SUBJECT: PROJECT MANAGEMENT AND ENTREPRENEURSHIP (HSMC-701)

UNIT 11: PROJECT SCHEDULING AND COSTING

CRITICAL PATH METHOD (CPM ) AND

PROGRAM EVALUATION AND REVIEW TECHNIQUE ( PERT)
Any project involves planning, scheduling and controlling a number of interrelated activities with use of limited resources, namely,
men, machines, materials, money and time. The projects may be extremely large and complex such as construction of a power plant, a
highway, a shopping complex, ships and aircraft, introduction of new products and research and development projects. It is required that
managers must have a dynamic planning and scheduling system to produce the best possible results and also to react immediately to the
changing conditions and make necessary changes in the plan and schedule. A convenient analytical and visual technique of PERT and CPM
prove extremely valuable in assisting the managers in managing the projects.
Both the techniques use similar terminology and have the same purpose. PERT stands for Project Evaluation and Review Technique
developed during 1950s. The technique was developed and used in conjunction with the planning and designing of the Polaris missile
project. CPM stands for Critical Path Method which was developed by DuPont Company and applied first to the construction projects in
the chemical industry. Though both PERT and CPM techniques have similarity in terms of concepts, the basic difference is, PERT is used
for analysis of project scheduling problems. CPM has single time estimate and PERT has three time estimates for activities and uses
probability theory to find the chance of reaching the scheduled time.
The methods are essentially network-oriented techniques using the same principle. PERT and CPM are basically time-oriented
methods in the sense that they both lead to determination of a time schedule for the project. The significant difference between two
approaches is that the time estimates for the different activities in CPM were assumed to be deterministic while in PERT these are described
probabilistically. These techniques are referred as project scheduling techniques.In CPM activities are shown as a network of precedence
relationships using activity-on- node network construction

Applications of CPM / PERT

These methods have been applied to a wide variety of problems in industries and have found acceptance even in government
organizations. These include
1. Construction of a dam or a canal system in a region
2. Construction of a building or highway
3. Maintenance or overhaul of airplanes or oil refinery
4. Space flight
5. Cost control of a project using PERT / COST
6. Designing a prototype of a machine
7. Development of supersonic planes
Basic Steps in PERT / CPM
Project scheduling by PERT / CPM consists of four main steps

1. Planning
The planning phase is started by splitting the total project in to small projects. These smaller projects in turn are divided into activities and
are analyzed by the department or section. The relationship of each activity with respect to other activities are defined and established and
the corresponding responsibilities and the authority are also stated. Thus the possibility of overlooking any task necessary for the completion
of the project is reduced substantially.

2. Scheduling
The ultimate objective of the scheduling phase is to prepare a time chart showing the start and finish times for each activity as well as its
relationship to other activities of the project. Moreover the schedule must pinpoint the critical path activities which require special attention
if the project is to be completed in time. For non-critical activities, the schedule must show the amount of slack or float times which can be
used advantageously when such activities are delayed or when limited resources are to be utilized effectively.

3. Allocation of resources
Allocation of resources is performed to achieve the desired objective. A resource is a physical variable such as labour, finance, equipment
and space which will impose a limitation on time for the project.
When resources are limited and conflicting, demands are made for the same type of resources a systematic method for allocation of resources
become essential.Resource allocation usually incurs a compromise and the choice of this compromise depends on the judgment of managers.

4. Controlling
The final phase in project management is controlling. Critical path methods facilitate the application of the principle of management by
expectation to identify areas that are critical to the completion of the project. By having progress reports from time to time and updating the
network continuously, a better financial as well as technical control over the project is exercised.Arrow diagrams and time charts are used
for making periodic progress reports. If required, a new course of action is determined for the remaining portion of the project.

Advantages and Disadvantages

PERT/CPM has the following advantages

➢ A PERT/CPM chart explicitly defines and makes visible dependencies (precedence relationships) between the elements,

➢ PERT/CPM facilitates identification of the critical path and makes this visible,
 ➢ PERT/CPM facilitates identification of early start, late start, and slack for each activity,

➢ PERT/CPM provides for potentially reduced project duration due to better understanding of dependencies leading to improved
overlapping of activities and tasks where feasible.

