A Three-Point Estimating Technique: PERT
What is PERT?
Three-Point Estimating is a technique used to estimate cost or duration by applying an average or weighted average of optimistic, pessimistic, and most likely estimates when there is uncertainty with the individual activity estimates.
There are multiple types of three-point estimating tools. The Program Evaluation and Review Technique (PERT), informally known as PERT PMP, is one type.
PERT is a technique used to estimate project duration through a weighted average of optimistic, pessimistic, and most likely activity durations when there is uncertainty with the individual activity estimates.
Understanding PERT for Projects: Three-Point Estimating PMP
With origins in the US Navy, PERT has been used across the globe, in many industries, and for decades (over the past 60 years). PERT has become the most used and popular method of choice among project managers due to its reliability and accuracy.
Key points about PERT include:
- PERT is used to estimate project duration or cost.
- PERT is a weighted average estimate technique.
- PERT is best used for planning to ensure accurate scope.
- PERT formula is an approximation of the Beta Distribution equation.
- PERT is determined using three points: Optimistic (O), Most Likely (M), and Pessimistic (P).
- PERT combines probability theory and statistics to derive a formula for the average activity from the three-point estimates.
Optimistic Estimate (0)
- One value within the PERT formula and is represented as
O. - Estimate for all favorable conditions with no risks or changes
- The “best-case” and thus shortest duration, or lowest cost, to complete the work.
Pessimistic Estimate (P)
- Used in the PERT formula and is represented as
P. - Estimate for all unfavorable conditions with all negative risks occurring and no mitigation of negative risks
- The “worst-case” and thus longest duration, or highest cost, to complete the work.
Most Likely Estimate (M)
- The Most Likely estimate and is represented as
M. - Estimate for both favorable and unfavorable conditions, with some risks occurring.
- The name is accurate in the estimate is based on changes, but ones that have been planned for and can be mitigated. The Most Likely estimate captures the highest likelihood of completing the work in the given duration or cost.
PERT Formula
The three points O, P, and M are used in the PERT formula. It uses a weighted average (not a simple average) to determine the mean of the three estimated values.
PERT = (O + 4M + P) / 6
The M value, Most Likely, is given 4 weights as the PERT formula is based on probability theory and statistics, specifically Beta Distribution (after all, it is the most likely).
PERT Example
Within a large city, some factors influence how long it takes to drive from home to the office. The weather, the time of day, and any vehicle accidents on the road can impact the duration to get from home to the office on those roads.
| Duration | Conditions | |
|---|---|---|
| Most Likely (M) | 60 minutes | clear weather, clear roads, normal volume of drivers on some of the roads |
| Optimistic (O) | 30 minutes | clear weather, clear roads, no other drivers on any road |
| Pessimistic (P) | 120 minutes | thunderstorm with rain, road blocked from multiple vehicle accidents, the highest volume of drivers |
The weighted average of the three estimates is used in the PERT formula:
PERT = (30 + [4 x 60] + 120) / 6 = 390 / 6 = 65 minutes
Staying with this example, consider if asked “how long does it take you to drive to work?”. Have you ever replied with “well, if it is a weekday at 8 am, it usually takes me 30 minutes longer than if it is a sunny weekend afternoon.” You are giving different estimates reflecting different situations for the same activity. Using PERT analysis, the estimates go from “guesses” to mathematically verified estimates.
Pros and Cons of Three-Point Estimation using PERT
| Pros | Cons |
|---|---|
| - Evaluate the time and resource needed for activities - Evaluate the sum requirements of all activities simultaneously - Improve interdepartmental communication as part of data gathering | - Subjectivity of activity sequence weakens accuracy - Bias of participants submitting estimates reduces precision of data - Resource of people and time needed to collect estimates can be cost-prohibitive |
Memo
- Clearly define the details of work using the WBS.
- How to calculate time according to PERT:
- Optimistic estimate: roughly calculated
- Most likely estimate: 1.25 times the optimistic estimate
- Pessimistic estimate: 2 times the optimistic estimate