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Difference Between PERT and CPM (with Comparison Chart) – Key Differences

Eleven important differences betweeb PERT and CPM are discussed in this article. One such difference is PERT is a technique of planning and control of time. Unlike CPM, which is a method to control costs and time.

Source: Difference Between PERT and CPM (with Comparison Chart) – Key Differences

Difference Between PERT and CPM

CPM vs PERTProject management can be understood as a systematic way of planning, scheduling, executing, monitoring, controlling the different aspects of the project, so as to attain the goal made at the time of project formulation. PERT and CPM are the two network-based project management techniques, which exhibit the flow and sequence of the activities and events. Program (Project) Management and Review Technique (PERT) is appropriate for the projects where the time needed to complete different activities are not known.

On the other hand, the Critical Path Method or CPM is apt for the projects which are recurring in nature.

The two scheduling methods use a common approach for designing the network and for ascertaining its critical path. They are used in the successful completion of a project and hence used in conjunction with each other. Nevertheless, the truth is that CPM is different from PERT in a way that the latter concentrates on time while the former stresses on the time-cost trade-off. In the same manner, there are many differences between PERT and CPM, which we are going to discuss in this article.

Content: PERT Vs CPM

  1. Comparison Chart
  2. Definition
  3. Key Differences
  4. Video
  5. Conclusion

Comparison Chart

BASIS FOR COMPARISON PERT CPM
Meaning PERT is a project management technique, used to manage uncertain activities of a project. CPM is a statistical technique of project management that manages well defined activities of a project.
What is it? A technique of planning and control of time. A method to control cost and time.
Orientation Event-oriented Activity-oriented
Evolution Evolved as Research & Development project Evolved as Construction 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-critical activities No differentiation Differentiated
Suitable for Research and Development Project Non-research projects like civil construction, ship building etc.
Crashing concept Not Applicable Applicable

Definition of PERT

PERT is an acronym for Program (Project) Evaluation and Review Technique, in which planning, scheduling, organizing, coordinating and controlling uncertain activities take place. 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. It was developed in the late 1950s. It is aimed to reduce the time and cost of the project.

PERT uses time as a variable which represents the planned resource application along with performance specification. In this technique, first of all, the project is divided into activities and events. After that proper sequence is ascertained, and a network is constructed. After that time needed in each activity is calculated and the critical path (longest path connecting all the events) is determined.

Definition of CPM

Developed in the late 1950s, Critical Path Method or CPM is an algorithm used for planning, scheduling, coordination and control of activities in a project. Here, it is assumed that the activity duration is fixed and certain. CPM is used to compute the earliest and latest possible start time for each activity.

The process differentiates the critical and non-critical activities to reduce the time and avoid the queue generation in the process. The reason for the identification of critical activities is that, if any activity is delayed, it will cause the whole process to suffer. That is why it is named as Critical Path Method.

In this method, first of all, a list is prepared consisting of all the activities needed to complete a project, followed by the computation of time required to complete each activity. After that, the dependency between the activities is determined. Here, ‘path’ is defined as a sequence of activities in a network. The critical path is the path with the highest length.

Key Differences Between PERT and CPM

The most important differences between PERT and CPM are provided below:

    1. PERT is a project management technique, whereby planning, scheduling, organising, coordinating and controlling uncertain activities are done. CPM is a statistical technique of project management in which planning, scheduling, organising, coordination and control of well-defined activities take place.
    2. PERT is a technique of planning and control of time. Unlike CPM, which is a method to control costs and time.
    3. While PERT is evolved as a research and development project, CPM evolved as a construction project.
    4. PERT is set according to events while CPM is aligned towards activities.
    5. A deterministic model is used in CPM. Conversely, PERT uses a probabilistic model.
    6. There are three times estimates in PERT, i.e. optimistic time (to), most likely time ™, pessimistic time (tp). On the other hand, there is only one estimate in CPM.
    7. PERT technique is best suited for a high precision time estimate, whereas CPM is appropriate for a reasonable time estimate.
    8. PERT deals with unpredictable activities, but CPM deals with predictable activities.
  1. PERT is used where the nature of the job is non-repetitive. In contrast to, CPM involves the job of repetitive nature.
  2. There is a demarcation between critical and non-critical activities in CPM, which is not in the case of PERT.
  3. PERT is best for research and development projects, but CPM is for non-research projects like construction projects.
  4. Crashing is a compression technique applied to CPM, to shorten the project duration, along with the least additional cost. The crashing concept is not applicable to PERT.