PERT/CPM has the following disadvantages:

➢ There can be potentially hundreds or thousands of activities and individual dependency relationships,

➢ The network charts tend to be large and unwieldy requiring several pages to print and requiring special size paper,

➢ The lack of a timeframe on most PERT/CPM charts makes it harder to show status although colours can help (e.g., specific colour
for completed nodes),

➢ When the PERT/CPM charts become unwieldy, they are no longer used to manage the project.
Difference between PERT and CPM :
S.No. PERT CPM

PERT is that technique of project management which is CPM is that technique of project management which is
used to manage uncertain (i.e., time is not known) used to manage only certain (i.e., time is known)
1. activities of any project. activities of any project.

It is event oriented technique which means that network is It is activity oriented technique which means that network
2. constructed on the basis of event. is constructed on the basis of activities.

3. It is a probability model. It is a deterministic model.

It majorly focuses on time as meeting time target or It majorly focuses on Time-cost trade off as minimizing
4. estimation of percent completion is more important. cost is more important.
 S.No. PERT CPM

5. It is appropriate for high precision time estimation. It is appropriate for reasonable time estimation.

6. It has Non-repetitive nature of job. It has repetitive nature of job.

There is no chance of crashing as there is no certainty of There may be crashing because of certain time
7. time. boundation.

It uses dummy activities for representing sequence of

8. It doesn’t use any dummy activities. activities.

It is suitable for projects which required research and

9. development. It is suitable for construction projects.

Critical Path in Network Analysis

The critical path for any network is the longest path through the entire network. Since all activities must be completed to complete
the entire project, the length of the critical path is also the shortest time allowable for completion of the project. Thus if the project is to
be completed in that shortest time, all activities on the critical path must be started as soon as possible. These activities are called critical
activities. If the project has to be completed ahead of the schedule, then the time required for at least one of the critical activity must be
reduced. Further, any delay in completing the critical activities will increase the project duration.
The activity, which does not lie on the critical path, is called non-critical activity. These non-critical activities may have some slack
time. The slack is the amount of time by which the start of an activity may be delayed without affecting the overall completion time of
the project. But a critical activity has no slack. To reduce the overall project time, it would require more resources (at extra cost) to
reduce the time taken by the critical activities to complete
Basic Scheduling Computations
The notations used are
➢ (i, j) = Activity with tail event i and head event j
➢ Ei = Earliest occurrence time of event i
➢ Lj = Latest allowable occurrence time of event j
➢ Dij = Estimated completion time of activity (i, j)
➢ (Es)ij = Earliest starting time of activity (i, j)
➢ (Ef)ij = Earliest finishing time of activity (i, j)
➢ (Ls)ij = Latest starting time of activity (i, j)
➢ (Lf)ij = Latest finishing time of activity (i, j)

The procedure is as follows

1. Determination of Earliest time (Ej): Forward Pass computation

• Step 1
The computation begins from the start node and move towards the end node. For easiness, the forward pass computation
starts by assuming the earliest occurrence time of zero for the initial project event.

• Step 2
i. Earliest starting time of activity (i, j) is the earliest event time of the tail end event i.e. (ES)ij = Ei
ii. Earliest finish time of activity (i, j) is the earliest starting time + the activity time i.e. (EF)ij = (ES)ij + Dij or
(EF)ij = Ei + Dij

iii. Earliest event time for event j is the maximum of the earliest finish times of all activities ending in to that event
i.e. Ej = max [(EF)ij for all immediate predecessor of (i, j)] or Ej =max [Ei + Dij]

2. Backward Pass computation (for latest allowable time)

• Step 1
For ending event assume E = L. Remember that all E’s have been computed by forward pass computations.
• Step 2
Latest finish time for activity (i, j) is equal to the latest event time of event j i.e. (Lf)ij = Lj

• Step 3
Latest starting time of activity (i, j) = the latest completion time of (i, j) – the activity time

or (LS)ij =(LF)ij - Dij or (LS)ij = Lj - Dij

• Step 4
Latest event time for event ‘i’ is the minimum of the latest start time of all activities originating from that event i.e. Li =
min [(LS)ij for all immediate successor of (i, j)] = min [(LF)ij - Dij] = min [Lj - Dij]

