in with no arrow going out, is
numbered.

Critical Path and Float Times

Consider the following notations for the purpose of calculating the various times of activities.
Estij = Earliest start time for activity (i,j) is the one at which the activity can start without affecting
the total project time.
LEstij = Latest start time for activity (i,j) is the latest possible time by which it must start without
affecting the total project time.
Eftij = Earliest finish time for activity (i,j) is the earliest possible time by which it must finish without
affecting the total project time.
Lftij = Latest finish time for activity (i,j) is the latest possible time by which it must get completed
without delaying the project completion.
tij = Duration of the activity.
It may be noted that Eft = Es+t and Lst = Lft- t.

With reference to events

Earlist event time (E) for any event is the earliest possible time by which all the activities emanating
(stemming) from that event can be started for the project completion time to remain unaltered. Effectively, E
for any event is the maximum of the Eft of all activities terminating at that event.

Latest event time (L) for any event is the latest possible time by which all the activities terminating at that
event can be ought to be completed without the project completion time being altered. Effectively, L for any
event is the minimum of the Lst of all activities at that event.

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Critical Path: The critical path in a network diagram is the longest continuous chain of activities (i.e.a path
along which it takes the longest duration) through the network starting from first to the last event and is shown
by thick line or double lines. All activities lying on this critical part are called critical activities, as any delay in
their execution will lead to a delay in the completion of the entire project.

How to find the critical path using forward pass and backward pass technique
 Set the earliest time of the first event (node) to „0‟.
 Add the activity time(s) commencing from this first event to this to get the earliest time (T E) of the
subsequent event/s. Now start with the earliest time of the subsequent event (which you have just
calculated) and add the activity times of those activities emanating from it. Keep doing this in the
forward direction following the arrowheads until you reach the last node. In case two or more
arrowheads converge on the same subsequent node select the greater of the choice of times as the
(TE) for that subsequent activity.
 You have now completed the forward pass.
 Now set the latest time of the last event equal to the earliest time you achieved in the forward pass (also
called the contractual obligation time).
 Subtract the activity time(s) from this to get the latest time (TL) of the preceding event(s). Next, use
the latest time of this (these) preceding event(s) and subtract the activity times of those activities
diverging from it. Keep doing this in the backward direction following the arrow tails until you reach
the first event. In case of two or more arrow tails diverging (if seen from right to left; then
converging) from the same node select the lesser of the choice of time as the T L for that preceding
event. When working back to the first event one of the choice must give „0‟.
 You have now completed the backward pass (whose objective was to calculate the Latest allowable
occurrence time of each activity).
 Now trace from the first to the last event a thick line or double line or a line of another colour ink
touching all those events where the earliest time and lastest time are identical
 This is the critical path whose duration is the latest time of the last event.

Normal project cost: This is calculated by adding up all the (direct) costs of each activity and possibly the
indirect costs for that much time.

Float or Slack: Slack is with reference to an event and float is with respect to an activity. In other words, slack
is used with PERT and flat with CPM, but they may be interchangeably used in general practice. Float or slack
means extra time over and above its duration, which a non-critical activity can consume without delaying the
project.

Total Float: The total float for an activity is given by the total time, which is available for performance of the
activity, minus the duration of the activity. It represents the amount of time by which it can be delayed without
delaying the project completion date. In other words it refers to the amount of free time associated with an
activity minus the earliest start time for the activity. Thus,
Total flat = Lst – Est
Where Lst = Latest Start Time and Est = Earliest Start time

Alternatively, Total flat = Lft – Eft or Lft – Est – duration of activity

Free Float: This is that part of the float which does not affect the succeeding activities. This is the float which
is obtained when all the activities are started at the earliest. This is given by the equation.
Free float = Earliest start time for following activity – the earliest completion time for this activity.
Alternatively,
Free float = Total flat – Head slack

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Where slack or float of an event is the difference between the earliest and latest event times.

Independent Float: If all the preceding activities are completed at their latest, in some cases, no float may be
available for the subsequent activities which may, therefore, become critical. On the other hand, in some cases,
even after completion of the activities at their latest, there may still be some float left.
The part of the float, which remains unaffected by utilization of float by the preceding activities and does not
affect the succeeding activities is called Independent float. Independent float is given by the equation:
Independent float Est for the - Lft for the - Duration of present
= following preceding activity
activity activity

Alternatively, Independent float = Free float – Tail slack

Interfering float: sometimes, float of an activity if utilized wholly or in a part, may influence the starting time
of the succeeding activities. The portion of the total which affects the start of subsequent activities is known as
Interfering Flat. This is given by the equation:
Interfering Float = Lft of activity in question – Est of the following event.
Alternatively,
Interfering float = Latest event time of the head event – earliest event time of that same event

In the case of independent float and interfering flat if negative figures are obtained the float is taken as zero.
Students are requested to put down the negative fitures (if any result) as the answers.

