Time, cost and performance tradeoffs in project management

Abstract

<p>Successful project selection and management requires optimal supervision of corporate resources within specifications for time, cost, and performance. We developed a model and algorithm to support decisions on these three dimensions for project managers. It combines the advantages of the Program Evaluation and Review Technique (PERT) and the Critical Path Method (CPM). Our methodology leads to more accurate results than PERT/CPM, which typically results in optimistic planning due to less than actual completion time estimates that do not consider the possibility of more than one longest (critical) path. We also estimate performance measured by the Internal Rate of Return (IRR) of the project and the tradeoffs between time/cost and performance. We allow decision makers to calculate the probability that each activity will be critical, an indication of their relative importance for managerial purposes, in polynomial time. Furthermore, our methodology provides the means to obtain the optimal time/cost schedule of expected completion times as well as the variability in these time, cost, and performance estimates. We can apply our equations to rank the desirability of projects in a proposed portfolio, thus aiding in the portfolio selection process. A stochastic extension to the Analytic Hierarchy Process (AHP) is also used in conjunction with our methodology to demonstrate the application of uncertainty calculations in managerial group choice situations.</p>