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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
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    References listed on IDEAS

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    1. Florin Tache & Oana-Catalina Tapurica & Cristina-Elena Ispasoiu, 2013. "Innovative Monitoring Tool for Environmental Issues within Project Management," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 2(2), pages 102-108.
    2. J. J. Martin, 1965. "Distribution of the Time Through a Directed, Acyclic Network," Operations Research, INFORMS, vol. 13(1), pages 46-66, February.
    3. D. R. Fulkerson, 1962. "Expected Critical Path Lengths in PERT Networks," Operations Research, INFORMS, vol. 10(6), pages 808-817, December.
    4. Gul Polat, 2012. "ANN approach to determine cost contingency in international construction project," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 1(2), pages 195-201.
    5. Irina B. đÉzarova, 2015. "An Analysis of Life Cycle of Projects in Housing Sector," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 4(1), pages 2-10.
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