“By employing network techniques like PERT and CPM one can plan, schedule and control a given
project very effectively.” Discuss.
Planning and control are two of the most important functions of management. Planning involves the
formulation of objectives and goals that are subsequently translated into specific plans and projects. The
function of control is to institute a mechanism that can trigger a warning signal of actual performance in
deviating from the plan. The PERT and CPM models are extremely useful for the purpose of planning,
analysing, scheduling and controlling the progress because:
 Each activity involved in the project is mapped on the network in a logical sequence with timings of
each activity marked.
 Critical activities are identified which have no slack.
 The non-critical activities are identified and free as well as total float is calculated.
 Est, Eft, Lst and Lft are marked on the diagram.
 Critical path is identified and in case of hindrance additional resources can be employed to keep to the
time schedule.
 Crashing of the activities is made feasible to conform to the changing considerations.
 PERT/CPM give us a lot of flexibility as regards resource, time and cost.

The Three Time Estimates of PERT: If the activity duration‟s in a project are uncertain then activity
scheduling calculations are done by using the expected values of the duration‟s. Sometimes, such expected
duration estimations may not give an accurate answer. Thus, rather than estimating directly the expected
completion time of an activity, three values are considered. From these times a single value is estimated for
future consideration. This is called three-time estimates in PERT. The three time estimates are as under:

1. Optimistic time (to): This is the shortest possible time to perform the activity, assuming that
everything goes perfectly well with no complications.

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2. Pessimistic time (tp): This is the maximum time that is required to perform the activity, under
extremely bad conditions. It is thus the longest time conceivable and it includes time for unusual
delays. However, such conditions do not include acts of nature like earthquakes, floods, etc.
3. Most likely time (tm): This is the most often occurring duration of the activity. It would be the best
estimate of what normally would occur. Statistically, it is the model value of duration of the activity.
The differences in these three times give a measure of the relative uncertainty involved in the activity. These
activity duration are bound to follow a probability distribution called Beta () distribution.
The three time estimates are reduced into a single expected time (t e) with the weighted average formula te
= te+4 tm + tp
6

Further, to determine duration variance in PET, we find an interval of variate values of six standard deviations
to contain the large majority of the distribution. Hence in PERT, the standard deviation is expressed as the one-
sixth of the range assumed by the variate.
Standard deviation ()= tp – to or variance (2) = [tp – to /6 ] 2
Variance of the project length is found by adding all the variances (2) of the activities lying on the critical path.
Standard deviation () of the project length is given by
________________________ ___________
 variances of activities on critical path =   2

Before calculating the above we would have to find  and consequently 2 for each activity of the network.
The standard deviation may be used to calculate the normal deviate „Z‟ and the corresponding probability of
occurrence of that event by the following formula.

Z = tS – tE

where tS is the conjectured time of completing the project or event.

Advantages and Limitations of PERT & CPM

Advantages of PERT
a. This technique gives the management the ability to plan the best possible use of resources to achieve a
given goal within the overall time and cost limitations.
b. It helps management to handle the uncertainties involved in programmes where no standard time data
of the Taylor-Gantt variety are available.
c. It presses for the right action, at the right point, and at that right time in the organisation.

Limitations of PERT
a. The basic difficulty comes in the way of time estimates for the completion of activities because
activities are of non-repetitive type.
b. This technique does not consider resources required at various stages of the project.
c. Use of this technique for active control of a project requires frequent updating and revising the PERT
calculations and this proves quite a costly affair.

Advantages of CPM
a. It helps in ascertaining the time schedule.
b. With its aid, control by the management is made easy.
c. It makes better and detailed planning possible.

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d. It provides a standard method for communicating project plans, schedules, time and cost performance.
e. It identifies the most critical elements and thus more attention can be paid to these activities.

Limitations of CPM

a. CPM fails to incorporate statistical analysis in determining the time estimates.

b. It operates on the assumption that there is a precise known time that each activity in the project will
take but this may not be true in actual life.
c. It is difficult to use CPM as a controlling device for the simple reason that one must repeat the entire
evaluation of the project each time when changes are introduced into the network. It may be
remembered that CPM was initially developed as a static planning model and not as a dynamic
controlling device.

