PROGRAM EVALUATION AND REVIEW TECHNIQUE – CRITICAL PATH METHOD

Almost every organization will take on a project which consists of a series of related activities
directed toward a major output and requires an extensive period of time to perform. In order to
aid managers in planning, scheduling and controlling the project, two popular techniques are
employed – Program Evaluation and Review Technique and Critical Path Method.

PERT and CPM are the two network-based project management techniques, which exhibit the
flow and sequence of the activities and events.

Program Evaluation and Review Technique – systematic procedure for using network analysis
systems for planning, measuring progress against schedule, evaluating changes to schedule,
forecasting future progress, and predicting and controlling costs. The technique studies and
represents the tasks undertaken to complete a project, to identify the least time for completing a
task and the minimum time required to complete the whole project.

Critical Path Method – planning and controlling technique used in projects for which some past
cost data are available. CPM permits a manager to complete a project in the shortest period of
time with minimum expenditures for overtime, additional labor, or additional equipment, and
without penalties for finishing late.

Importance of PERT – CPM. By using PERT or CPM, managers can obtain:

 A graphical display of project activities.

 An estimate of how long the project will take.
 An indication of which activities are most critical to timely project completion.
 An indication of how long any activity can be delayed without delaying the project.

Six Steps of PERT – CPM

1. Define the project and all of its significant activities or tasks.

2. Develop the relationships among the activities. Decide which activities must precede and
follow others.
3. Draw the network connecting all of the activities.
4. Assign time and/or cost estimates to each activity.
5. Compute the longest time path through the network; this is called the critical path.
6. Use the network to help plan, schedule, monitor, and control the project.
PERT diagram – an arrow or a network showing the interrelationships or interdependencies of
the various activities of a project. Diagram of project activities that shows sequential relationships
by use of arrows and nodes.

Node

Branch

1. Activity on arrow (AOA) – network diagram convention in which arrows designate

activities.
2. Activity on node (AON) – network convention in which nodes designate activities.

Events – represents a specified accomplishment at a particular instant in time. It represents the

start or finish of an activity.

Activity – task to be accomplished. Represents the time or resources necessary to move from
one event to another.

Illustration 1:
The activities in the project are related to each
other in various ways. These relationships are
called interdependencies.

1. Events 2 an 3 are dependent on the

occurrence of event 1.
2. Event 4 cannot occur until activities 1-2
and 1-3 have all been performed.
In any network, there is always at least one connected path that goes from the start event to the
end event.

Path – sequence of activities that leads from the starting node to the finishing node.

Critical path – the longest path; determines expected project duration.

 A delay in the completion of activities in the critical path would cause a delay in the
completion of the entire project.
 Shortening the total completion time of the whole project can be accomplished only by
shortening the critical path.

The sum of the activity times is as follows:

Path 1-2-4 (4+10) = 14 weeks

Path 1-3-4 (12+8) = 20 weeks

Analysis:

1. The critical path is path 1-3-4, with a total time requirement of 20 weeks.
2. The project will take 20 weeks to complete.
3. If path 1-3-4 will be delayed, the end event will slip a corresponding amount, thus,
increasing the project duration.

Slack time – the length of time by which a particular activity or path can be delayed without
delaying the scheduled deadline.

 Activities along the critical path have a slack time of zero.

 All non-critical activities have positive slack.

Path 1-2-4 has a slack time of 6 weeks, (20-14).

Path 1-3-4 has a zero slack time.
Cost Estimating

PERT Probabilistic Approach, which involves three time estimates:

1. Optimistic time to – length of time required under optimistic condition. It is the shortest time
to finish an activity.
2. Pessimistic time tp – length of time required under the worst condition.
3. Most likely time tm – most probable time that will be required to finish the activity.

Expected activity time te – average time an activity would require if it were repeated a large
number of times.
𝑡𝑜 +4𝑡𝑚 +𝑡𝑝
𝑡𝑒 =
6
CPM Deterministic Approach, which involves two estimates:

1. Normal completion time – estimated time the activity is to be completed under normal
conditions.
2. Crash completion time – shortest time it would take to finish an activity if additional funds
and resources were allocated to the task.

Project scheduling – a mechanism to communicate what tasks need to get done and which
organizational resources will be allocated to complete those tasks in what timeframe. A project
schedule is a document collecting all the work needed to deliver the project on time.

Resource leveling – a technique in which start and finish dates are adjusted based on resource
constraints with the goal of balancing demand for resources with the available supply.

