STUDY UNIT TWO

PROGRAMME EVALUATION AND REVIEW TECHNIQUE

AND CRITICAL PATH METHOD (PERT AND CPM)
5.1. INTRODUCTION
Programme Evaluation and Review Technique (PERT) and Critical Path
Method (CPM) are two techniques that are widely used in planning and
scheduling of the large projects. A project is a combination of various
activities. For example, Construction of a house can be considered as a
project. Similarly, conducting a public meeting may also be considered as
a project.

In the above examples, construction of a house includes various activities

such as searching for a suitable site, arranging the finance, purchase of
materials, digging the foundation, construction of superstructure etc.
Conducting a meeting includes printing of invitation cards, distribution of
cards, arrangement of platform, chairs for audience etc. In planning and
scheduling the activities of large sized projects, the two network
techniques
• PERT
• CPM
They are conveniently used to estimate and evaluate the project
completion time and control the resources to see that the project is
completed within the stipulated time and at minimum possible cost. Many
managers, who use the PERT and CPM techniques, have claimed that
these techniques drastically reduce the project completion time. But it is
wrong to think that network analysis is a solution to all bad management
problems. In this lecture, let us discuss how PERT and CPM are used to
schedule the projects.

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Initially, projects were represented by milestone chart and bar chart.
But they had little use in controlling the project activities. Bar chart
simply represents each activity by bars of length equal to the time taken
on a common time scale as shown in figure 5. l. This chart does not show
interrelationship between activities. It is very difficult to show the
progress of work in these charts. An improvement in bar charts is
milestone chart. In milestone chart, key events of activities are identified
and each activity is connected to its preceding and succeeding activities
to show the logical relationship between activities. Here each key event is
represented by a node (a circle) and arrows instead of bars represent
activities, as shown in figure 5.2. The extension of milestone chart is
PERT and CPM network methods.

Figure 5.1: Bar chart Figure 5.2: Milestone chart

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5.2. PERT AND CPM
In PERT and CPM the milestones are represented as events. Event or node
is either starting of an activity or ending of an activity. Activity is
represented by means of an arrow, which is resource consuming. Activity
consumes resources like time, money and materials. Event will not
consume any resource, but it simply represents either starting or ending
of an activity. Event can also be represented by rectangles or triangles.
When all activities and events in a project are connected logically and
sequentially, they form a network, which is the basic document in
network-based management. The basic steps for writing a network are:
(a) List out all the activities involved in a project. Say, for example, in
building construction (in order), the activities are:
• Site selection,
• Arrangement of Finance,
• Preparation of building plan,
• Approval of plan by municipal authorities
• Purchase of materials,
• Digging of foundation,
• Filling up of foundation,
• Building superstructure,
• Fixing up of doorframes and window frames
• Roofing,
• Plastering,
• Flooring,
• Electricity and water fittings,
• Finishing.

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(b) Once the activities are listed, they are arranged in sequential manner
and in logical order. For example, foundation digging should come before
foundation filling and so on.
(c) After arranging the activities in a logical sequence, their time is
estimated and written against each activity. For example: Foundation
digging: 10 days, or 1½ weeks.
(d) Some of the activities do not have any logical relationship, in such
cases; we can start those activities simultaneously. For example,
foundation digging and purchase of materials do not have any logical
relationship. Hence both of them can be started simultaneously. Suppose
foundation digging takes 10 days and purchase of materials takes 7 days,
both of them can be finished in 10 days. And the successive activity, say
foundation filling, which has logical relationship with both of the above,
can be started after 10 days. Otherwise, foundation digging and purchase
of materials are done one after the other; filling of foundation should be
started after 17 days.
(e) Activities are added to the network, depending upon the logical
relationship to complete the project network.
Some of the points to be remembered while drawing the network are:

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(a) There must be only one beginning and one end for the network, as
shown in figure 5.3.

(b) Event number should be written inside the circle or node (or
triangle/square/rectangle etc). Activity name should be capital
alphabetical letters and would be written above the arrow. The time
required for the activity should be written below the arrow as in figure 5.
4

Figure 5.4:Numbering and naming the activities.

(c) While writing network, see that activities should not cross each other.
And arcs or loops as in figure 5.5 should not join Activities.

Figure 5.5. Crossing of activities not allowed.

(d) While writing network, looping should be avoided. This is to say that
the network arrows should move in one direction, i.e. starting from the
beginning should move towards the end, as in figure 5.6.

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Figure 5. 6. Looping is not allowed.

(e) When two activities start at the same event and end at the same event,
they should be shown by means of a dummy activity as in figure 15.7.
Dummy activity is an activity, which simply shows the logical
relationship and does not consume any resource. It should be represented
by a dotted line as shown. In the figure, activities C and D start at the
event 3 and end at event 4. C and D are shown in full lines, whereas the
dummy activity is shown in dotted line.