Distinction between CPM and PERT

The main points of distinction between CPM and PERT are as below:

1. CPM is activity oriented, i.e. CPM network is built on the basis of activities. Also results of various
calculations are considered in terms of activities of the project. On the other hand, PERT is event
oriented.
2. CPM is a deterministic model i.e., it does not take into account the uncertainties involved in the
estimation of time for execution of a job to an activity. It uses a single time estimate. It completely
ignores the probabilistic elements of the problem. PERT, however, is a probabilistic model. It uses
three estimates of the activity time: optimistic, pessimistic and most likely; with a view to take
into account time uncertainty. Thus the expected duration of each activity is probabilistic and
expected duration indicates that there is fifty percent probability of getting the job done within that
time.
3. CPM places dual emphasis on time and cost and evaluates the trade-off between project cost and
project time. By deploying additional resources, it allows the project manager to manipulate project
duration within certain limits so that project duration can be shortened at an optimal cost. One the
other hand, PERT is primarily concerned with time. It helps the manager to schedule and coordinate
various activities so that the project can be completed on scheduled time.

It is difficult to say with certainty which approach is commonly used. The nature of the project generally
dictates the use of an approach. CPM is commonly used for those projects which are repetitive in nature,
(e.g., construction projects) and where one has prior experience of handling similar projects. PERT is
generally used for those projects where time required to complete various activities is not known apriori.
Thus, for planning and scheduling research and development projects, PERT is widely used. For such project it
is very necessary that the project is completed in time, PERT can determine the probabilities of completing
various stages of such projects. It can identify the activities which have high potential of causing delays in
completing the project scheduled date so that the manager can take preventive measures to reduce possible
delays to maintain the project schedule.
However, the differences have almost faded and both these tools have merged together to provide a single tool
of management control.

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 Notes:- Facility Planning 6th Sem
PERT
1. The origin is military (naval).
2. It is an event-oriented approach.
3. There is allowance for uncertainty.
4. It has three time estimates.
5. It is probabilistic model with uncertainty in
activity duration.
6. It does not demarcate between critical and non-
critical activities.
7. It is especially suitable when high precision is
required in time estimates. E.g. defence projects.
8. Time is averaged.
9. The concept of „crashing‟ is not applied.
10. It lays emphasis on reduction of the execution
time of the project without too much cost
implications. It is time-based.
11. Used to schedule first time projects due to its
probabilistic nature that is suitable when activity
times are not known with certainty.
CPM
1. The origin is industrial.
2. It is an activity-oriented system.
3. No such allowance.
4. There is only one single estimate of time and the
emphasis is on cost.
5. It is a deterministic model with well-known
activity (single) time based upon past experience.
6. It marks critical activities.
7. It is suitable when reasonable precision is
required e.g. Civil construction projects, industrial
expansion schemes, etc.
8. No average of time is involved.
9. The concept of crashing is applied.
10. It lays emphasis on the greatest reduction in
completion time with the least increase in project
cost. It is cost-based.
11. Used to schedule projects that are repetitive in
nature due to its deterministic nature.

PROBLEM: For the network shown below normal time, crash time, normal cost and crash
cost are given in the table. Contract the network by crashing it to optimum and calculate the
optimum project cost and saving.

Indirect cost is Rs.100/- per day

Activity Normal Crashing

Time in days Cost in Rs. Time in days Cost in Rs.
1-2 3 300 2 400
2-3 6 480 4 520
2-4 7 2100 5 2500
2-5 8 400 6 600
3-4 4 320 3 360
4-5 5 500 4 520
4100

Solution:

Step-I Draw the network and identify critical path.

Project duration - 18 days

Normal cost - Rs.4100/-

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 Notes:- Facility Planning 6th Sem

Step-II To contract the network identify the activities on critical path which have cost slope less than
the indirect cost.

Cost slope = Crash cost – normal cost

Normal time – crash time

Activity Cost slope

1-2 100
2-3 20
2-4 200
2-5 100
5-4 40
4-5 20

Step-III: Crashing activity having minimum cost slope i.e. 2-3 and 4-5
Critical path: 15 days

Step IV: Path remains the same.

Crash activity having reset minimum cost slope i.e. 3.4
Critical path – 14 days

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 Notes:- Facility Planning 6th Sem
This is the optimum network.