Video: PERT Vs CPM

Conclusion

The difference between these two project management tools is getting blurred as the techniques are merged with the passage of time. That is why, in most projects, they are being used as a single project. The primary point that distinguishes PERT from CPM is that the former gives the extreme importance of time, i.e. if the time is minimized, consequently the cost will also be reduced. However, cost optimization is the basic element, in the latter.

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Understand the difference between Lead-Lag, Float/Slack and Buffer Management

Over many years of my training experience, I have found that people are confused with the following project management terminologies. I have put my best effort to clarify these terms.

Source: Understand the difference between Lead-Lag, Float/Slack and Buffer Management

Over many years of my training experience, I have found that people are confused with the following project management terminologies. I have put my best effort to clarify these terms. Please do share your feedback and comments for the benefits of the others.

1.      Lead and Lag are the duration unit of tasks. Lead is portrayed by negative (-) sign whereas Lag is by positive (+) sign. A lead is the amount of time whereby a successor activity can be advanced with respect to a predecessor activity whereas A lag is the amount of time whereby a successor activity will be delayed with respect to a predecessor activity.

Lead and Lag are decided by the Project manager based on the logical relationship between two tasks. For example, Hang a photo frame on the wall. In this case, consider you have the following tasks…

a.      Task A – Construct a wall

b.     Task B – Paint a Wall

c.      Task C – Hang a photo frame

Here, Task B is a predecessor to Task C and it also required waiting time (Lag) before the successor task can start. Now the lag will be decided by the project manager based on expert judgment and other facilitation techniques in this case.

Hence, Lead and Lag are always imposed by the project managers on a critical or non-critical path based on task logical relationship.

2.      Float or Slack is again an activity duration unit where a task can be delayed without having impact on early start date of successor task (free float) or project duration (Total Float) or customer constraints date (Project float) but the difference here, it is not imposed by project manager manually rather they exist in network diagram because of the sequencing of the tasks.

Float or Slack can only exist on the non-critical path.

Formula: Float = LS-ES or LF – EF

3.      Buffer or Reserve Or Padding are used in project management as a risk response strategy. They are again manually decided by project managers based on expert judgment or other facilitation techniques with the team and other stakeholders.

In the Project network diagram on the critical path, when we put buffer (Project Buffer) at the end of the network, it is for the purpose of mitigating the unknown-unknown risk and hence to protect the project schedule for delay from unidentified risk.

When we put Buffer on a non-critical path (Feeding Buffer) it is again for risk of delay to task on the non-critical path which has an impact on the task on the critical path because of their relationship/constraints.

To summarize, Float, Lead/Lag and Buffer are not the same. Float for the task cannot be decided by project manager whereas Lead/Lag and Buffer can be decided by him with other’s help.

Lead/Lag can exist on both critical or non-critical paths the same as Buffer but the difference is Buffer can also exist at the end of the critical path as oppose to Lead/Lag.

 

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Precedence Diagramming Method (Activity on Node Method) in Scheduling | PM Study Circle

A Precedence Diagramming Method (PDM) is a graphical representation technique. It shows the inter-dependencies of activities and is used in schedule

Source: Precedence Diagramming Method (Activity on Node Method) in Scheduling | PM Study Circle

 

A Precedence Diagramming Method (PDM) is a graphical representation technique. It shows the inter-dependencies of activities and is used in schedule development. The other name for this technique is Activity on Node (AON).

We use this method in drawing the project schedule network diagrams; for example, critical path networkcritical chain network diagram, and others.

The Precedence Diagramming Method shows activity relationships. Hence, it is an important communication tool for stakeholders.

Precedence Diagramming Method (PDM)

The Precedence Diagramming Method is made of rectangles, known as nodes. These boxes show the project activities. An arrow connects two boxes and shows the relationship. Therefore, these diagrams are also known as Activity on Node (AON) diagrams.

Type of Dependencies in PDM

The PDM uses four dependencies:

  1. Mandatory Dependency
  2. Discretionary Dependency
  3. External Dependency
  4. Internal Dependency

Mandatory Dependency

This dependency is also known as hard logic. You cannot avoid it. Starting the next activity depends on it.

For example, you cannot install the ceiling until you build all the walls.

Discretionary Dependency

This dependency is also known as preferential or soft logic, it plays a role in optimizing resources.

For example, you can construct the four walls in any sequence. However, if constructing them in a certain sequence is beneficial you build them in that order.

Here, you can change the sequence of activities as per your preferred logic.

External Dependency

The project management team has no control over an external dependency.

For example, you may need government approval before starting the next activity.

Internal Dependency

These are dependencies are within the control of your project or organization.

For example, you cannot get a resource until it is free from another project.

