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Three-Point Estimating and PERT Analysis in Schedule Risk

5 minutes 5 Questions

Three-Point Estimating and Program Evaluation and Review Technique (PERT) Analysis are critical tools in Schedule Risk Analysis, providing a more realistic estimation by considering uncertainty and variability in activity durations. Traditional single-point estimates often fail to account for the inherent risks and uncertainties in project schedules. Three-Point Estimating enhances this by utilizing optimistic, pessimistic, and most likely duration estimates for each activity. In Three-Point Estimating, the optimistic estimate (O) represents the best-case scenario where everything proceeds as planned without any delays. The pessimistic estimate (P) considers the worst-case scenario with potential delays or issues. The most likely estimate (M) is the most probable duration considering normal delays and problems. By calculating the expected activity duration using a weighted average, project managers can derive a more realistic estimate. The PERT formula commonly used is: (O + 4M + P) / 6. This approach acknowledges that activity durations are not certain and that there is a probability distribution of possible outcomes. Incorporating Three-Point Estimating into schedule planning allows for a quantification of schedule risks and uncertainties. It enables project managers to perform statistical analysis on the potential variance in the schedule and to understand the probability of meeting project deadlines. Moreover, PERT Analysis goes beyond just calculating expected durations; it helps in determining the probability of completing the project within a certain timeframe. By analyzing the standard deviation and variance of activities, project managers can construct confidence intervals and assess the likelihood of project completion dates. This probabilistic approach provides valuable insights for risk management and decision-making. Implementing Three-Point Estimating and PERT Analysis enhances the robustness of schedule risk analysis by providing a structured methodology to incorporate uncertainty into project schedules. It supports proactive risk management by enabling early identification of schedule risks and the development of mitigation strategies to address potential delays.

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PMI-SP - Schedule Risk Analysis and Mitigation Example Questions

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Question 1

When analyzing schedule risk using PERT, which formula correctly represents the standard deviation of an activity duration?

Correct Answer: (Pessimistic - Optimistic) / 6

In PERT analysis, the standard deviation (σ) of an activity duration is calculated using the formula: (Pessimistic - Optimistic) / 6. This formula is based on statistical principles where the range (difference between pessimistic and optimistic estimates) is divided by 6 because: 1. In a normal distribution, approximately 99.73% of all values fall within ±3 standard deviations of the mean 2. The total range (Pessimistic - Optimistic) represents 6 standard deviations The other formulas are incorrect because: - The formula with (P + 4M + O) / 6 is actually for calculating Expected Value (mean) - Multiplying by Most Likely or dividing by Most Likely would skew the standard deviation calculation inappropriately This standard deviation calculation is crucial for understanding the uncertainty and variability in activity durations, which helps in risk analysis and schedule management.

Question 2

In a Three-Point PERT estimation scenario, what effect would decreasing the pessimistic estimate while keeping optimistic and most likely estimates constant have on the overall risk assessment?

Correct Answer: It reduces the overall variance and indicates lower schedule uncertainty

In PERT (Program Evaluation and Review Technique) estimation, when the pessimistic estimate is decreased while keeping optimistic and most likely estimates constant: The overall variance decreases because: 1. Variance in PERT is calculated using (P-O)²/36 2. When P (pessimistic) value decreases, the difference between P and O (optimistic) becomes smaller 3. This smaller range results in reduced variance 4. Lower variance indicates reduced uncertainty in the schedule Why other answers are incorrect: - Standard deviation would decrease, not increase, as it's the square root of variance - No need to recalculate optimistic estimate as PERT allows independent values - Decreasing pessimistic estimate actually reduces risk exposure and probability of overruns by narrowing the range of possible outcomes

Question 3

In PERT analysis, how is the weighted average duration calculated when the most likely estimate appears to be closer to the pessimistic estimate?

Correct Answer: Apply the standard PERT formula with (O + 4M + P)/6, as the formula remains constant regardless of estimate distributions

In PERT analysis, the standard formula (O + 4M + P)/6 is the correct and proven method for calculating weighted average duration, regardless of where the most likely estimate falls between optimistic and pessimistic values. This formula is based on beta distribution statistics and has been mathematically proven to provide the most accurate results. The '4' multiplier for the most likely estimate (M) ensures proper weighting of the central tendency, while the single counts of optimistic (O) and pessimistic (P) values provide balanced consideration of the extremes. Modifying this formula based on perceived closeness to either extreme would introduce bias and reduce the statistical validity of the PERT estimation. The standard formula already accounts for variations in distribution through its weighting system. The other proposed formulas would skew the results inappropriately and do not align with established PERT methodology. Changing the weightings would invalidate the statistical basis of the PERT calculation and potentially lead to inaccurate project estimates.

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