Project Durations and Contingencies
Predicting project completion times is one of the challenges of Project Managers. Project schedule overruns are quite common due to uncertainty in estimating task durations, lack of historical data, inadequate skill, etc.
We could simply add the usual 10% schedule contingency to help ensure we finish our project on time or maybe we could take a more scientific approach based on a beta (β) frequency distribution and the PERT (programme evaluation and review technique) formula:
In this situation, the project critical path BET = (O + 4ML + P)/6 = (22 + 160 + 100) = 47 days, the Standard Deviation = (P – O)/6 = 13 days, and Contingency = Standard Factor x Standard Deviation. The Standard Factor is the same for all projects. As with all estimates, their accuracy depends on the accuracy of the input data. To save us from these laborious calculations, if they are really needed, we could invest in some pricey software such as @Risk or Crystal Ball to run a Monte Carlo simulation to determine for example what project cost or duration would provide us with the confidence level we require, or what are the chances of finishing our project within budget and on time. Anyway, here are the calculations for the above example:
The main reason we project managers use the PERT Formula is to have an estimate for cost or duration that is reasonably accurate. When project managers – especially inexperienced ones – estimate duration, sometimes they choose an amount of time that is too short or too long. The same scenario also happens with cost. One of the most criticised factors in using the PERT Formula is the question of whether the initial optimistic, most likely, and pessimistic durations are truly objective.