Project management

using GERT analysis

inShare

ARTICLE Methodology September 1978

Project Management Quarterly
By Taylor, Bernard W.
How to cite this article:
Taylor, B. W. (1978). Project management using GERT analysis. Project Management
Quarterly, 9(3), 1520.

LAURENCE J. MOORE

Virginia Polytechnic Institute and State

University
Application of network analysis to project planning and control has been
extensive since the late 1950s [12], PERT and CPM, the best known network
modeling techniques, have been applied to a diverse number of projects for
planning and control purposes. However, PERT and CPM do have limited
capabilities which prohibit modeling of many complex project network forms. A
more flexible generalized network tool which has received increased attention
recently is GERT (Graphical Evaluation and Review Technique) [5], GERT
includes features such as probabilistic branching (stochastic models), network
looping (feedback loops), multiple sink nodes (multiple outcomes), and
multiple node realization (repeat events) which are unavailable in PERT/CPM.
These GERT features provide the user with the capability to model and
analyze projects and systems of a very general form. Since many real-world
system problems do involve probabilistic occurences, false-starts, activity
repetition, and multiple outcomes, GERT is an ideal tool for the modeling and
analysis.
The purpose of this paper is to describe the GERT network modeling
technique and simulation package, and demonstrate its capabilities via an
example of R&D project planning. Included in this overview of GERT will be a
discussion of the use of GERT output for management planning and control
including sensitivity analysis and implementation.

GERT Modeling
The conceptual framework for construction of PERT/CPM networks is straight
forward and generally well-known. However, since GERT networks are similar
in construction to PERT/CPM networks it will be useful to briefly review the
PERT/CPM components.
PERT/CPM networks consist of two major components, activities and events.
Network activities represent actual operations of the real-world project, while
events represent milestones in the project that occur at a point in time. Events
can represent the beginning or end of an activity or both; and, the beginning
or end of both of more than one activity. Activities generally consume time and
resources. In network configuration, events are represented by arrows. PERT
and CPM differ in that in CPM activities are assumed to have only a single
time for duration while in PERT the activity times are probabilistic, and
typically described by a three estimate beta distribution. (For a more detailed
explanation of PERT and CPM see [5]).

Figure 1. The GERT Characteristics

Figure 1 presents a brief schematic which highlights the differences between
PERT/CPM and GERT, and demonstrates the various GERT characteristics
and attributes [5] [8] [9] [13]. The primary difference between PERT/CPM and
GERT networks is that GERT has two types of nodes, deterministic and
probabilistic [4], Node 3 in Figure 1 (the identification number is on the right-
hand side of the cone shaped node) is a probabilistic node. Instead of one
deterministic branch (arrow) as in PERT/CPM there are four possible
outcomes each with a probability of occurrence. Thus, at a probabilistic node
a choice situation exists where one of several alternatives may be selected
based on the associated probabilities. However, the sum of the probabilities
for all activities emanating from a probabilistic node must be 1.00 (i.e., there is
a 1.0 probability that one of the activities will be realized).
If the activity emanating from node 3 and looping back to node 2 occurs, this
would cause activity 2-3 to be repeated. If, on the other hand, the activity
labeled failure was realized, the network might flow to a sink node which
ends the network. Alternatively, if the activity labeled success is realized, the
network might continue for several more activities before the network ended in
another (different) sink node. The fourth activity at node 3 is activity 3-3
representing a self-loop back to the same node. These alternative activities
reflect the feedback, multiple outcome and repeating activities characteristics
of GERT.
Node 2 is a deterministic node as used in PERT/CPM. Because node 2 is
deterministic, the probability of realization for activity 2-3 is 1.0. In both node 2
and node 3 the number is the upper left-hand quadrant represents the number
of releases necessary for the first realization of the node (in both cases shown
only one activity release is required). The number in the lower left quadrant of
each node is the number of activity releases required for all subsequent
realizations of the node.
GERT is relatively easy to use since it requires only that the project of interest
be (1) diagrammed in network form, (2) converted to program input data
describing the network, and (3) simulated using the prewritten GERTS-IIIZ
simulation package 5 . By simulating the network, statistical data can be
collected at different nodes for network duration and cost. The GERTS-IIIZ
program is maintained by Pritsker and Associates, Inc. (P.O. Box 2413 West
Lafayette, Indiana 47906) and copies can be purchased for several hundred
dollars. The program is written in FORTRAN IV and can be operated using
any FORTRAN complier. The program is accompanied by a users manual
which makes use of the program quite simple for anyone with minimal
computer skills (also, see [5l). This ease with which GERT can be
implemented facilitates model experimentation, network modification and
sensitivity analysis.
The GERT simulation package has the capability for nine different probability
distributions for activity times: constant, normal, uniform, erlang, lognormal,
poisson, beta, gamma and the beta fitted to three parameters. The GERT
model also has the capability for assigning fixed and variable costs to network
activities, (i.e., a fixed cost can be assigned so that each time an activity takes
place the cost is accumulated; the variable cost is tabulated depending on the
length of time the activity consumes.)
GERT has been effectively applied to a number of systems problems
including product planning [2], research and development planning [6], market
research [11], production planning [l3], quality control [l], manpower planning
[3] and Ph.D. program development [10], among others.