Figure 15.7: Use of Dummy activity.

(f) When the event is written at the tail end of an arrow, it is known as tail
event. If event is written on the head side of the arrow it is known as head
event. A tail event may have any number of arrows (activities) emerging
from it. This is to say that an event may be a tail event to any number of
activities. Similarly, a head event may be a head event for any number of

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activities. This is to say that many activities may conclude at one event.
This is shown in figure 15.8.

Figure 15.8Tail event and Head event.

The academic differences between PERT network and CPM network are:
(i) PERT is event oriented and CPM is activity oriented. This is to say that
while discussing about PERT network, we say that Activity 1-2, Activity
2-3 and so on. Or event 2 occurs after event 1 and event 5 occurs after
event 3 and so on. While discussing CPM network, we say that Activity
A follows activity B and activity C follows activity B and so on. Referring
to the network shown in figure 9, we can discuss as under. PERT way:
Event 1 is the predecessor to event 2 or event 2 is the successor to event.

1. Events 3 and 4 are successors to event 2 or event 2 is the predecessor

to events 3 and 4.CPM way: Activity 1-2 is the predecessor to Activities
2-3 and 2-4 or Activities 2-3 and 2-4 are the successors to activity 1-2.

(ii) PERT activities are probabilistic in nature. The time required to

complete the PERT activity cannot be specified correctly. Because of
uncertainties in carrying out the activity, the time cannot be specified
correctly. Say, for example, if you ask a contractor how much time it takes
to construct the house, he may answer you that it may take 5 to 6 months.
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This is because of his expectation of uncertainty in carrying out each one
of the activities in the construction of the house. Another example is if
somebody asks you how much time you require to reach railway station
from your house, you may say that it may take 1 to 1½ hours. This is
because you may think that you may not get a transport facility in time.
Or on the way to station, you may come across certain work, which may
cause delay in your journey from house to station. Hence PERT network
is used when the activity times are probabilistic.

Figure 15.9: Logical relationship in PERT and CPM.

Figure 15.10: Three Time estimates.

There are three time estimates in PERT, they are:

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(a) OPTIMISTIC TIME: Optimistic time is represented by tO. Here the
estimator thinks that everything goes on well and he will not come across
any sort of uncertainties and estimates lowest time as far as possible. He
is optimistic in his thinking.
(b) PESSIMISTIC TIME: This is represented by tP. Here estimator
thinks that everything goes wrong and expects all sorts of uncertainties
and estimates highest possible time. He is pessimistic in his thinking.

(c) LIKELY TIME: This is represented by tL. This time is in between

optimistic and pessimistic times. Here the estimator expects he may come
across some sort of uncertainties and many a time the things will go right.
So while estimating the time for a PERT activity, the estimator will give
the three time estimates. When these three estimates are plotted on a
graph, the probability distribution that we get is closely associated with
Beta Distribution curve.

For a Beta distribution curve as shown in figure 6.10, the characteristics

are:
• Standard deviation = (tP – tO)/6 = σ ,
• Range=tP – tO .
• Variance = {(tP – tO)/6}2 = σ 2
• Expected Time or Average Time = tE = (tO + 4tL + tP) / 6
These equations are very important in the calculation of PERT times.
Hence the student has to remember these formulae. Now let us see how to
deal with the PERT problems.
(g) Numbering of events: Once the network is drawn the events are to be
numbered. In PERT network, as the activities are given in terms of events,
we may not experience difficulty. Best in case of CPM network, as the
activities are specified by their name, is we have to number the events.
For numbering of events, we use D.R.
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Fulkerson’s rule .As per this rule:
An initial event is an event, which has only outgoing arrows from it and
no arrow enters it. Number that event as 1.
Delete all arrows coming from event 1. This will create at least one more
initial event. Number these initial events as 2, 3 etc. Delete all the
outgoing arrows from the numbered element and which will create some
more initial events. Number these events as discussed above. Continue
this until you reach the last event, which has only incoming arrows and
no outgoing arrows.

While numbering, one should not use negative numbers and the initial
event should not be assigned ‘zero’. When the project is considerably
large, at the time of execution of the project, the project manager may
come to know that some of the activities have been forgotten and they are
to be shown in the current network. In such cases, if we use skip
numbering, it will be helpful. Skip numbering means, skipping of some
numbers and these numbers may be made use to represent the events
forgotten. We can skip off numbers like 5, 10, 15 etc. or 10, 20 and 30 or
2, 12, 22 etc.
Another way of numbering the network is to start with 10 and the second
event is 20 and so on. This is a better way of numbering the events.Let
now see how to write network and find the project completion time by
solving some typical problems.

Problem 5.1.
A project consists of 9 activities and the three time estimates are given
below. Find the project completion time (TE).

