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Extending The PERT Model For Probabilistic Activity Direct Costs

Mihir Dash ()

Journal of Applied Management and Investments, 2017, vol. 6, issue 4, 231-236

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.

Keywords: PERT/CPM model; sensitivity; probabilistic activity direct costs; activity times (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:ods:journl:v:6:y:2017:i:4:p:231-236