APS1032H

Introduction to Energy Project

Management

Lecture 2 (continued)
CPM and PERT
 Critical Path Method (CPM)
• Sequence of scheduled activities that determines the duration of the project.

• It is the longest sequence of tasks (activities) in a project plan that must be

completed on time in order for the project to meet its deadline.

• If there is any delay in any tasks on the critical path, then your whole project
will be delayed.

• Although many projects have only one critical path, some projects may have
multiple critical paths.

• It is an important tool for effective project management.

• Commonly used with all forms of projects, including construction, energy,

software development, research projects, product development, engineering,
and plant maintenance, among others.

Payam Rahimi, PhD., P.Eng.

APS1032H: Introduction to Energy Project Management 2
 Background and History
• Developed in the 1950s by the US Navy.

• Originally, the critical path method considered only logical

dependencies between terminal elements.

• Since then, it has been expanded to allow for the inclusion of

resources related to each activity, through processes called
activity-based resources assignments and resource leveling.

• Critical Path Method for the construction industry

• Non-computer approach
• John Fondahl

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 John Fondahl
• Stanford CE Professor Emeritus – 35 years

• Passed away September 13, 2008

• US Marine Corps Sergeant in Iwo Jima

• Co-founder of the CEM program

• 1961 Paper for the US-Navy – “Non-computer Approach to the

Critical Path Method for the Construction Industry”

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 What is CPM
• The essential technique for using CPM is to construct a model
of the project that includes the following:

• A list of activities required to complete the project (also

known as Work Breakdown Structure)

• The time (duration) that each activity will take to completion

• The dependencies between activities

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 What is CPM
• CPM Calculates:
• The longest path of planned activities to the end of the
project
• The earliest and latest that each activity can start and finish
without making the project longer

• Determines “critical” activities (on longest path)

• Prioritize activities for the effective management and to shorten

the planned critical path of a project by:
• Pruning critical path activities
• “Fast tracking” (performing more activities in parallel)
• “Crashing the critical path” (Shortening the durations of
critical path activities by adding resources)
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APS1032H: Introduction to Energy Project Management 6
 Advantages of CPM
• It provides a visual representation of project activities, clearly
presents the time required to complete tasks, and tracks
activities so you don’t fall behind.

• It reduces uncertainty since it calculates shortest and longest

time of completion of each activity. It forces you to consider
unexpected factors that may impact your tasks.

• Identifies the most important tasks.

• Helps reduce timeline

• Compares planned with actual

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 Key Steps in the CPM
• There are six steps in the CPM:

• Step 1: Specify each activity: Identify each activity involved in

the project (use only higher-level activities to avoid
complexity).

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APS1032H: Introduction to Energy Project Management 8
 Key Steps in the CPM
• Step 2: Establish Dependencies (Activity Sequence)

• To correctly identify activities and their precedence, ask yourself

these three questions for each activity of the list in Step 1:

• Which tasks should take place before this task happens?

• Which tasks should be finished at the same time as this tasks?

• Which tasks should happen right after this task?

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 Key Steps in the CPM
• Step 3: Draw the network diagram

Critical Path Method Chart (CPA) also known as network diagram

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 Key Steps in the CPM
• Step 4: Estimate activity completion time

• There are three common ways to estimate the completion times:

1. Best-Guess Estimates
a  4m  b
2. 3-Point Estimates E
6

3. Triangular Distribution E  a  m  b
3

• a: the best-case estimate

• m: the most likely estimate
• b: the worst-case estimate
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APS1032H: Introduction to Energy Project Management 11
 Key Steps in the CPM
• Step 5: Identify the Critical Path

• Two ways to identify critical path:

1. Eyeball your network diagram and identify the longest path.

2. Use Forward Pass/Backward Pass technique.

• If you have multiple critical path, you will run into network
sensitivity. A project schedule is sensitive if the critical path is
likely to change once the project begins.
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APS1032H: Introduction to Energy Project Management 12
 Key Steps in the CPM
• Step 6: Update the critical path diagram to show progress

• As the project progresses, you will learn the actual activity

completion times.

• The network diagram can then be updated to include this updated

information.

• By updating the network diagram, you may recalculate a different

critical path and have a more realistic view of the project
completion.

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APS1032H: Introduction to Energy Project Management 13
 Definitions
• Float (Slack): amount of time that a task can be delayed without
causing a delay to
• Subsequent tasks (free float)
• Project completion date (total float)

• Critical path: the sequence of activities which add up to the

longest overall duration. It is the shortest time possible to
complete the project. Any delay of an activity on the critical
path directly impacts the planned project completion date (there
is no float on the critical path). A project can have several,
parallel, near critical paths. An additional parallel path through
the network with total durations shorter than the critical path is
called sub-critical or non-critical path.

