Project Network Planning and Risk Assessment

The current state-of-the-art of decision modelling for construction projects is characterised by the following three techniques, which are widely in use:

1. Gantt or bar chart, which shows the start and finish times of the project's activities.

2. Critical Path Method (CPM), which allows the interdependence of the activities to be taken into account, and the identification of the Critical Path of subsequent activities in which any delay in an activity causes a delay in the total project duration.

3. Program Evaluation and Review Technique (PERT), which is similar to CPM, but allows estimated probability distributions for the duration of the activities to be accounted for.

CPM was developed by Kelly and Walker in 1957. PERT originates from the Special Projects Office of the U.S. Navy and was developed in the late fifties for the Polaris missile program.

The Gantt chart is most frequently used because of its simplicity, but does not show the relationships between the activities that are needed to complete the project (Fig. 3.1).

CPM is better for the larger and more complex jobs in that the network shows the interdependence of the various operations (Fig. 3.2).

The initial real-life experiences with CPM in manufacturing scheduling were disappointing, in that actual project durations tended to considerably exceed the predictions according to the model. The variability in expected activity times had to be accounted for. In its simplest form, this can be done by adding

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C

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Figure 3.1 Example GANTT chart

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Arrows show precedence relationships

Arrows show precedence relationships

Figure 3.2 Example CPM

an estimated margin to each expected activity time, to allow for unforeseen delays.

PERT is similar to CPM, but it allows three estimates for the duration of an activity to be provided: a pessimistic, a best guess and an optimistic estimate.

In this chapter we will first describe the traditional critical path method, the probabilistic approach of PERT, and Monte Carlo simulation on a priori selected paths through the network, which represent the current state-of-the-art. We will then show how to conduct Monte Carlo simulation without any a priori selection of paths through the network. Subsequently, the concept of path ranking is introduced in two different rankings: slack (or float) ranking and risk ranking. The latter is to be preferred for large and complex projects, see Chapter 11. Finally, we describe how to allow for mitigations on-the-run, including constraints due to limited human resources.

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