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1. Write the network for the given project and find the project completion
time?

Solution
In PERT network, it is easy to write network diagram, because the
successor and predecessor event relationships can easily be identified.
While calculating the project completion time, we have to calculate te i.e.
expected completion time for each activity from the given three-time
estimates. In case, we calculate project completion time by using tO or tL
or tP separately, we will have three completion times. Hence it is
advisable to calculate tE expected completion time for each activity and
then the project completion time. Now let us work out expected project
completion time.

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Problem 5.3
There are seven activities in a project and the time estimates are as follows
Activities Time in weeks

Activity Time in weeks

tO tL Tp
A 2 6 10
B 4 6 12
C 2 3 4
D 2 4 6
E 3 6 9
F 6 10 14
G 1 3 5

The logical of activities are:

1. Activities A and B start at the beginning of the project.
2. When A is completed C and D start.
3. E can start when B and D are finished.
4. F can start when B, C and D are completed and is the final activity.
5. G can start when F is finished and is final activity the.

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(a) What is the expected time of the duration of the project?
(b) What is the probability that project will be completed in 22 weeks?

Solution
First we use to establish predecessor and successor relationship and then
find standard deviation σ , variance σ2 and expected time of completing
activities, tE.

Activities Predecessor Weeks tE =tO + σ= σ2

Event tO tL tP 4tL+tP /6 (Tp-
tO)/6
A - 2 6 10 6 8/6=1.33 1.77
B - 4 6 12 10 8/6=1.33 1.77
C A 2 3 4 3 2/6=0.33 0.11
D A 2 4 6 4 4/6=0.66 0.44
E B, D 3 6 9 5 1
F B,C,D 6 10 14 10 8/6=1.33 1.77
G F 1 3 5 3 4/6=0.66 0.44

Now to write network the logical (predecessor) relationship is considered.

Figure 5.16
After writing the network, numbering of events and tE is entered on the
network. Next the project completion time is worked out. The project
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completion time TE = 23 weeks. This project has two critical paths i.e. A
– D – F – G and B – F – G.
(1)
Critical path Variance σ2
A 1.77
D 0.44
F 1.77
G 0.44
Σσ2 4.42
Σσ2 = 4.42 = 2.10

(2)
Critical path Variance σ2
B 1.77
F 1.77
G 0.44
Σσ2 3.98
Σσ2 = 3.98 = 1.99

In critical path method, the time duration of activity is deterministic in

nature i.e. there will be a single time, rather than three time estimates as
in PERT networks. The network is activity oriented. The three ways in
which the CPM type of networks differs from PERT networks are:

CPM PERT
• Network is constructed on the • Network is constructed on the
basis of jobs or events (event oriented)
activities(activity oriented

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 • CPM does not take • PERT network deals with
uncertainties in the estimation uncertainties and hence three
of times. The time required is time estimates are
deterministic and hence only considered(Optimistic Time,
one time is considered Most likely Time and Pessimistic
Time)
• CPM times are related to cost. • As there is certainty of time,
That is can be by decreasing activity duration cannot be
the activity duration direct reduced. Hence cost cannot be
costs increased(crashing of expressed correctly. We can say
activity duration is possible) expected cost of completion of
activity (crashing of activity
duration is not possible

PROJECT CRUSHING
• Crashing
– reducing project time by expending additional resources
• Crash time
– an amount of time an activity is reduced
• Crash cost
– cost of reducing activity time
• Goal
– reduce project duration at minimum cost

BENEFITS OF PERT/CPM
• Useful at many stages of project management
• Mathematically simple
• Give critical path and slack time
• Provide project documentation
• Useful in monitoring costs
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CPM/PERT CAN ANSWER THE FOLLOWING IMPORTANT
QUESTIONS:
• How long will the entire project take to be completed? What are the
risks involved?
• Which are the critical activities or tasks in the project which could
delay the entire project if they were not completed on time?
• Is the project on schedule, behind schedule or ahead of schedule?
If the project has to be finished earlier than planned, what is the best way
to do this at the least cost?

LIMITATIONS TO CPM/PERT
• Specified precedence relationships
• Over emphasis on critical paths
• Deterministic CPM model
• Activity time estimates are subjective and depend on judgment
• PERT assumes a beta distribution for these time estimates, but the
actual distribution may be different
• PERT consistently underestimates the expected project completion
time due to alternate paths becoming critical
To overcome the limitation, Monte Carlo simulations can be performed
on the network to eliminate the optimistic bias

COMPUTER SOFTWARE FOR PROJECT MANAGEMENT

• Microsoft Project (Microsoft Corp.)
• MacProject (Claris Corp.)
• PowerProject (ASTA Development Inc.)
• Primavera Project Planner (Primavera)
• Project Scheduler (Scitor Corp.)
• Project Workbench (ABT Corp.)
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