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Extending The PERT Model For Probabilistic Activity Direct Costs

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  • Mihir Dash

    (Alliance University, India)

Abstract

One of the major sources of concern for project managers is project cost uncertainty. Higher cost uncertainty leads to higher probability of cost over-run. Thus, project cost uncertainty is a very important element in project cost control. The traditional project management methodologies of PERT/CPM only allow for probabilistic activity times, and consequently probabilistic project duration, which is associated with indirect project costs. In particular, PERT/CPM does not consider probabilistic activity direct costs; activity direct costs are assumed to be definite and known, while activity times are assumed to follow beta distributions, parametrized by the three time estimates (optimistic, pessimistic, and most likely times). This paper proposes an extension of the PERT/CPM model under the conditions of probabilistic activity direct costs and activity times. Further extensions of the model are also discussed.

Suggested Citation

  • Mihir Dash, 2017. "Extending The PERT Model For Probabilistic Activity Direct Costs," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 6(4), pages 231-236, November.
    • Handle: RePEc:ods:journl:v:6:y:2017:i:4:p:231-236
    as

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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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