3. Determination of floats and slack times

There are three kinds of floats

• Total float – The amount of time by which the completion of an activity could be delayed beyond the earliest expected completion
time without affecting the overall project duration time.
Mathematically
(TF)ij = (Latest finish – Earliest fiinish) for activity ( i – j)

(TF)ij = (LF)ij - (EF)ij or (TF)ij = (Lj - Dij) - Ei

• Free float – The time by which the completion of an activity can be delayed beyond the earliest finish time without affecting the
earliest start of a subsequent activity.
Mathematically
 (FF)ij = Total float - Slack of head event

• Independent float – The amount of time by which the start of an activity can be delayed without effecting the earliest
start time of any immediately following activities, assuming that the preceding activity has finished at its latest finish
time.
Mathematically
IF = Free Float –Slack of tail event
The negative independent float is always taken as zero.

• Event slack - It is defined as the difference between the latest event and earliest event times.
Mathematically
Slack of head event = Lj – Ej,
Slack of tail event = Li - Ei

4. Determination of critical path

• Critical event – The events with zero slack times are called critical events. In other words the event i is said to be critical
if Ei = Li

• Critical activity – The activities with zero total float are known as critical activities. In other words an activity is said
to be critical if a delay in its start will cause a further delay in the completion date of the entire project.

• Critical path – The sequence of critical activities in a network is called critical path. The critical path is the longest path
in the network from the starting event to ending event and defines the minimum time required to complete the project.
Worked Examples on CPM

Problem 3:
Determine the early start and late start in respect of all node points and identify critical path for the following network.

Activity Normal Solution:

(i, j)
Time Calculation of E and L for each node is shown in the network
(Dij)
(1, 2) 10
(1, 3) 8
(1, 4) 9
(2, 5) 8
(4, 6) 7
(3, 7) 16
(5, 7) 7
(6, 7) 7

(5, 8) 6

(6, 9) 5

(7, 10) 12
(8, 10) 13
(9, 10) 15
 Normal Earliest Time Latest Time
Activity Slack/Difference Total Float Free float Independent
Time ttail

Start Finish Start Finish Tail Head

(i, j) (Dij) (EF) (LS) event event (TF) (FF) Float (IF)
(ES) (LF)
ES + Dij LF – Dij
LF-EF TF-slack FF-slack of
of head head event
event

(1, 2) 10 0 10 0 10 0 0 0 0 0
(1, 3) 8 0 8 1 9 0 1 1 0 0
(1, 4) 9 0 9 1 10 0 1 1 0 0
(2, 5) 8 10 18 10 18 0 0 0 0 0
(4, 6) 7 9 16 10 17 1 1 1 0 -1
(3, 7) 16 8 24 9 25 1 0 1 1 0
(5, 7) 7 18 25 18 25 0 0 0 0 0
(6, 7) 7 16 23 18 25 1 0 2 2 1

(5, 8) 6 18 24 18 24 0 0 0 0 0

(6, 9) 5 16 21 17 22 1 1 1 0 -1

(7, 10) 12 25 37 25 37 0 0 0 0 0
(8, 10) 13 24 37 24 37 0 0 0 0 0
(9, 10) 15 21S 36 22 37 1 0 1 1 0
Answer:
a) From the table, the critical nodes are
(1, 2), (2, 5), (5, 7), (5, 8), (7, 10) and (8, 10)

b) Duration of the project = 37

c) From the table, there are two possible critical paths
i. 1 → 2 → 5 → 8 → 10
ii. 1 → 2 → 5 → 7 → 10

PROBLEM 4:Find the critical path and calculate the slack

time for the following network Solution
Normal
Activity(i, j) Time
(Dij)
(1, 2) 2
(1, 3) 2
(1, 4) 1
(2, 6) 4
(3, 7) 5
(3, 5) 8
(4, 5) 3
(5, 9) 5
(6, 8) 1
(7, 8) 4
(8, 9) 3
The earliest time and the latest time are obtained below