When performing project planning activities, the manager will attempt to schedule certain tasks
simultaneously. When more resources such as machines or people are needed than are
available, or perhaps a specific person is needed in both tasks, the tasks will have to be
rescheduled concurrently or even sequentially to manage the constraint. Project planning
resource leveling is the process of resolving these conflicts. It can also be used to balance the
workload of primary resources over the course of the projects, usually at the expense of one of
the traditional triple constraints (time, cost, scope).
Illustration 2:

Activity Predecessor Time estimates (weeks)

Optimistic Most likely Pessimistic Expected time

A - 1 3 5 3
B - 1 2 3 2
C - 3 5 7 5
D A 3 4 5 4
E B 3 4 5 4
F B 5 6 13 7
G C 5 6 13 7
H D, E 2 8 14 8
I G, F 5 6 13 7

Requirements:
1. Construct the network.
2. Determine the critical path.

Solution:

1. PERT network with time estimates in weeks.

2. The critical path is determined by choosing the longest time from among the paths:
Path A-D-H or 1-2-5-7 (3+4+8) = 15
Path B-E-H or 1-3-5-7 (2+4+8) =14
Path B-F-I or 1-3-6-7 (2+7+7) = 16
Path C-G-I or 1-4-6-7 (5+7+7) = 19

The critical path is path C-G-I which gives the longest time to finish the project.
Analysis:

1. The project will be completed in 19 weeks.

2. Events 1-4-6-7 or activities C-G-I should not be delayed as these activities are the critical
path, meaning the activities should not be postponed. The management should focus its
attention on the activities that fall on this path.
3. The slack time of each path is as follows:
Path A-D-H or 1-2-5-7 19 – 15 = 4 weeks
Path B-E-H or 1-3-5-7 19 – 14 = 5 weeks
Path B-F-I or 1-3-6-7 19 – 16 = 3 weeks

Illustration 3:

Activity Predecessor Time estimates (weeks)

Optimistic Most likely Pessimistic Expected time

A - 1 2 3 2
B - 1 2 3 2
C - 1 2 3 2
D A 1 2 9 3
E A 2 3 10 4
F (Dummy)* E
G B 2 6 15 7
H B 2 5 14 6
I D, E 1 4 7 4
J C 4 9 20 10
K H, J 1 2 9 3
L G, I, K 4 4 4 4

*Dummy Activity – lets us draw a network with proper precedence relationships. It is not assigned
any time.

Requirements:
1. Determine the expected time per activity.
2. Construct the network.
3. Determine the critical path.
Solution:
1. The expected times for each activity are:
A–2 G–7
B–2 H–6
C–2 I–4
D–3 J – 10
E–4 K–3
F–0 L–4
2. The network diagram is as follows:

3. The critical path is determined as follows:

A-D-I-L 13
A-E-F-I-L 14
B-G-L 13
B-H-K-L 15
C-J-K-L 19

The critical path is path C-G-I which gives the longest time to finish the project.

Analysis:

1. The project will be completed in 19 weeks.

2. Events 1-2-7-8-9 or activities C-J-K-L should not be delayed as these activities are in the
critical path.
3. Paths other than the critical path can be delayed as follows:
A-D-I-L 6 weeks
A-E-F-I-L 5 weeks
B-G-L 6 weeks
B-H-K-L 4 weeks

*Note: the length of delay is determined based on the path. The length of delay for each
activity is not determined.
Determining the slack time for each activity

The slack time for each activity can be determined by the use of the forward pass or backward
pass.

1. Forward pass is the process of moving from left to right in a network to define all the
earliest start and earliest finish times.

The earliest start time for an activity leaving a node is equal to the largest earliest finish time of
all the activities entering that same node. Earliest finish time is determined using the formula:

EF = ES + te

Using the same data in the previous illustration, the earliest start and earliest finish times are as
follows:

Activity Earliest start time Earliest finish time

A 0 2
B 0 2
C 0 2
B 2 5
E 2 6
F
G 2 9
H 2 8
I 6 10
J 2 12
K 12 15
L 15 19
 2. Backward pass is a process of computing the latest finish time and the latest start time for
every activity starting from the completion point. Latest finish time is the latest time at
which an activity is completed without extending the completion time of the network.

The latest finish time for an activity entering a node is equal to the smallest latest start time of
all the activities leaving that same node. Latest start time is determined using the formula:

LS = LF – te

Activity Latest start time Latest finish time

A 5 7
B 4 6
C 0 2
B 8 11
E 7 11
F
G 8 15
H 6 12
I 11 15
J 2 12
K 12 15
L 15 19
Computation of slack time

Slack time = LF – EF or LS – ES

Activity Latest start Earliest start Latest finish Earliest finish Slack time
time time time time
A 5 0 7 2 5
B 4 0 6 2 4
C 0 0 2 2 0
B 8 2 11 5 6
E 7 2 11 6 5
F
G 8 2 15 9 6
H 6 2 12 8 4
I 11 6 15 10 5
J 2 2 12 12 0
K 12 12 15 15 0
L 15 15 19 19 0

*The critical path can be traced from activities with 0 slack time.