Total direct cost for activities on this network is:

300+520+2100+400+360+520=Rs.4200/-

Indirect cost : 14 days x 100 = Rs.1400/-

Director + Indirect cost = 4200+1400=Rs.5600/-

Cost without crashing

Direct cost: Rs.4100/-
Indirect cost: 18days x100=Rs.1800/-
Total cost: Rs.4100+1800=Rs.5900/-
Saving: Rs.5900-5600=Rs.300/-

Project Time & Cost in Networking

Introduction

Lot of money is involved for completing various activities in a project. Hence, the project manager always
remains conscious of time as well as costs involved. CPM assumes direct relationship between time and cost
and uses time-cost trade-off concept, which is its unique feature. This concept relates to the fact that on a crash
basis, it will cost a little more but even this increase in cost may prove economical in various ways. As such the
project manager will keep in mind the time-cost consideration before taking decisions regarding the project and
its different activities.

Crashing

Crashing is employed when we want to shorten the project completion time by spending extra resources i.e.
ultimately more money. In real life, it is always possible to employ more resources. Consider, for example, the
activity of laying bricks which requires a gang of a mason assisted by a few labourers. By increasing the
number of labourers the activity duration can be shortened or crashed. But there is a limit to this. Too many
labourers per mason would not reduce the duration any more since they are liable to jam up. Concerned
specialists would have to estimate the crashing limit for each activity as also the extra money for crashing each
activity. Once these estimates are made available an analysis can be made to determine the time-cost trade-off
curve i.e. what cost it takes to crash the project to a given duration. In other words, crash time is the minimum
activity duration to which an activity can be compressed by increasing the resources and hence by increasing the
direct costs.

Time-cost optimisation algorithm

The process of shortening a project is called crashing and is usually achieved by adding extra resources to an
activity. Project crashing involves the following steps:
Step one: Find the normal critical path and identify the critical activities. List all possible paths starting with the
critical path and followed by sub-critical paths. Write the duration of each path.

Step two: Calculate the cost slope for the different activities by using the formula.

Cost slope = Crash cost-normal cost

Normal time-crash time

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 Notes:- Facility Planning 6th Sem
The crash slope indicates the extra cost required to expedite an activity per unit time.

Step three: Rank the activities in the ascending order of the crash slope and mark a tally for the number of days
each activity can be crashed.

Step four: Crash the activities on the critical path beginning with those that are the least expensive to crash until
they are crashed to maximum possible extent. If an activity selected for crashing lies on any other listed path it
will reduce the duration of those paths as well. Find the additional direct cost resulting from cashing the activity
as well indirect cost now expended and add the two to the normal direct cost to achieve the total cost. The
following table will be of great use to systematize the crashing process.
1 Activities crashed
2 No. of days crashed
3 Revised Project duration
4 Normal Direct (Activity) costs
5 Direct costs of crashing (cumulative
6 Indirect costs involved (if any)
7 =4+5+6 Total cost

The indirect costs (if any) are calculated as follows:

Indirect costs per unit time X time duration of revised project duration.
For safety sake, students should crash one day at a time and cancel one stick off the tally. It must be noted that
indirect costs are related to time and decrease with a reduction in project duration while the direct costs of
crashing activities are inversely proportionate to time i.e. they rise with a decrease in project duration. The net
effect of these two costs determine total cost.

Step five: As the duration of the critical path gets reduced, other paths too get critical. Now further reduction in
project duration is only possible if the critical paths are crashed simultaneously. The problem (of crashing)
ends when one of the co-critical paths to be crashed runs out of crashing time.
Students are requested to carefully note whether they have been asked minimum project duration and associated
cost or optimum project duration and associated cost after crashing. Optimum project duration is when the
costs associated with the project are minimum. Minimum project duration is the shortest project completion
time irrespective of the cost involved.

Note: crashing may also be more conveniently carried out, when the network is plotted on a time graph, which
we call a scheduled network or a squared network.

SOLVED EXERCISES (2.5)

1. C & D starts concurrently, after completion of A&B which are independently. E follows C & F follows D.
Job ends after completion of E & F.

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 Notes:- Facility Planning 6th Sem

2. A & B starts the job concurrently. C follows A & D follows B. E starts after completion of C & D. F
follows E and it is the last activity.

3. Operation Post Operation

A precedes B
B -“- C, D, E
C -“- F
D -“- F
E -“- F

3. Activity 1-2, 2-3, 2-4, 2-5, 3-4, 4-5

4
1
2
5

4. Activity Immediate predecessor Days

A - 5
B - 8
C A 2
D A 6
E B, C 4
F B,C,D 3

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 Notes:- Facility Planning 6th Sem

1
2 4 6

5. Activity Immediate predecessor Days

A - 4
B - 2
C - 2
D - 4
E B 3
F C 2
G D, F 3
H E, G 4

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