Normal Earliest Time Latest Time

Float Time
Activity(i, j) Time Start Finish Start Finish
(Dij) (Ei) (Ei + Dij ) (Li - Dij ) (Li) (Li - Dij ) - Ei
(1, 2) 2 0 2 5 7 5
(1, 3) 2 0 2 0 2 0
(1, 4) 1 0 1 6 7 6
(2, 6) 4 2 6 7 11 5
(3, 7) 5 2 7 3 8 1
(3, 5) 8 2 10 2 10 0
(4, 5) 3 1 4 7 10 6
(5, 9) 5 10 15 10 15 0
(6, 8) 1 6 7 11 12 5
(7, 8) 4 7 11 8 12 1
(8, 9) 3 11 14 12 15 1
Answer:
a) From the above table, the critical nodes are the activities (1, 3), (3, 5) and (5, 9)
b) Duration of the project = 15
c) The critical path is 1 → 3 → 5 → 9
Project Evaluation and Review Technique (PERT)
The main objective in the analysis through PERT is to find out the completion for a
particular event within specified date. The PERT approach takes into account the
uncertainties. The three time values are associated with each activity
Optimistic time – It is the shortest possible time in which the activity can be
finished. It assumes that every thing goes very well. This is denoted by t0.
Most likely time – It is the estimate of the normal time the activity would take.
This assumes normal delays. If a graph is plotted in the time of completion and the
frequency of completion in that time period, then most likely time will represent
the highest frequency of occurrence. This is denoted by tm.
Pessimistic time – It represents the longest time the activity could take if
everything goes wrong. As in optimistic estimate, this value may be such that
only one in hundred or one in twenty will take time longer than this value. This is
denoted by tp.

In PERT calculation, all values are used to obtain the percent expected value.

1. Expected time – It is the average time an activity will take if it were to be repeated
on large number of times and is based on the assumption that the activity time
follows Beta distribution, this is given by
te = ( t0 + 4 tm + tp ) / 6
2. The variance for the activity is given by
σ2 = [(tp – to) / 6] 2
Determination of project paths

Length of the path 1→ 2→5→6 = 2+1+7=10

Length of the path 1→ 3→5→6 = 4+6+7=17

Length of the path 1→ 4→6 = 5+3= 8

Since 1→ 3→5→6 has largest duration. Therefore the critical path is1→ 3→5→6.

c) The expected project length duration is = 17 weeks

d) Standard deviation of project length (σ2)=sum of the standard deviations of the activities on
the critical paths=1+4+4 =9

e) I) the probability of completing the project with in 4 weeks earlier than expected is given by
TS TE
P( Z D), where D

13 17
D 1.33 . Given that P(Z 1.33) 0.9082 . Therefore
3

P(Z 1.33) 0.5 (1.33)

0.5 0.4082
0.0918 9.18%

ii) The probability of completing the project not more than 4 weeks than the expected time
TS TE
is given by P( Z D), where D

21 17
D 1.33 . Given that P(Z 1.33) 0.9082 . Therefore
3

P(Z 1.33) 0.5 (1.33)

0.5 0.4082
0.9082 90.82%

TS 17
f) Value of Z for p=90% i.e. 1.28 , Therefore TS=1.28×3+17=20.84 weeks
3
Worked Examples
PROBLEM 5: Find the earliest and latest expected time to each event and also critical path in the
network.

Task: A B C D E F G H I J K

Least time: 4 5 8 2 4 6 8 5 3 5 6
Greatest time: 8 10 12 7 10 15 16 9 7 11 13
Most likely 5 7 11 3 7 9 12 6 5 8 9
time:

