Benefits of Monte Carlo simulation as the extension to the Programe Evaluation and Review Technique
Abstract
Given the complexity and innovation of projects,
project managers are increasingly forced to take into account the
aspect of risk and uncertainty in project planning. The aim of the
article is to compare two project management best planning
practices: the Programe Evaluation and Review Technique and
Monte Carlo simulation, as well as to present benefits of
employment Monte Carlo simulation as the extension to the
Programe Evaluation and Review Technique.
The research methodology included literature review of strengths
and weaknesses of two methods and the analysis of PERT and
Monte Carlo simulation results for estimating the budget for the
construction project presented in a case study. Automated Monte
Carlo simulation was modeled and performed in MS Excel with
additional Monte Carlo add-on “@Risk for Excel”. Key findings
of the comparative study show better precision and
comprehensiveness of Monte Carlo simulation in contrast to ease
of use of PERT method. PERT provides better project estimates
when used alongside with Monte Carlo simulation.
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