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How exactly does MS Project calculate Peak Units?

Let me explain the situation: I have a task named 'Task 2', it has a duration of 2 days, 20 hrs work, Fixed Duration, from Monday to Friday a resource works 11 hrs, and 9 hrs on weekends (I changed the default working time from 8am to 5pm, to 7am to 7pm through 'Change Working Time').

I also have a Resource named 'Mike', his Max Units is 100%, he is assigned to Task 2, his assignment units is equal to 100%; If I remember correctly that means that his working 11 hours each day on the task.

MS Project assigned Mike 12.5 hrs on Thursday and 7.5 hrs on Friday, Task Usage reports a 114% percent allocation for Thursday & 68% on Friday; both of the percent values makes senses.

What I don't get is how is MS project reporting a Peak value of 125%? Should it not be equal to 114%?

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Aldie, Peak and Percent Allocation are not the same. You can most easily see this by examining the usage view while toggling the bottom tier of the time scale between days and hours. By specifying 20 hours of work on a fixed-duration task with duration of 2 days (16 hours), you have required the sole resource (Mike) to produce 1.25 hours work for each 1.0 hour of time available over the course of the task. He gets assigned at 125%. This also means that Mike - being a Time Lord - is expected to work 1.25 seconds for each 1.0 second that passes for the rest of us. On an hour-by-hour basis, it is easy to see that Peak and Percent Allocation both report 125%. On a daily basis, however, Mike's percent allocation for the first day is 12.5 hours (actually 10 hours * 1.25 hrs/hr, because you didn't allow his task to start before 08:00) divided by 11 hours he has available, or 114%.

It is possible for you (or MSP) to modify one of the Usage grids, so that Mike is expected to deliver 1 hour of work within 1 minute of time. That's a Percent Allocation of 6,000% for that one-minute period, and MSP rolls this up as the Peak value - i.e. the maximum instantaneous usage rate for the assignment - of 6,000%. The (time-scaled) peak values and percent allocations for each of the other minutes in the grid remain at 125%.

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