URBS 609 PERT, Unit 2

PERT/CPM CALCULATIONS
Basic Techniques Using MS Excel And Manual Calculation

About This Training Module

This training module was crafted using PowerPoint
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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 Stepanalysis 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 PERTStandard 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) probability(TO x 1 + TL x 4 + TP x 1) / 6 = TE 1) 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} {read (pessimisticAs 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
Set up in tabular form, it might look like this

A Refresher
TASK ID 1 2 3 4 5 6 7 8 Description Mark Utilities Dig Holes Buy Trees Buy Flowers Plant Trees Plant Flowers Buy Edging Install Edging Duration (Days)

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Set up in visual form it 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
TASK 1 2 5 6 8 TOTAL TASK 3 4 7 TOTAL TO CRITICAL PATH TASKS (Longest Duration) TL TP TE

TO

TL

TP

OTHER PROJECT TASKS TE

TO-Optimistic Remember

TM-Likely

TP-Pessimistic TE-Expected (Derived by PERT)

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
TASK 1 2 5 6 8 TOTAL TASK 3 4 7 TOTAL TO 1 2 1 1 1 7 TO .5 .5 .5 1.5 CRITICAL PATH TASKS (Longest Duration) TL TP TE 3 5 3 4 7 4.17 3 6 3.17 3 5 3 2 4 2.17 15 28 15.6 OTHER PROJECT TASKS TL TP TE 1 3 1.25 1 3 1.25 1 3 1.25 3 9 3.75 SD .67 .83 .83 .67 .5 3.5 SD .42 .42 .42 1.26 V .44 .69 .69 .44 .25 2.51 V .17 .17 .17 .51

TO-Optimistic

TM-Likely

TP-Pessimistic TE-Expected (Derived by PERT) V=Variance

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SD=Standard Deviation

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

TASK 1 2 5 6 8 TOTAL TASK 3 4 7 TOTAL TO 1 2 1 1 1 7 TO .5 .5 .5 1.5 CRITICAL PATH TASKS (Longest Duration) TL TP TE ES EF LS LF Slack 3 5 3 0 3 0 3 0 4 7 4.17 3 7.17 3 7.17 0 3 6 3.17 7 10.17 7 10.17 0 3 5 3 10 13 10 13 0 2 4 2.17 13 15.17 13 15.17 0 15 28 15.51 OTHER PROJECT TASKS TL TP TE ES EF LS LF FLOAT 1 3 1.25 0 1.25 3 4.25 3 1 3 1.25 0 1.25 3 4.25 3 1 3 1.25 1.25 2.50 4.25 5.50 3 3.75 3 9 SD .67 .83 .83 .67 .5 3.5 SD .42 .42 .42 1.26 V .444 .694 .694 .444 .254 2.530 V .17 .17 .17 .51

ES=Earliest Start EF=

Earliest Finish

LS=Latest Start

LF=Latest Finish

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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: (DCOMPUTE: (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) 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) (15(15-15.51)/1.59=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((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 Expectations

Sum Pert Expectations using either autoautosum 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 autofeature 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 Formula used for PERT Analysis Completion Probability

Excel uses 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 cost-per(crashed time saved) 3. Develop project network (PERT) 4. Crash the activity on the critical path with the lowest cost-forcost-forcrashing 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 nonpaths are critical.
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CPM Analysis
A typical CPM table might have the following structure:
Activity Begin End Time (Crashed) Time (Normal) Cost (Crashed) Cost (Normal) Time Saved Cost Increase Cost / Week

Foundation

4000

3000

1000

1000

Frame

8000

4000

4000

1333

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

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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 same preparation:
1. Define the Project and all of its significant activities or tasks. 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 PERTExcel,Fullerton: Cal State, 2000 MS Project, by Microsoft Corporation MS Excel, by Microsoft Corporation PM Body of Knowledge (PMBOK), Philadelphia: PMI, 2000 Project Management Institute (PMI) Resource Center
Project Management Institute Website

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 PrenticeIndia Private Limited, 1974

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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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