Project Time Management

Program Evaluation and Review

Technique (PERT)
 PERT is a network analysis technique used to
estimate project duration when there is a high
degree of uncertainty about the individual activity
duration estimates
 PERT uses probabilistic time estimates
 Duration estimates based on using optimistic, most
likely, and pessimistic estimates of activity durations,
or a three-point estimate
 PERT attempts to address the risk associated with
duration estimates by developing schedules that are
more realistic
 It involves more work than CPM since it requires several
duration estimates
 PERT Formula and Example
 PERT weighted average =
optimistic time + 4X most likely time + pessimistic time
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 Example:
PERT weighted average =
8 workdays + 4 X 10 workdays + 24 workdays = 12 days
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where optimistic time= 8 days,
most likely time = 10 days, and
pessimistic time = 24 days
 Examples of Beta Distributions
P(time)

P(time)
a m t b a t m b
Time Time
P(time)

a m=t b
Time
Project with Probabilistic Time Estimates
Equipment Equipment testing
installation and modification
1 4 System Final
6,8,10 2,4,12 training debugging
System 10
development 8
Manual 3,7,11 1,4,7
Start 2 testing Finish
3,6,9
5 11
Position 2,3,4 9 1,10,13
recruiting Job Training 2,4,6
System
3 6 System changeover
1,3,5 3,4,5 testing

Orientation
7
2,2,2
 Activity Time Estimates

TIME ESTIMATES (WKS) MEAN TIME VARIANCE

ACTIVITY a m b t б2
1 6 8 10 8 0.44
2 3 6 9 6 1.00
3 1 3 5 3 0.44
4 2 4 12 5 2.78
5 2 3 4 3 0.11
6 3 4 5 4 0.11
7 2 2 2 2 0.00
8 3 7 11 7 1.78
9 2 4 6 4 0.44
10 1 4 7 4 1.00
11 1 10 13 9 4.00
 Probabilistic Time Estimates
 Beta distribution
 probability distribution traditionally used in CPM/PERT

a + 4m + b
Mean (expected time): t=
6
2
b-a
Variance: 2 = 6
where
a = optimistic estimate
m = most likely time estimate
b = pessimistic time estimate
Activity Early, Late Times & Slack

ACTIVITY t б ES EF LS LF S
1 8 0.44 0 8 1 9 1
2 6 1.00 0 6 0 6 0
3 3 0.44 0 3 2 5 2
4 5 2.78 8 13 16 21 8
5 3 0.11 6 9 6 9 0
6 4 0.11 3 7 5 9 2
7 2 0.00 3 5 14 16 11
8 7 1.78 9 16 9 16 0
9 4 0.44 9 13 12 16 3
10 4 1.00 13 17 21 25 8
11 9 4.00 16 25 16 25 0
 Earliest, Latest, and Slack
Critical Path 2-5-8-11
1 0 8 4 8 13
8 1 9 5 16 21
10 13 17

16
1 0 3
8 9
2 0 6 Finish
Start 7 9 16
6 0 6 9
5 6 11 16 25
3 6 9 9 9 13
9 16 25
4 12 16
3 0 3 6 3 7
3 2 5 4 5 9

7 3 5
2 14 16
Total Project Variance
2 = б22 + б52 + б82 + б112
 = 1.00 + 0.11 + 1.78 + 4.00
= 6.89 weeks
 Project Crashing
 Projects will sometimes have deadlines that are impossible to meet
using normal procedures
 By using exceptional methods it may be possible to finish the project
in less time than normally required
 However, this usually increases the cost of the project
 Reducing a project’s completion time is called crashing

 Crashing a project starts with using the normal time to create the
critical path
 The normal cost is the cost for completing the activity using normal
procedures
 If the project will not meet the required deadline, extraordinary
measures must be taken
 The crash time is the shortest possible activity time and will require
additional resources
 The crash cost is the price of completing the activity in the earlier-
than-normal time
 Four Steps to Project Crashing
1. Find the normal critical path and identify the critical activities
2. Compute the crash cost per week (or other time period) for all
activities in the network using the formula

Crash cost – Normal cost

Crash cost/Time period =
Normal time – Crash time
3. Select the activity on the critical path with the smallest crash cost
per week and crash this activity to the maximum extent possible
or to the point at which your desired deadline has been reached
4. Check to be sure that the critical path you were crashing is still
critical. If the critical path is still the longest path through the
network, return to step 3. If not, find the new critical path and
return to step 2.
 Normal Time and Cost
vs. Crash Time and Cost
$7,000 –

$6,000 –
Crash cost
$5,000 – Crashed activity

Slope = crash cost per week

$4,000 –

$3,000 – Normal activity

Normal cost
$2,000 –

$1,000 –
Crash time Normal time

– | | | | | | |
0 2 4 6 8 10 12 14 Weeks
 Project Crashing
TOTAL
NORMAL CRASH ALLOWABLE CRASH
TIME TIME NORMAL CRASH CRASH TIME COST PER
ACTIVITY (WEEKS) (WEEKS) COST COST (WEEKS) WEEK