• Critical activity: activity with zero float

• Resource leveling: iterative process of assigning crews to

activities in order to calculate their duration
APS1032H: Introduction to Energy Project Management 14
Payam Rahimi, PhD., P.Eng.
 Definitions
• Activity Identity Box

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 The CPM Approach

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 Class Exercise (1)

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 Class Exercise (1)

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 Class Exercise (1)

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 Class Exercise (1)
• Gantt Chart

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 Other Scenarios in CPM
• Establish time-cost relationship

• Establish scheduling variations

• Determine most favorable balance between time-cost

• Normal Start: normal time, least cost

• All-Crash Start: least time, higher cost

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 Shortening Your Schedule
• Fast Tracking:
• Which activities can be done parallel to each other to move the project
along faster (only activities on the critical path).

• While fast tracking reduces your project timeframe, it also involves risk
because you are performing parallel activities that were originally
planned to be performed in sequence.

• Cash Duration (Crashing):

• Refers to the shortest possible time for which an activity can be
scheduled.
• This can only happen by adding more resources.
• It may results in lower quality of work because the goal in crash duration
is speed.

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 Managing Resource Constraints
• Resource constraint issues can change the critical path.

• With Resource Leveling, one can resolve conflicts over

allocating resources. A resource-leveled schedule may include
delays due from resource bottlenecks (a resource being
unavailable at the necessary time).

• Resource leveling may also result in a previously shorter path

becoming the longest or most “resource critical” path. This
happens when the tasks on the critical path are affected by the
resource constraints.

• A similar concept is called critical chain, which protects activity

and project durations from unexpected delays due to resource
constraints.
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 Summary
• Critical Path Analysis is an effective and powerful method of
assessing:

• Tasks which must be carried out

• Where parallel activity can be carried out
• The shortest time in which a project can be completed
• Resources needed to achieve a project
• The sequence of activities, scheduling, and timing involved
• Task priorities

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 PERT for Project Planning and Scheduling
• PERT is a network-based aid for planning and scheduling the
many interrelated tasks in a large and complex project.

• It was developed during the design and construction of the

Polaris submarine in the USA in the 1950s.

• PERT uses a network representation to capture the precedence

or parallel relationships among the tasks in the project.

• CPM and PERT are often used in the same context and scenario.

APS1032H: Introduction to Energy Project Management Payam Rahimi, PhD., P.Eng.

25
 What is PERT
• A PERT chart, or activity-on-arrow diagram, is a visual
representation of your project’s schedule.

• It shows the sequence of tasks.

• PERT chart is made with a lot of the same information that is

used in CPM, such as earliest and latest start dates, earliest and
latest finish dates, and slack (float) between activities.

• The biggest difference between CPM and PERT is the time

estimation.

APS1032H: Introduction to Energy Project Management Payam Rahimi, PhD., P.Eng.

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 PERT Formalism and Rules
• Directed arcs represent activities, each of which has a specified
duration. This is the “activity on arc” formalism.
• Nodes are events or points in time.
• The activities (arcs) leaving a node cannot begin until all the
activities (arcs) entering a node are completed. This is how
precedence is shown.
• There is a single starting node which has only outflow arcs, and
a single ending node, that has only inflow arcs.
• There are no cycles in the network.

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 PERT Formalism and Rules
• Consider the example of building an office for a nuclear power plant, shown
below.

• Perhaps pouring the concrete foundation (Activity A-B), happens at the same
time as the assembly of the roof trusses (Activity A-D). However, the
finalization of the roof (Activity D-E) cannot begin until both A-D and B-D
(assembly of the building frame) are done.

• B-D cannot start until the concrete foundation has been poured (A-B).

• All of this precedence and parallel information is neatly captured in the

PERT diagram.

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 PERT: Major Question about Project
• There are two major questions about any project:

1. What is the shortest time for completion of the project?

2. Which activities must be completed on time in order for the

project to finish in the shortest possible time? These
activities constitute the critical path through the PERT
diagram.

• The process of finding the critical path answers both questions.

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 PERT: Finding Critical Path
• Step 1: Make a forward pass through the diagram, calculating earliest time
(TE) for each event (node). TE is the latest of the arrival times for entering
arcs.

• Step 2: Make a backward pass through the diagram, calculating the latest
time (TL) for each event (node). TL is the earliest of the leaving times for the
existing arcs.

• Step 3: Calculate node slack time (SN) for each node. This the amount of time
by which an event could be adjusted later than its TE without causing
problems downstream.

• Step 4: Calculate the total arc slack time (SA) for each arc (activity). This is
the amount of time by which an activity could be adjusted later than the TE of
the node at its tail without causing problem later.

• Step 5: The critical path connects the nodes at which SN = 0 via the arcs at
which SA= 0
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 Class Exercise (2)
• Find the critical path for the PERT diagram below

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 Class Exercise (2)
• The resultant critical path is

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 PERT: Special Case
• Sometimes a situation arises in which one
activity must precede two different
events. How can this happen when a
single arc can terminate only at a single
event node?

• The solution lies in the use of dummy

arcs which have a duration of zero.

• Dummy arcs are normally shown as

dashed lines, in which activity A-B is the
immediate predecessor of both events C
and D.