Dependency Relation

The Precedence Diagramming Method uses four relationships:

  1. Finish to Start (FS)
  2. Finish to Finish (FF)
  3. Start to Start (SS)
  4. Start to Finish (SF)

Finish to Start (FS)

Here, the next activity cannot start until the first is complete. This is the most common relationship in PDM.

Finish To Start (FS) Relationship

For example, to paint a wall you first you have to construct it. In this case, the first activity is building the wall and the second activity is painting. You cannot start painting the wall until the wall is ready.

Finish to Finish (FF)

Here, you cannot complete the next activity until the first is finished. Put simply, both activities should be finished simultaneously.

Finish To Finish (FF) Relationship

For example, let us say that you are coding a program for a client. The client gives you the features after completing a milestone. You cannot finish coding until you get the client’s complete requirements. Here, both activities should be finished simultaneously.

Start to Start (SS)

Here, the next activity cannot be started until the first starts. Both activities should start simultaneously.

Start To Start (SS) Relationship

Suppose you have to apply a coating on a wall, but the wall must be cleaned in order to apply it.

Therefore, one team will clean the wall and second team will coat it. Both activities can start simultaneously.

Start to Finish (SF)

Here, you cannot finish the next activity until the first starts.

Start To Finish (SF) Relationship

For example, let us say you are moving into a new home and your old home has to be demolished. In this case, you cannot move into your new home until it is ready. Hence, the second activity (construction of the new home) must be finished before the first activity starts (moving into a new home).

Put simply, you are moving into your new home. You cannot start vacating your old home until the new house is ready.

Although this relationship is rare, you must understand all the dependencies. It will help you draw the network diagram and develop the project schedule.

This concludes the precedence diagram method.

You may hear the term Activity on Arrow (AOA). This is a less commonly used technique in diagramming methods. The AOA method is a special case of the Precedence Diagramming Method.

AOA diagram only uses the Finish to Start relationship. It shows the duration over the arrows, that is why many experts call this diagramming method the Activity on Arrow diagram. PERT is an example of this technique.

There is a difference between the AON and AOA diagram. The AOA diagram emphasizes milestones (events), and the AON diagram emphasizes tasks.

How to Draw a Precedence Diagram

To draw a PDM, you will break your Work Breakdown Structure down to the activity level.

Then you will create a table, list all activities, and sequence the activities.

The next step is to add relationships to each activity. You will add what activity comes next.

Finally, you will draw the diagram.

Benefits of Precedence Diagramming Method

This method offers many benefits to project management:

  1. It helps you find relationships and dependencies among activities. This helps you in planning and avoiding risks. If any task is missing, you can easily identify it.
  2. You can find critical activities and focus on them. Any delay in critical activities will delay your schedule.
  3. A project schedule network diagram is a good communication tool. Stakeholders can visualize activities and understand the schedule.
  4. Without the Precedence Diagram, you cannot develop your project schedule.

Summary

The Precedence Diagram Technique has an important role in project management. Your project schedule depends on it and it is a good communication tool. It is commonly referred to as AON, where nodes represent activities. The other PDM is AOA, where nodes represent milestones and duration is shown on the arrow.

This topic is important for the PMP exam. You may see one or two questions on this topic.

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Rolling Wave Planning – Project Management Knowledge

Source: Rolling Wave Planning – Project Management Knowledge

Rolling wave planning is a project management technique that involves progressive elaboration to add detail to the Work Breakdown Structure (WBS) on an ongoing basis. At the beginning of the project, near term deliverables are decomposed into individual components (work packages) and defined at the greatest level of detail. Deliverables and schedule activities that will take place several reporting periods in the future are more broadly defined. For example, Phases 1-2 might be broken down fully in the WBS. Phases 3-6 might be outlined only to the level of subprojects. Then, while schedule activities for phase 1 are underway, the detailed planning for phase 3 would commence. As phase 2 is put in motion, planning for phase 4 would start and so forth

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Contingency Reserve vs Management Reserve | PM Study Circle

The contingency reserve and management reserve are the backbone of your risk management, as they provide you with means to manage risks.

Source: Contingency Reserve vs Management Reserve | PM Study Circle

 

Risks occur in every project and as a project manager, it is your responsibility to manage them as they occur. These risks can be identified or unidentified. If these risks are identified, you will implement the contingency plan; otherwise, you will manage them through a workaround.

To manage these risks, you will use the contingency reserve and management reserve. These reserves are defined during the risk management planning process. The contingency reserve and management reserve provide you with a cushion against the risks and are part of your project budget.