Figure 2. GERT Network of an R & D Project

GERT Application for an R&D Project

In this section the GERT modeling process and the GERTS-IIIZ simulation will
be demonstrated via an example of a generalized research and development
project. The projects follows the normal R&D process consisting of 5 basic
stages: (1) problem definition, (2) research activity, (3) solution proposal, (4)
prototype development, and (5) solution implementation. (This is a modified
version of a more complex R&D model presented by Moore and Taylor [6]).
Figure 2 is the GERT network which reflects this sequential R&D process.
The project is initiated in activity 2-3 which is followed by the first stage of the
R&D process, formal definition of the problem to be attacked by the R&D
team. Problem definition is represented by activity 3-4. Following the
completion of stage 1, problem definition, the next stage, research activity is
normally initiated. However, the possibility that the problem was not
sufficiently defined is reflected by activity 4-3 which causes stage 1 to be
repeated. If the process proceeds to activity 4-5, research activity, the next
step is represented by activity 5-6, solution proposal.
At the completion of activity 5-6, four alternative outcomes are possible. First,
it may be concluded that the problem was incorrectly defined to begin with,
thus prohibiting the development of a viable solution proposal. This possibility
is shown by activity 6-3, a loop back to node 3 for redefinition of the problem.
Second, the search for a solution proposal may have indicated insufficient
research in which case the network loops back (i.e., by activity 6-4) to node 4
for reconducting the research activity. Third, the attempt to propose a solution
may indicate that no solution exists. This occurrence is reflected by activity 6-
7, defined as project washout. Node 7 is a sink node indicating project
termination, and the end of the network. Finally, if a solution proposal is
successfully developed the network proceeds to activity 6-8, prototype
development.
When activity 6-8 is completed, two outcomes are possible. If the prototype
was not developed properly, redevelopment is necessary which is shown by
activity 88, a self-loop around node 8. (Note that it was not possible to loop
back to node 6 in order to repeat activity 6-8 since this would have resulted in
the possible realization of any one of the four alternative activities emanating
from node 6 rather than just activity 6-8.) If a satisfactory prototype is
developed, the solution is implemented in activity 8-9. Node 9 is a second
network sink node representing successful completion of the R&D project.
TABLE 1 Activity Descriptions With Time And Cost Estimates
Table 1 provides a summary of all relevant network information, including
activity descriptions, activity time estimates and associated probability
distributions, outcome probabilities, and fixed and variable cost estimates. For
example, activity 4-5, research activity, has a 0.80 probability of being
realized. The time of duration is defined by a beta distribution with 3
estimates; a minimum of 60 days, a most likely of 100 days and a maximum of
120 days. Each time this activity is realized a fixed (i.e., set-up) cost of $2,000
is incurred. For each day the activity is in progress a variable cost of $300 is
incurred. The three parameter beta distribution was used in this network since
activity estimates tend to be subjective for an R&D project of this type as is
true in PERT networks.

