All language subtitles for 7. PERT & Straight 3-Point Techniques

If the project is important,
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and you want to know what resources
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and material and services the deliverable needs,
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the activity breakdown is by far the best technique.
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However, if you just want a quick estimate,
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the Program Evaluation Review Technique, or PERT,
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is fast and a lot better than a single-point guess.
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As a rule of thumb, about plus minus 50% accuracy.
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The development of PERT was driven by the observation
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that most people produce low estimates
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because they are afraid of looking incompetent.
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They are afraid to tell you the real number.
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So the key value of this technique is
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it factors in the worst-case.
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The method estimates three numbers,
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the optimistic case O,
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most likely case M,
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and pessimistic case P,
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and then calculates the statistical likelihood.
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As the PERT estimate is equal to the optimistic case,
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plus four times the most likely case,
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plus the pessimistic case, all divided by six.
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The most likely estimate M is multiplied by four
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to approximate data if it was drawn from
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a normal statistical distribution,
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which is the usual distribution of most events,
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sometimes called the Bell Curve,
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where numbers are more likely to fall in the middle.
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So to get the average you have to divide by six.
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Now here's the value of the technique.
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After trying to look competent by estimating
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a smaller number for the optimistic and most likely case,
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people almost always estimate the pessimistic estimate
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as much larger than the most likely number.
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So the overall PERT average provides a larger
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and therefore more realistic estimate.
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We'll look at an example in a minute.
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Interestingly however, humans being human,
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experience shows the PERT estimate
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often still underestimates in practice,
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so a straight 3-point average,
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with no weighting of the most likely number by four,
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is often recommended today.
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The 3-point estimate is equal to the optimistic,
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plus most likely, plus pessimistic, all divided by three.
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If you're going to use one of the two methods,
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straight 3-point is recommended instead of PERT,
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since underestimation is a much more
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common problem than overestimation.
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If you want to make really sure the estimate
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is large enough you can also pad it
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with one or more standard deviations,
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calculated as the standard deviation is equal to the
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optimistic minus the pessimistic estimate divided by six.
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Then statistical theory tells us
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that if you add one standard deviation
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the actual result should be less than or equal to
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your estimate 84% of the time.
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If you add two standard deviations,
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the actual result should be less than or equal
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your estimate 98% of the time.
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And if you add three standard deviations,
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the actual result should be less than or equal
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the estimate 99.9% of the time.
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Let's take a look at an example.
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Let's say a deliverable owner estimates that their work
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will most likely take 15 days to complete,
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could take 10 days if all goes perfectly,
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or could take as much as 30 days
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if there are significant problems.
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Then the PERT estimate is 10 plus four
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times 15 plus 30 all divided by six or 16.7.
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A little bit more than 10% higher
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than the most likely estimate.
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The 3-point estimate is 10 plus 15 plus 30
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straight divided by three or 18.3.
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A little more than 20% higher
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than the most likely estimate.
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If you have a choice, the 3-point estimate is recommended,
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since, as is usually the case,
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it is larger than PERT, and in the real world,
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likely to be more accurate.
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If you want to add some padding,
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the standard deviation is SD equals 30 minus 10
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divided by six or 3.3.
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So padding the PERT estimate indicates that,
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if this estimate is drawn from a normal distribution,
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adding one standard deviation means that 84% of the time
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16.7 plus 3.3 or 20 days should be enough.
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Adding two standard deviations means that 98% of the time
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16.7 plus 3.3 plus 3.3 or 23.3 days should be enough.
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And adding three standard deviations mean that
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99.9% of the time 16.7 plus 3.3 plus 3.3 plus 3.3
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or 26.6 days should be enough.
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You can also use statistical formulas
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to determine how many standard deviations to add
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to obtain any given percentage confidence you want.
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For example, 60%, 70%, 80%, et cetera.
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There's no question, PERT and 3-point
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are faster techniques than activity breakdown,
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however they are just not as accurate.
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And the basic reason is that
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the larger the item being estimated,
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the less accurate any estimating technique will be,
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and with PERT and 3-point we typically want to move fast,
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ao by definition are estimating larger items of work,
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not at the activity level.
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Which returns us to the fundamental point.
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If the project and an accurate estimate are important,
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instead work with the core project team
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to break the effort into individual deliverables,
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and then have the leads break
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the deliverables into activities.
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And then you get all the other advantages as well,
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such as identification of the resources,
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material, and services required.