PERT Estimation Technique Explained with Examples


PERT Estimation Technique Explained with Examples

It is common knowledge that before the commencement of any project activity, there has to be an accurate, advance, and meaningful time estimate. Every project must have its target budget and target time of completion, arrived at through estimation. 

What happens when these estimates are inaccurate? Simple. The responsible team will not complete the project within the allocated budget, and neither will they meet target completion date. Therefore, project teams must come up with quality and accurate estimation techniques before kicking a project into action.

However, arriving at estimates is not as easy as it sounds. It gets even more complex when dealing with a large project with several stakeholders. Different parties, project management gurus, and schools have, over the years, come up with different project estimation techniques for accurate time estimation.

In this article, we look at one of the most successful and proven methods of project estimations-PERT. It joins the league of other renowned estimation techniques such as function point counting, top-down estimation, bottom-up estimation, WAVE, and CPM.

This article, therefore, takes a detailed look into this technique, complete with examples to give you a clear understanding of what it is and entails.

x
Why Should We Hire You? 5 Best Answers

What is PERT?

Fully known as the Program Evaluation and Review Technique, PERT was created by the US Navy decades ago. It is estimated to have come up in the 1950s as an estimation technique for a Ballistic Missile project, which involved thousands of contractors.

This methodology ensured that the project ended two years earlier than expected and has since been used in many big projects. Therefore, PERT is a tool used in handling big projects or programs that entail a series of activities.

It is used to analyze project activities and determine their sequential arrangement before working out the required time to complete all the tasks. All this is done by drafting a critical path, which is normally known as the PERT analysis.

PERT and Project Management

This estimation technique is normally used for research projects or for programs that have not yet been implemented. PERT is considered an appropriate statistical tool whenever an organization seeks to implement a program or undertake a project they have not done before.

It is often difficult to determine the time within which a project can be completed when it is being done for the first time. Therefore, in cases where there is no historical data, PERT comes in handy. It is the most suitable method for providing deadlines for every task involved in a project and guiding teams on the sequence of all the activities involved.



Click Here to download 3000+ Project Management Documents: Complete Library of Project Management Templates, Processes, Plans, Checklists, Forms, Tools, Presentation Slides and Infographics. Suitable For All Industries.



PERT also helps in budgeting for a project since it gives the project team and manager an idea of the estimated duration, which helps ascertain the need for both financial and human resources, including their acquisition

PERT Basics

To fully understand how PERT works, we need to look at the basics. PERT is mainly concerned with management probabilities, which forms its core. It, therefore, reveals itself in simple statistical methods, which we will look at in the examples.

Several individuals also categorize PERT with CPM, the critical path method, given their similar characteristics. However, PERT and CPM do not share the same focus. All in all, PERT breaks down all the tasks into detailed activities, just as other estimation techniques do.

Once the tasks have been broken down, a chart, which we will look at later, is prepared. It illustrates the interdependencies among the activities. A network of activities and their interdependencies is then drawn illustratively to be used in estimation.

In this network of activities, a node represents each event. Activities exist as arrows and are drawn from one event to the next, depending on the sequence. The earliest time, written as TE and the latest time, captured as TL, is figured out for each activity. Identification of the slack time for each activity then follows afterward.

How then does this method arrive at the different estimates? PERT estimation technique takes a statistical approach, which differentiates it from a number of estimation techniques.

The Three Chances

To learn how this estimation technique works, you need to know the three chances. These are the three estimation times involved in PERT. They include the Optimistic Time Estimate, known as TOPT, Most Likely Time Estimate, TLIKELY, and Pessimistic Time Estimate, TPESS.

You can clearly see from these three chances that PERT takes a totally different approach when it comes to project estimation. Instead of jumping directly into the expected completion time, it breaks down all the time possibilities regarding the project.

Keep in mind that all these estimates are derived for every activity. Therefore, a range of time is normally given for each activity with the most probable value, which in this case refers to TLIKELY. Let’s take a detailed look into these three.

  • TOPT

This refers to the fastest time the project can complete an activity. This technique assumes that all the necessary resources have been put in place and all the predecessor activities have been completed as was initially planned. This estimate is hard to achieve most of the time because projects are expected to face some challenges.

  • TLIKELY

This is the most used estimate. In fact, whenever project managers are asked for a quick time estimate of the project, they normally forward this to the top management. This also happens if they are asked to submit one estimate from the three established by the PERT method.

  • TPESS

This refers to the maximum time needed to complete an activity. It assumes and factors in all the negative things that may affect an activity. Most project teams assume resource unavailability and rework when deriving this estimate.

The PERT Chart

This is also known as the project network. It plays an important role in determining the time needed for completing the project. PERT cannot be successful without a PERT chart.  It also captured a detailed series in which the project’s activities will be carried out as well as the proposed time to be taken to complete every task.