Model Results
The GERT R&D network was simulated 1000 times from which time and cost
statistics were generated. The results of the simulation are summarized in
Tables 2 and 3. Interpreting the results, there is a .745 probability that the
project will be successfully completed, with an expected completion time of
419 days. The average cost of successful completion is $473,000. The
maximum time the project will take, as indicated by the simulation, is 1,514
days, with a cost of $1,147,900. Alternatively, there is a .255 probability the
project will washout in an average time of 182 days, with an associated mean
cost of $195,000. The GERTS-IIIZ simulation package can also provide time
and cost statistics at individual network nodes in the form of frequency
distributions, which can then be converted to histograms. Figure 3 shows an
example of a histogram for time statistics collected on node 9, time to
successful completion of the project. Similar histograms can be developed for
time statistics on node 7, and cost statistics on both sink nodes.

The Use of GERT Results

The GERT simulation results can be used in several ways by management to

facilitate and enhance project planning. The primary difference in the GERT
results and the results obtained from a PERT or CPM network (apart from the
fact that the GERT results reflect a stochastic network) are the cost statistics.
These cost statistics provide a significant input into determining whether or not
a project should be undertaken and/or how it can be best controlled.
TABLE 2 Network Simulation Results Time Statistics for R&D Project Network

Time (days)

Node Event Probability E(t) ot Min t M

7 Project Washout 0.255 182 76 108

9 Successful Completion 0.745 419 125 277 1

- Overall Project 1.000 358 154 108 1

Figure 3. Time to Successful Completion of Project
For the R&D example network it may be determined that if the project cost (of
success) exceeds $700,000 then it should not be undertaken. Employing the
histogram output for node 9 would lead to the forecast that there is a .07
probability that the total cost of a successful project will equal or exceed the
$700,000 limit. Depending upon the amount of risk the firm is willing to
assume, a .07 probability may or may not be acceptable. Probabilistic
information of this type can also be obtained for project duration. For example,
in the R&D network there is a .20 probability that the time for a successful
completion of the project will exceed 1.4 years (i.e., 500 days). If a critical time
deadline is established at 500 days then a 20 percent chance of not finishing
on time may be too risky.
TABLE 3
Network Simulation Results
Cost Statistics for R&D Project Network

Cost (thousand $'s)