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 Class Exercise (3)
• Example: The precedence table for
activities involved in a project is shown
opposite. An activity arc network is to be
drawn to model this project process.

a) Explain and identify why it is necessary

to use dummy activities when drawing
the activity network.
b) Draw the activity network using the
necessary dummy activities.

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 PERT: Calculation of Individual Activity
• How the duration of each activity is assessed?

1. Direct estimation: a single number is stated directly based

on long experience with similar projects.

2. Three-Estimate: 3 estimates with specific properties are

used in a weighted average. m is the most likely value,
obtained in a manner similar to direct estimate. a is an
optimistic estimate, i.e. the time needed if everything goes
just right. Finally b is the pessimistic estimate, i.e. the time
needed if everything goes wrong.

Given these three estimates, the final duration is

a  4m  b
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 Probabilistic PERT
• Estimating is an inexact art, so we expect that our initial
duration estimates have some error in them.

• We need to know how much this error is going to affect our

estimates of the total project duration.

• We start with the 3-Estimate approach to estimate the activity

durations.

• Then we make the following assumptions.

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 Probabilistic PERT
• Probabilistic Assumptions:
• The activity duration fit a Beta distribution.
• The range from a to b in the three-estimate approach covers 6 standard
deviations.
• The activity durations are statistically independent.
• The critical path now means the path that has the longest expected value of
total project time.
• The overall project duration has a normal distribution.

• Given the above assumptions, the expected value of each activity duration
is given in exactly the same way as for the three-estimate approach.

The variances of each activity duration is  b  a 

2
•
 6 
 
• The expected value of the total project duration is the sum of the expected
activity durations along the critical path.

• Variances of the project duration is the sum of the variances of the activity
durations for the activities in the critical path.
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 Resource Leveling
• The PERT method assumes that you have all the resources that
you need.

• What if there is a resource shortage issue?

• There may be slack in the activities arcs which allows them to

be shifted apart in time so that they no longer compete for the
resources.

• By using slack time in activities we can move resources

demand around without lengthening the overall project time.

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 Class Exercise (4)
• Consider the small piece of previous example as shown in the
diagram below.

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 Class Exercise (4)
• The tables below summarizes the total free slack for all the
non-critical activities and numbers of employees required.

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 Class Exercise (4)
• First scenario: every activity scheduled as late as possible.

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 Class Exercise (4)
• Second scenario: Every activity scheduled as early as possible.

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 Time-Cost Tradeoffs
• Sometimes it is possible to reduce the amount of time that an
individual activity takes by paying more.

• In these situations, what activities should be sped up?

• This is a complicated problem and one needs to consider all the

activities simultaneously to reach the optimized solution.

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 Time-Cost Tradeoffs
• We show one example using a linear programming
formulation.

• The plot below shows a linear relation between cost of an

activity and the time it takes to complete. Assumption is that
any amount of speed up between Dij and dij is possible.

• Dij: Large duration

• dij: Small duration (crash point)
• K: A hypothetical value to
facilitate calculation

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 Time-Cost Tradeoffs
• Every activity can have a duration between Dij and dij, which
we call xij.
• We also define the constant Cij as the negative of the slope of
the curve:
Cdij  CDij
Cij 
Dij  d ij
• The cost of xij is
Kij  Cij xij
• The objective is to minimize the
total cost, i.e.,
minimize  ( Kij  Cij xij )
• By dropping the constants:
minimize  (Cij xij ) or maximize  (C x )
ij ij

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 Time-Cost Tradeoffs
• We also need to capture the precedence relationship. This is
difficult as we don’t know the event time, let alone the activity
time.

• We define the variable yk to represent the unknown event time.

• How do we make sure that yk is later than

activities 4-7 and 5-7?

• This is easily achieved by using two inequality

y4  x47  y7 and y5  x57  y7

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 Time-Cost Tradeoffs
• We now have procedure to optimize the cost-time relation:

1. Define the starting event time as y0  0

2. Define ending event time as yn  T where T is less than

shortest project time if all activities run in normal time. (Why?)

3. Maximize  (C x ) ij ij subject to: d ij  xij  Dij

yi  xij  y j  0 for all events
y0  0
4. Note that minimum cost for
yn  T
speeding up the project is not
given directly by the optimum
xij , yk  0
value of the objective function, but it is easy to calculate once
the xij values are known.
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 References
• Fondahl, John W., “Non-Computer Approach to the Critical
Path Method for the Construction Industry”, Report #9, Stanford
University, 1961
• Fondhal, John W., “The History of Modern Project
Management- Precedence Diagramming Methods: Origins and
Early Development”, Project Management Journal. Vol XVIII,
No 2, 1987
• Hendrickson, Chris & Au, Tung, Project Management for
Construction, Prentice Hall, 1989
• Weber, Sandra C., Scheduling Construction Projects: Principles
and Practices, Prentice Hall, 2005
• Chinneck, John W., Practical Optimization: A Gentle
Introduction, 2009

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