1 12 7 $3,000 $5,000 5 $400

2 8 5 2,000 3,500 3 500
3 4 3 4,000 7,000 1 3,000
4 12 9 50,000 71,000 3 7,000
5 4 1 500 1,100 3 200
6 4 1 500 1,100 3 200
7 4 3 15,000 22,000 1 7,000
$75,000 $110,700
 $500 $7000
2 4
FROM …
8 12 $7000
7 Project Duration:
1 4
12
36 weeks

$400 3 6
4 5 4
4 $200
$3000
$200

$500 $7000
2 4
TO… 8 12 $7000
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Project Duration: 1 4
31 weeks 7
Additional Cost:
$400 3 6
$2000
4 5 4
4 $200
$3000
$200
 Time-Cost Relationship
• Crashing costs increase as project duration
decreases
• Indirect costs increase as project duration
increases
• Reduce project length as long as crashing costs
are less than indirect costs
 Time-Cost Tradeoff

Minimum cost = optimal project time

Total project cost

Indirect cost
Cost ($)

Direct cost

Crashing Time
Project duration
 Earned Value - What is it?
 Simply, it is a project monitoring and measurement
system that:
1. establishes a clear relationship between planned
accomplishments and actual accomplishments
2. reinforces and rewards good planning practices

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 Earned Value - What is it?
 Basic concepts of Earned Value Management (EVM)
 Each task in a project earns value as planned work is completed
 For example, if you were paid on this basis, you would earn $$ at key
milestones based on the value of what you have completed (earned value)
 Earned value can be compared to actual cost and budgeted cost to
determine variance and predict future performance

 The budgeted cost (e.g., dollars, person-hours, person-days, etc.) in

terms of your baseline plan/budget of the work performed up to a
specified point in time
 Also known as Budgeted Cost of Work Performed (BCWP)
 Each task in the Work Breakdown Structure (WBS) is assigned a
BCWP based on its individual cost.
 Project BCWP is total of BCWP for all tasks required to complete the project

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 Earned Value Components
 Planned Value (PV) Budgeted cost of the work scheduled (BCWS)
 How much work (person-hours) you planned to have
accomplished at a given point in time (this is from the WBS in
your plan)
 Actual Cost AC ( ACWP)
 How much work (person-hours) you have actually spent at a given
point in time
 Earned Value EV Budgeted cost of the work performed (BCWP)
 The value (person-hours) in terms of your base budget of what
you have accomplished at a given point in time (or, % complete X
Planned Value)

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 Earned Value: Example
Today

18

14

On Day X:
 PLANNED VALUE (Budgeted cost of the work scheduled, BCWS) =
18 + 10 + 16 + 6 = 50
 EARNED VALUE (Budgeted cost of the work performed, BCWP) =
18 + 8 + 14 + 0 = 40
 ACTUAL COST (of the work performed , ACWP) =
45 (from your project tracking - not evident in above chart)

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 Earned Value: Example
Actual Cost: what you Today
have actually spent to this
Cost (Person-Hours)

point in time.

Planned Value: what your

plan called for sending on the
tasks planned to be completed
by this date.

Earned Value: value (cost)

of what you have
accomplished to date, per the
base plan.

Time (Date)
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 Earned Value: Example
Today
Cost (Person-Hours)

Over
Budget

Behind
Schedule

Time (Date)
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 Variance
 Any schedule or cost deviation from a specific
plan.
 Used within an organization to verify the budget
and schedule for a project
 Frequently used as a key component of plan
reviews and performance measurement

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 Variance
 Must compare scheduling and budget variance at the
same time
 Schedule variance: deviations from work planned – not a
measure of changes in cost
 Cost variance: deviations from the
budget – not a measure of work scheduled vs. work
completed
 Example: applying more $$/people to a task may maintain
the schedule, but it adds to cost… schedule on track… over
budget on expenses (cost)

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 Performance Indices
 Cost Performance Index
 CPI = BCWP/ACWP
 Schedule Performance Index
 SPI = BCWP/BCWS
 Analysis
 CPI > 1.0  exceptional performance
 CPI < 1.0  poor performance
 Similar for SPI (Schedule Performance Index)

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 Earned Value & Variance: Example
18

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On Day X:
 PLANNED VALUE (BCWS) = 18 + 10 + 16 + 6 = 50
 EARNED VALUE (BCWP) = 18 + 8 + 14 + 0 = 40
 ACTUAL COST (ACWP) = 45 (from your project tracking)
Therefore:
 Schedule Variance = BCWP – BCWS = 40 - 50 = -10 (behind schedule)
 Schedule Performance Index = 40 / 50 = 0.8, or 80% of plan (a B-, at best)
 Cost Variance = BCWP - ACWP = 40 - 45 = -5
 Cost Performance Index = 40/45 = .89, or you’re getting an 89¢ return on every $1.00 (or,
person-hour) spent on this project
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 Primary Measurement Methods
 Measurable efforts
 Discrete increments of work with definable
schedule and tangible results (i.e., real tasks with a
deliverable)
 Level of effort
 Work that is not discernable in discrete,
measurable tasks (e.g., project management,
training)

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 Determining % Complete – When?
 Allocate based on time spent – but what if you
spend more time than allocated?
 Allocate 50% at start of task, 50% at end
 But only for small, discrete tasks
 Allocate 100% at start of task
 Allocate 100% at end of task
 Best solution if you keep tasks very small Our approach
 Allocate value at Critical Milestones
 Good solution when using with contract work
 Others?

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