Many professionals assume these reserves are the same since they serve the same purpose. Generally, small and medium-sized organizations do not differentiate between them and take them as a percentage of the project cost to keep things simple. Therefore, professionals that have experience with these organizations may not know the difference between the contingency and management reserves.

Contingency Reserve

You manage identified risks with the contingency reserve. This reserve can be in either cost or time.

The contingency reserve is not random; it is an estimate reserve based on various risk management techniques.

Project managers control this reserve; they have full authority to use it whenever an identified risk occurs. They can also delegate this authority to a risk owner. The risk owner will manage it and update the project manager in later stages.

How to Calculate the Contingency Reserve

There are various techniques to calculate the contingency reserve. Some of them are as follows:

  • Percentage of the Project’s Cost
  • Expected Monetary Value
  • Decision Tree Analysis
  • Monte Carlo Simulation

Now we will discuss each technique in detail.

Percentage of the Project’s Cost

Many small and medium-sized organizations use this technique for small projects; it helps save money and resources.

Basically, you take a percentage of the cost of the project to calculate the contingency reserve, which usually lies between 3% and 10%. This number is based mainly on the perceived risk of the project.

Expected Monetary Value

Expected monetary value is a statistical technique used to quantify risks and help calculate the contingency reserve. This technique is used in medium to high-cost projects, where the stakes are too high to risk the project failing.

To find the expected monetary value, first you will calculate the probability and impact of each event, then multiply them together to generate the EMV of each risk.

Expected Monetary Value (EMV) = Probability * Impact

Then add the calculated EMV of all identified risks together.

Example

Assuming you have four risks with probabilities and impact:

contingency reserve management reserve expected monetary value

From the above table, you could argue that the funds needed to manage all identified risks is 4,500 USD, but this would be incorrect.

Not all possible risks are guaranteed; some may happen and some may not. All risks will add their EMV to the pool. The risks that do occur will use money from the pool, but the risks that do not occur will help cover the cost of those that did.

In the above scenario, you may need to add 1,100 USD to your budget to cover all identified risks.

The expected monetary value concept works well when you have many risks because the more you can identify, the better the spread of the reserve. If you have identified fewer risks, there will not be enough spread, and the reserve may dry up.

The EMV technique has a few drawbacks, which include:

  • You assume that all risks are independent, which is not always the case.
  • If the number of risks is small, the spread will be less, and the reserve may be insufficient.
  • There is a chance of avoiding positive risks, which may lead to a false result.

Decision Tree Analysis

Decision tree analysis is a quantitative risk analysis technique. This technique helps you select the best choice. This is a graphical technique that looks like a tree, hence its name.

Here, you determine the expected monetary value of each event and select the best choice.

Example:

Calculate the expected monetary value of the best choice.

Decision Tree example

In this example, you have three choices: Choice A, Choice B, and Choice C.

As seen from the figure above, all three choices represent opportunities. Therefore, you will find the expected monetary value of the three events and go with the most favorable. You are trying to get the maximum profit.

Now, let us calculate the EMV of all three events.

In the diagram, you were given the probability of one event, while the probability of the other event is not provided. To find the other probability, you have to subtract the probability of the first event from 100, because the sum of all possible outcomes for one event is 100%.

EMV of Choice A = 0.30*200 + 0.70*400

= 60 + 280

= 340 USD

EMV of Choice B = 0.40*300 + 0.60*200

= 120 + 120

= 240 USD

EMV of Choice C = 0.2*500 + 0.80*200

= 100 + 160

= 260 USD

You have to choose the one with the highest EMV, which is Choice A.

Note that if all risks are negative, you select the least negative option. This is because you want to spend the least amount of money on managing risks.

Monte Carlo Simulation

In 1940, an atomic nuclear scientist named Stanislaw Ulam invented this technique and named it Monte Carlo after the city in Monaco, which is famous for its casinos.

This technique gives several possibilities of outcomes and the probabilities for any choice of action.

For example, we will discuss the use of the Monte Carlo simulation in analyzing a project schedule. To use this technique, you must have duration estimates for each activity.

pert

You have three activities with the following estimates (in months):

According to the PERT estimate, these three activities will end in 18.3 months.

Best case, it will take 15 months, and in the worst case, it may take 23 months.

Now, if we run the Monte Carlo simulation for these tasks, five hundred times, it will show us results like this:

monte-carlo-simulation

(The above information is only for illustration purposes and is not from an actual Monte Carlo simulation test result.)

After reviewing the results, you can determine that there is a 2% chance of completing the project in 16 months, or a 70% chance of completing the project in 19 months, or a 95% chance of completing the project in 20 months, etc.

Likewise, you can run the Monte Carlo simulation for the budget.