Crashing the network

Crashing refers to the efforts designed to complete the project ahead of the schedule. However,
when managers use crashing, the variable costs of the project will also increase.

Crashing the network means finding the minimum cost of completing the project in minimum time
to achieve an optimum trade off between time and cost.

PERT – Cost network

Determining the proper trade off is referred to as PERT – Cost analysis.

A simplified approach in applying PERT – Cost analysis:

1. Each activity is assigned two projected time estimates:

 A normal time, and
 A crash time

2. Compute the incremental crash cost for each activity that can be crashed using
the formula:
𝐶𝑟𝑎𝑠ℎ 𝑐𝑜𝑠𝑡 – 𝑁𝑜𝑟𝑚𝑎𝑙 𝑐𝑜𝑠𝑡
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠 𝑠𝑎𝑣𝑒𝑑
 3. Set up the stage table which summarizes the status of the project.
4. To find alternative trade offs, crash the critical activity (usually in the critical path)
with the least incremental cost.

Illustration:

Assume that for a special project of ABC Manufacturing Co., the total normal cost is 316,000 and
the PERT – time inputs are shown in the network below:

Initial stage table:

Path Cumulative expected activity time (days)

0-1-2-3-7 48
0-1-2-3-4-6-7 55
0-1-4-6-7 59
0-1-5-6-7 67*

Projected time: 67 days*

Activities crashed: none
Project cost: 316,000

The management wants to determine whether the project’s completion time can be shortened at
the least possible incremental cost. Thus, a PERT – Cost analysis is made, producing the
following network:

The network activity shows the activity time on the upper sides of the arrows, the normal time is
written first, followed by its crash time. If an activity cannot be crashed, only the normal time
appears. Written below the arrows are the incremental costs per day of those activities that can
be crashed.
If the management wishes to reduce the total project time, it has to crash an activity that lies in
the critical path. To find the next trade-off, crash the critical activity whose incremental cost in the
least. This cost/time trade offs should always be considered along the critical path.

The activity to crash in the path 0-1-5-6-7, is the activity 1-5 with the least incremental cost of
2,000 per day. Crashing this activity reduces the path time by 16 days and adds an additional
(2,000 x 16) 32,000 to the project cost. The path 0-1-4-6-7, then, becomes the critical path with
59 days.

Status:

Path Cumulative expected activity time (days)

0-1-2-3-7 48
0-1-2-3-4-6-7 55
0-1-4-6-7 59*
0-1-5-6-7 51

Projected time: 59 days*

Activities crashed: 1-5
Project cost: 316,000 + 32,000 = 348,000

Thus, the second trade off is to crash one activity and finish the activity in 59 days at a cost of
348,000.

Along the new critical path, 0-1-4-6-7, the next activity to crash is the activity with the least
incremental cost, which is activity 1-4 with an incremental cost of 2,600. Crashing activity 1-4
reduces total project time to 55 days and increases the project cost by (2,600 x 4) 10,400.

Status:

Path Cumulative expected activity time (days)

0-1-2-3-7 48
0-1-2-3-4-6-7 55
0-1-4-6-7 55*
0-1-5-6-7 51

Projected time: 55 days*

Activities crashed: 1-5 and 1-4
Project cost: 316,000 + 32,000 + 10,400 = 358,400

It can be observed that the path 0-1-4-6-7 remains critical and path 0-1-2-3-4-6-7 has also become
critical. Path 0-1-2-3-4-6-7 can be reduced further, but not path 0-1-4-6-7. Therefore, the project
has reached its limiting point and no more time can be saved.

Final trade off: crash two activities (1-5 and 1-4) and finish the minimum crash time of 55 days at
a minimum total crash cost of 358,400.
 BASIS FOR
PERT CPM
COMPARISON

Meaning PERT is a project management CPM is a statistical technique of

technique, used to manage project management that
uncertain activities of a project. manages well defined activities of
a project.

What is it? A technique of planning and control A method to control cost and time.
of time.

Orientation Event-oriented Activity-oriented

Evolution Evolved as Research & Evolved as Construction project

Development project

Model Probabilistic Model Deterministic Model

Focuses on Time Time-cost trade-off

Estimates Three time estimates One time estimate

Appropriate for High precision time estimate Reasonable time estimate

Management of Unpredictable Activities Predictable activities

Nature of jobs Non-repetitive nature Repetitive nature

Critical and Non- No differentiation Differentiated

critical activities

Suitable for Research and Development Project Non-research projects like civil
construction, ship building etc.

Crashing concept Not Applicable Applicable