PERT Three Point Estimation Technique

PERT Three Point Estimate Technique

The PERT Three Point Estimate technique is a type of three point estimate. The only difference is that it applies weighting so that the most-likely estimate is weighted 4 times more than the other two estimates (optimistic and pessimistic). This formula is most valuable in estimating time or cost of activities for projects that are especially unique, such as in research and development where there are many unknowns. For projects that are similar to previous projects and there is good historical data and expert experience, the formula is less useful because you could use other techniques like analogous estimating (based on previous experience and projects).

Pert Estimate

E = (o + 4m + p) / 6

where E is Estimate; o = optimistic estimate; p = pessimistic estimate; m = most likely estimate

Standard Deviation

SD = (p − o)/6

where SD is Standard Deviation; p = pessimistic estimate; o = optimistic estimate

To produce a PERT three point estimate:

1. Decompose the project into a list of estimable tasks, i.e. identify tasks for each Work Breakdown Structure (WBS) work package
2. Estimate the E value and SD for each task.
3. Calculate the E value for the total project work as E (Project Work) = Σ E (Task)
4. Calculate the SD value for the total project work as SD (Project Work) = √Σ SD (Task) 2

The E and SD values are then used to convert the project estimates to confidence levels as follows:

1. Confidence level in E value +/- SD is approximately 68%
2. Confidence level in E value +/- 1.645 × SD is approximately 90%
3. Confidence level in E value +/- 2 × SD is approximately 95%
4. Confidence level in E value +/- 3 × SD is approximately 99.7%
5. Information Systems typically use the 95% confidence level, i.e. E Value + 1.645 × SD, for all project and task estimates.[2]

PERT Three Point Estimate Example:

For Activity A:

• o = 4 hours
• p = 16 hours
• m = 8 hours

Using the estimates above for Activity A, calculate the Estimate:

1. E = (4 + 4(8) + 16) / 6
2. E = 52 / 6
3. E = 6.5 hours

Using the estimates above for Activity A, calculate the Standard Deviation:

1. SD = (16 – 4) / 6
2. SD = 12 / 6
3. SD = 2 hours

PERT Three Point Estimate Results for Activity A:

1. 4.5h – 8.5h hours: Confidence level in E value +/- SD is approximately 68.2%
2. 5.3h – 7.7h: Confidence level in E value +/- 1.645 × SD is approximately 90%
3. 2.5h – 10.5h: Confidence level in E value +/- 2 × SD is approximately 95%
4. .5h – 12.5h: Confidence level in E value +/- 3 × SD is approximately 99.7%
5. Information Systems typically use the 90% confidence level, i.e. E Value + 1.645 × SD, for all project and task estimates.

PERT Three Point Estimation References:

• Standard Deviation
  • (http://en.wikipedia.org/wiki/Standard_deviation)
• Three Point Estimation
  • (http://en.wikipedia.org/wiki/Three-point_estimation
• Advanced Pert Estimation
  • (http://tynerblain.com/blog/2009/06/18/advanced-pert-estimation/)

PERT Three Point Estimation Tools

• PERT Spreadsheet in Excel from the Nebraska CIO
  • (http://www.cio.nebraska.gov/plan_proj…/task_estimating_worksheet.xls)
• PERT Estimating Spreadsheet — Lewis Institute
  • (http://www.lewisinstitute.com/_siteFiles/downloads/21.xls)