It has a number of elements, which are:

  • The Event

This refers to the node at which an activity starts or ends. The number of nodes will depend on the number of lined up activities.

  • Activity

Tasks are normally broken down in to activities, which refer to the actions supposed to be taken or accomplished in the successful execution of a project. In simpler terms, activities refer to the action taken as part of the project execution process.

The estimated time for performing these activities is normally captured in brackets and can either be days, hours, weeks, or months.

  • Critical Path

This is the path that passes through all the essential activities carried out in a sequence and needed to execute a project successfully. The critical path links the first event to the last one, which explains its name.

Formulas Associated with PERT Estimation Technique

Like we mentioned, this is a statistical tool used to arrive at the estimated duration for project activities and, lastly, the entire project. The PERT estimation technique normally looks like a complicated method, which is not the case in the real sense.

You will be good to go as long as you understand the formula involved in time estimation when using this technique. Let us break this down further and put it into perspective.

1. Estimated Duration

This refers to the duration required to complete a given task needed to execute the project successfully. It has its own distinct formula, which is:

Estimated Duration = [Optimistic Time Estimate+ (4 * Most Likely Time Estimate) + Pessimistic Time Estimate] / 6

We explained all these in the first part of our article. You can take some time to go through them and refresh your memory for what we will cover ahead.

Example

Where the Optimistic Estimate is four days, Most Likely Time Estimate 6 days, and the Pessimistic Time Estimate 8 days for an activity, we will apply the above formula to come up with:

Estimated Duration = [4+(4*6) +8]/6= 6 days

To come up with the total time estimate for the entire project, do this for all the activities and then add the estimated time for all the activities.

2. Variance

In PERT analysis, variance refers to the level of volatility of time needed to complete an activity from the average time. Therefore, to determine the variance of each activity in your project through this technique, use the following formula:

Variance = [ (Pessimistic Time Estimate- Optimistic Time Estimate)/ Most Likely Time Estimate] squared.

Example

From our previous example where the Optimistic Estimate was four days, Most Likely Time Estimate 6 days, and the Pessimistic Time Estimate 8 days for an activity, we will apply this formula to get a variance of:

[(8-4)/6] squared= 0.44

How to Evaluate the Critical Path

This refers to the most extended path in the PERT chart, which connects the nodes that fulfill all four conditions. When coming up with a chart, one should ensure that all the related activities are captured in a series right from the first to the last.

These conditions must be fulfilled to identify the critical path in a project network or PERT chart:

1. Earliest Start Time

This normally refers to a forward pass which begins with the first event. To arrive at it, you have to use the following formula:

Earliest Start Time of The Ending Node= x (Earliest Start Time of Starting Node +Estimated Duration of    Concerned Activity)

You must have noticed the letter ‘x; in our formula. It directs that when the ending node consists of more than one starting node, the highest earliest start time of the ending node from all the values is considered.

2. Last Completion Time

This starts in the reverse order, normally from the last node or event. It is, therefore, a backward pass calculated by:

Latest Completion Time of Starting Node = m (Latest Completion Time of Ending Node- Estimated Duration of Concerned Activity)

Like in the first formula, m here dictates that where there are two or more ending nodes for a given starting node, the least latest Completion time of starting node value is to be considered.

Advantages of PERT

This technique has its fair share of advantages that users enjoy. Let us take a look at these:

  • Flexibility

PERT is highly flexible. It can be used to plan single project activities in all industries. It is not, therefore, industry-specific as compared to other estimation techniques.

  • This estimation technique allows users and project managers alike to understand the relationship that exists amongst activities. This is made possible by the fact that it offers a graphical display of all these activities.
  • Allows tactical level planning

This technique allows for tactical level planning and operational control of projects, which comes with its fair share of advantages. Most projects or programs that employ this estimation technique end up being successful and are completed even before the lapse of the estimated time. It can therefore be considered as an upgrade of the other estimation techniques.

  • It gives room for managers to conduct ‘what if;’ analysis on project activities. This is quite similar to the third point as it leads to tactical planning.

Disadvantages of PERT

This technique also has its disadvantages that are worth considering before choosing it.

  • Even though this project can be used in all industries, it is not as effective when two or more project activities rely on the same resources for completion.
  • This technique also requires lots of information input to come up with an effective plan. It may therefore be expensive in the long run as compared to other techniques.
  • It exposes project teams to PERT charts which may be highly complicated and confusing, especially in large projects. These complications may also be a recipe for inaccurate predictions.

Conclusion

PERT is one of the best estimation techniques that you can employ in your project. However, make sure that you are acquainted with how part charts work before you resort to it.

Recent Posts