Crash Times

In the preceding sections, no distinction was made between PERT and CPM. The basic difference between PERT and CPM lies in the ability to calculate percent complete. PERT is used in R&D or just development activities, where a percent-complete determination is almost impossible. Therefore, PERT is event oriented rather than activity oriented. In PERT, funding is normally provided for each milestone (i.e., event) achieved because incremental funding along the activity line has to be based on percent complete. CPM, on the other hand, is activity oriented because, in activities such as construction, percent complete along the activity line can be determined. CPM can be used as an arrow diagram network without PERT. The difference between the two methods lies in the environments in which each one evolved and how each one is applied. According to Archibald and Villoria:9

The environmental factors which had an important role in determining the elements of the CPM techniques were:

(a) Well-defined projects

(b) One dominant organization

(c) Relatively small uncertainties

(d) One geographical location for a project

The CPM (activity-type network) has been widely used in the process industries, in construction, and in single-project industrial activities. Common problems include no place to store early arrivals of raw materials and project delays for late arrivals.

Using strictly the CPM approach, project managers can consider the cost of speeding up, or crashing, certain phases of a project. In order to accomplish this, it is necessary to calculate a crashing cost per unit time as well as the normal expected time for each activity. CPM charts, which are closely related to PERT charts, allow visual representation of the effects of crashing. There are these requirements:

• For a CPM chart, the emphasis is on activities, not events. Therefore, the PERT chart should be redrawn with each circle representing an activity rather than an event.

• In CPM, both time and cost of each activity are considered.10

• Only those activities on the critical path are considered, starting with the activities for which the crashing cost per unit time is the lowest.

Figure 12-16 shows a CPM network with the corresponding crash time for all activities both on and off the critical path. The activities are represented by cir-

9 R. D. Archibald and R. L. Villoria, Network-Based Management Systems (PERT/CPM) (New York: John Wiley, 1967), p. 14.

10 Although PERT considers mainly time, modifications through PERT/cost analysis can be made to consider the cost factors.

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Figure 12-16. CPM network.

Figure 12-16. CPM network.

cles and include an activity identification number and the estimated time. The costs expressed in the figure are usually direct costs only.

To determine crashing costs we begin with the lowest weekly crashing cost, activity A, at $2,000 per week. Although activity C has a lower crashing cost, it is not on the critical path. Only critical path activities are considered for crashing. Activity A will be the first to be crashed for a maximum of two weeks at $2,000 per week. The next activity to be considered would be F at $3,000 per week for a maximum of three weeks. These crashing costs are additional expenses above the normal estimates.

A word of caution concerning the selection and order of the activities that are to crash: There is a good possibility that as each activity is crashed, a new critical path will be developed. This new path may or may not include those elements that were bypassed because they were not on the original critical path.

Returning to Figure 12-16 (and assuming that no new critical paths are developed), activities A, F, E, and B would be crashed in that order. The crashing cost would then be an increase of $37,500 from the base of $120,000 to $157,500. The corresponding time would then be reduced from twenty-three weeks to fif-

teen weeks. This is shown in Figure 12-17 to illustrate how a trade-off between time and cost can be obtained. Also shown in Figure 12-17 is the increased cost of crashing elements not on the critical path. Crashing these elements would result in a cost increase of $7,500 without reducing the total project time. There is also the possibility that this figure will represent unrealistic conditions because sufficient resources are not or cannot be made available for the crashing period.

The purpose behind balancing time and cost is to avoid the useless waste of resources. If the direct and indirect costs can be accurately obtained, then a region of feasible budgets can be found, bounded by the early-start (crash) and late-start (or normal) activities. This is shown in Figure 1218.

Since the direct and indirect costs are not necessarily expressible as linear functions, time-cost trade-off relationships are made by searching for the lowest possible total cost (i.e., direct and indirect) that likewise satisfies the region of feasible budgets. This method is shown in Figure 1219.

Like PERT, CPM also contains the concept of slack time, the maximum amount of time that a job may be delayed beyond its early start without delaying the project completion time. Figure 12-20 shows a typical representation of slack time using a CPM chart. In addition, the figure shows how target activity costs can be identified. Figure 12-20 can be modified to include normal and crash times as

Crashing Project Schedule


Figure 12-17. CPM crashing costs.


Figure 12-17. CPM crashing costs.


Figure 12-19. Determining project duration.

Figure 12-20. CPM network with slack.

well as normal and crash costs. In this case, the cost box in the figure would contain two numbers: Th number would be the normal cost, and the second would be the crash cost. These numbers might also appear as running totals.

PERT/CPM Problem Areas

PERT/CPM models are not without their disadvantages and problems. Even the largest organizations years of experience in using PERT and CPM have the same ongoing problems as newer or smaller companies.

Many companies have a difficult time incorporating PERT systems because PERT is end-item oriente Many upper-level managers feel that the adoption of PERT/CPM removes a good part of their power ability to make decisions. This is particularly evident in companies that have been forced to accept PERT/CPM as part of contractual requirements.

There exists a distinct contrast in PERT systems between the planners and the doers. This human elei must be accounted for in order to determine where the obligation actually lies. In most organizations ! planning is performed by the program office and functional management. Yet once the network is constructed, the planners and managers become observers and rely on the doers to accomplish the job within time and cost limitations. Management must convince the doers that they have an obligation tc the successful completion of the established PERT/CPM plans.

Unless the project is repetitive, there usually exists a lack of historical information on which to base t estimates of most optimistic, most pessimistic, and most likely times. Problems can also involve poor predictions for overhead costs, other indirect costs, material and labor escalation factors, and crash co is also possible that each major functional division of the organization has its own method for estimat costs. Engineering, for example, may use historical data, whereas manufacturing operations may pref learning curves. PERT works best if all organizations have the same method for predicting costs and performance.

PERT networks are based on the assumption that all activities start as soon as possible. This assumes qualified personnel and equipment are available. Regardless of how well we plan, there almost alway differences in performance times from what would normally be acceptable for the model selected. Fo selected model, time and cost should be well-considered estimates, not a spur-of-the-moment decisioi

Cost control presents a problem in that the project cost and control system may not be compatible wit company fiscal planning policies. Project-oriented costs may be meshed with non-PERT-controlled jo order to develop the annual budget. This becomes a difficult chore for cost reporting, especially when project may have its own method for analyzing and controlling costs.

Many people have come to expect too much of PERT-type networks. Figure 12-21 illustrates a PERT network broken down by work packages with identification of the charge numbers for each activity. I projects may contain hundreds of charge numbers. Subdividing work packages (which are supposedly lowest element) even further by identifying all subactivities has the advantage that direct charge numl can be easily identified, but the time and cost for this






Figure 12-21. Using PERT for work package control.

form of detail may be prohibitive. PERT/CPM networks are tools for program control, and managers must be careful that the original game plan of using networks to identify prime and supporting objectives is still met. Additional detail may mask this all-important purpose. Remember, networks are constructed as a means for understanding program reports. Management should not be required to read reports in order to understand PERT/CPM networks.

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