For example, you can generate data like adding 20,000 USD to the project cost gives a 70% chance that you can complete the project within the budget. If you add 40,000 USD to the project cost, there is a 95% chance that you can complete the project within the budget, etc.

So, it’s clear that with the use of this technique you can get valuable information which will help you make better-informed decisions.

As you proceed, you will become more familiar with the situation and you can review this contingency reserve again. If required, this reserve can be reduced and you can release the funds.

Management Reserve

The management reserve is defined as the cost or time reserve that is used to manage the unidentified risks or “unknown-unknown”.

The management reserve is a part of the project budget but not the cost baseline. It is not an estimated reserve; it is a figure that is fashioned according to the organization’s policies.

It can be 5% of the total project cost or duration of the project or it may be as high 10%. The management reserve is usually estimated based on the uncertainty of the project.

For example, if you are doing a project in which your organization has the expertise and experience, the management reserve will be less. In this case, there is less uncertainty.

However, if you are doing a kind of project new to your organization, the management reserve will be high, because in this situation, the uncertainty is greater.

The project manager does not control management reserve, the management does. Therefore, the project manager must receive approval to use this reserve whenever any unidentified risk occurs.

Many organizations try to avoid using the management reserve. They think if the project manager has to come to them every time to get approval, then why keep it separate? The project manager can come any time they need extra money; so why have a management reserve?

On the PMP exam, you will see many questions on contingency reserve, management reserve, cost estimate, and the project budget. These are crucial concepts; without these reserves, you cannot estimate the cost baseline and project budget. Therefore, for your easy reference, I am explaining these topics here as well.

Cost Estimate

The cost estimate is the cost of all work packages and is “rolled up” to the top level; this is the total cost of the project.

Cost Baseline

When you add the contingency reserve to the cost estimate, you get the cost baseline.

Cost Baseline = Cost Estimate + Contingency Reserve

Note that the project’s performance will be measured against the cost baseline.

Project Budget

If you add the management reserve to the cost baseline, you will get the project budget.

Project Budget = Cost Baseline + Management Reserve

When You Cannot Use the Management Reserve

Management reserve and contingency reserve are different and serve different purposes.

Below are a few cases where you should not use the management reserve.

When You Are Over Budget

You have to estimate the new budget and try to get it approved. You should never use the management reserve to compensate for cost overrun.

The management reserve is for unidentified risks, not to cover the cost overrun.

While Using Schedule Compression Techniques

There are two schedule compression techniques: fast tracking and crashing.

Schedule compression may lead to new risks. Identify those risks, prepare a response plan, and calculate the new contingency reserve. You will need to get it approved.

You can revisit your management reserve for a review as well.

However, in crashing, you use extra resources. After you complete the planning for crashing, you have to revisit your risk management planning.

Gold Plating

You should avoid gold plating and you should not use the management reserve for it, this increases the risk and changes the scope.

Fallback Plan

I often receive emails from my visitors asking me why we cannot use the management reserve for the fallback plan.

By definition, the management reserve is used for unknown risks.

fallback plan is not used for unknown risks; it is a plan for known risks when the primary response plan fails. Therefore, you will use the contingency reserve for this plan, not the management reserve.

Residual Risks

Since residual risks are identified risks, you will use contingency reserve to manage these risks.

The Difference Between Contingency Reserve and Management Reserve

The following are a few differences between the contingency reserve and management reserve:

  • The contingency reserve is used to manage identified risks, while the management reserve is used for unidentified risks.
  • The contingency reserve is an estimated figure, while the management reserve is a percentage of the cost or duration of the project.
  • The project manager has authority over the contingency reserve, while for the management reserve, they need management’s permission.
  • The contingency reserve is a part of the performance measurement baseline, while the management reserve is not.

Summary

To complete your project successfully, you will have to be proactive in risk management. The contingency reserve and management reserve are the backbone of your risk management, as they provide you with means to manage risks. The contingency reserve and management reserve are not the same; they are calculated with different techniques, and serve different purposes. The contingency reserve is for identified risks and is a part of your cost baseline while the management reserve is for unidentified risks and is a part of your budget.

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4 Sure-Fire Steps to Solve PDM PMP Questions – Precedence Diagramming Method Example

Precedence Diagramming Method ExampleLet us understand how to solve PDM PMP Questions. We will look at an example of such a question and discuss the logical steps involved in solving the questions.I received the following question in mail from one of my students. I do not know the source of the question. She found the question confusing. The question is worded to confuse the readers. The question is about determining the relationship between 2 activities. Let us look at the question.

Source: 4 Sure-Fire Steps to Solve PDM PMP Questions – Precedence Diagramming Method Example