Solution
Greatest time Most likely Expected time
Task Least time(t0)
(tp) time (tm) (to + tp + 4tm)/6
A 4 8 5 5.33
B 5 10 7 7.17
C 8 12 11 10.67
D 2 7 3 3.5
E 4 10 7 7
F 6 15 9 9.5
G 8 16 12 12
H 5 9 6 6.33
I 3 7 5 5
J 5 11 8 8
K 6 13 9 9.17
 Expected Start Finish
Task Total float
time (te) Earliest Latest Earliest Latest
A 5.33 0 0 5.33 5.33 0
B 7.17 0 8.83 7.17 16 8.83
C 10.67 5.33 5.33 16 16 0
D 3.5 0 10 3.5 13.5 10
E 7 16 16 23 23 0
F 9.5 3.5 13.5 13 23 10
G 12 3.5 18.5 15.5 30.5 15
H 6.33 23 23 29.33 29.33 0
I 5 23 25.5 28 30.5 2.5
J 8 28 30.5 36 38.5 2.5
K 9.17 29.33 29.33 31.5 38.5 0

Answer:

a) The critical path is A →C →E → H → K

b) Duration of the project = 38.5
PROBLEM 6:
A project has the following characteristics

Most optimistic time Most pessimistic time Most likely time

Activity
(a) (b) (m)
(1 – 2) 1 5 1.5
(2 – 3) 1 3 2
(2 – 4) 1 5 3
(3 – 5) 3 5 4
(4 – 5) 2 4 3
(4 – 6) 3 7 5
(5 – 7) 4 6 5
(6 – 7) 6 8 7
(7 – 8) 2 6 4
(7 – 9) 5 8 6
(8 – 10) 1 3 2
(9 – 10) 3 7 5

Construct a PERT network. Find the critical path and variance for each event.
 te v
Activity (a) (b) (m) (4m)
(a + b + 4m)/6 [(b – a) / 6]2
(1 – 2) 1 5 1.5 6 2 4/9
(2 – 3) 1 3 2 8 2 1/9
(2 – 4) 1 5 3 12 3 4/9
(3 – 5) 3 5 4 16 4 1/9
(4 – 5) 2 4 3 12 3 1/9
(4 – 6) 3 7 5 20 5 4/9
(5 – 7) 4 6 5 20 5 1/9
(6 – 7) 6 8 7 28 7 1/9
(7 – 8) 2 6 4 16 4 4/9
(7 – 9) 5 8 6 24 6.17 1/4
(8 – 10) 1 3 2 8 2 1/9
(9 – 10) 3 7 5 20 5 4/9
The network is constructed as shown below

ANSWER;

a) The critical path = 1 → 2 → 4 → 6 → 7 →9 →10

b) Duration of the project = 28.17

PROBLEM 7
Calculate the variance and the expected time for each activity

Solution

te v
Activity (to) (tm) (tp)
(to + tp + 4tm)/6 [(tp – to) / 6]2
(1 – 2) 3 6 10 6.2 1.36
(1 – 3) 6 7 12 7.7 1.00
(1 – 4) 7 9 12 9.2 0.69
(2 – 3) 0 0 0 0.0 0.00
(2 – 5) 8 12 17 12.2 2.25
(3 – 6) 10 12 15 12.2 0.69
(4 – 7) 8 13 19 13.2 3.36
(5 – 8) 12 14 15 13.9 0.25
(6 – 7) 8 9 10 9.0 0.11
(6 – 9) 13 16 19 16.0 1.00
(8 – 9) 4 7 10 7.0 1.00
(7 – 10) 10 13 17 13.2 1.36
(9 – 11) 6 8 12 8.4 1.00
(10 – 11) 10 12 14 12.0 0.66
PROBLEM 8: Product manager has planned a list of activities culminating in the inaugurate launch
of the new products.These are given in the table below:

What is the probability that product manager will be able to complete the language launch within 80
days-time?

Solution:
Network diagram for given problem is shown in following fig:

Expected time value for each activity of given network is listed in table below along with three
variance.
 Value of earliest & latest time is calculated on the basis of expected time te as follows:

Value of earliest & latest time is calculated on the basis of expected time te as follows:

Hence critical path along with E-value and L- value are same i.e., 1- 2-4-5-6-7- 8-9 Expected project
duration is 172.83 days
Variance of project length = Sum of variance of each critical activity = 6.25 + 0.44 + 32.11
+100+1.36+.44+0= 140.6

For Z = -2.77 Probability of completing the project with 80 days-time i.e., 0.3%.