Node Event Probability E(c) oc Min c M

7 Project Washout 0.255 195.1 72.1 129.9 6

 9 Successful Completion 0.745 473.0 128.5 316.5 11

- Overall Project 1.000 402.1 168.3 129.9 11

This same type of probabilistic analysis can be performed for a project failure.
In this way management can ascertain information regarding its potential
losses since a project failure typically represents a loss. For the R&D example
there is a .96 probability that, if the project washes out, a cost (i.e. loss) of at
least $350,000 will be incurred. This potential loss may make the firm ponder
its undertaking more in-depth. Probabilistic data on project failure can further
be used to determine the most likely time a washout will occur so that
contingency plans can be developed (i.e., alternative projects arranged) in
order to keep R&D project teams and work forces fully scheduled.
GERT output can also be used to determine labor, equipment and resource
needs for the project under analysis. Typically, cost statistics are employed as
budget data with these factors included. For example, if statistics for project
time showed an excessive project duration then extra labor, equipment or
capital could be added to reduce total project time. Such additions could also
be made to reduce the possibility of project failure at late stages in the project
where associated costs would be highest. The effect of these resource
increases would subsequently be reflected in the project cost statistics (i.e.,
budget). (An alternative to resource determination is to use the fixed and
variable cost feature of the simulation model for resource units as opposed to
dollar values in order to determine resource consumption directly).
The network itself can be modified and adjusted to reflect alternative project
strategies. GERT networks in general are usually sensitive to outcome
probability changes. For example, in Figure 2 if the probability of realization
for activity 4-3, a problem redefinition, is altered the overall network time and
cost can be significantly effected. Management can take advantage of this
capability by adding and subtracting resources to see how outcome
probabilities are effected and hence how the overall network is affected. For
example, management might determine that their time frame is much more
flexible than the expected time indicated by the network simulation. By
reducing resources (i.e., pulling off men, capital and equipment), activity 3-4,
problem definition is not as effective, thus, the probability of activity 4-3,
problem redefinition, is increased which increases overall network time. In this
instance the firm saves resources (which might be critical) in lieu of time which
may be readily available. Of course, this logic can work in the opposite
direction, wherein the time frame is critical and resources are available in
abundance, in which case the outcome probabilities for looping are reduced
by adding resources. In general, the GERT model is ideal for testing trade-off
situations between project time and cost.
In general, the GERT network is not as sensitive to activity time changes as
node branching probability changes. Of course if the project activity times are
extremely cost sensitive then a slight alteration in an activity time can affect
network (project) cost even though the overall network time might not be
affected significantly. However, one of the unique capabilities available with
GERT is the ability to use any one of nine probability distributions for activity
times. Since projects which are networked tend to be unique, the selection of
activity probability distributions is subject to a great deal of uncertainty. In
such cases it can be useful to experiment with alternative distributions to
observe the overall affect on network statistics. Such experimentation can
lead management to perform much more in-depth research into the nature of
activity time distributions rather than simply accepting the subjective beta
distribution as is so often done in PERT This can lead to further insight into
the activities and project analysis in general.
An important network modification which can have a significant affect on the
management planning process is the probability of project washout (or
failure). This aspect of network analysis was briefly mentioned previously but
it needs to be discussed in greater detail. The probability of project failure
reflected by node 7 in the example network (Figure 2) represents the inherent
risk in undertaking the project. At the very least, the probability of a washout
offers a guideline to compare with some acceptable risk level for the projects
undertaking. This risk indicator can become more complex if there are several
opportunities for project washout. For example, in our R&D network, if there
were chances of washout from nodes, 4, 5, and 8 as well as node 6, then the
problem of determining how to reduce the probability of project failure
becomes more difficult. In such a case the opportunities to affect project
failure, either positively or negatively, increases via the additional activities
directly affecting a washout.
The type of information discussed in this section can have important
ramifications for project contract negotiations. If the project is for internal firm
use, it is beneficial in contracting for labor, materials, capital and equipment.
However, in the important case of project planning for external use, GERT
information can aid in setting contract prices so that the firm can be assured of
a profit. For example, since the probability of exceeding $700,000 for the
successful completion of the project is .07, a contract price of $900,000 would
seem to provide a reasonable chance to make a profit and management could
react accordingly. The same analysis could be used for establishing a project
due date. The washout data can enable the firm to build minimum losses into
a contract and perhaps distribute the potential losses between the firm and
the customer in an equitable fashion.

GERT vs PERT/CPM

As this point in the presentation it will be useful to elaborate in more detail

about some of the important differences between GERT and PERT/CPM.
CPM, the most widely used project network tool, provides very little
information for planning beyond an estimate of project duration and a
knowledge of activity sequencing. In fact, it is this latter attribute of activity
sequencing that tends to be the primary use of CPM. The availability of data
for use in detailed financial planning is extremely limited. PERT expands on
CPM in that the requirements for several estimates of time data leads to more
information regarding the probabilistic nature of the project. However, the
PERT computed results are known to be biased, whereas the GERT
simulation leads to unbiased statistical estimates. GERT in its simplest form
can be used to replicate PERT networks by employing only deterministic
branching and either constant or probabilistic activity time estimates. Added to
this is the ability to model complex stochastic projects, and the large amount
and variety of statistical data that can be generated. The preferrability of
GERT as a planning tool for many real world situations should be apparent. In
addition, during the past few years advances have been made in GERT which
have extended its capabilities. The most important advancement now readily
available to practitioners is Q-GERT which, among other things, can model
queues at nodes and route items through servers based on user established
decision rules [7]

Summary