Date post: | 21-Feb-2017 |
Category: |
Documents |
Upload: | timothy-havranek-mba-pmp |
View: | 12 times |
Download: | 0 times |
Cost & Schedule Risk Assessment Using @Risk 6.0
Timothy J. Havranek, MBA, PMP
Leigh Hostetter, PMP
24 October 2012
What If?
2
In Business and in Life:
We always made the best possible decisions, and
Implemented those decisions in the most efficient manner
Rank projects based on risks and opportunities
Develop optimum project strategies
Transform optimum project strategies into tactical plans
Track project implementation; provide early warning of variances
Develop meaningful dashboards and increase transparency
Forecast project completion dates and costs
Improve portfolio performance metrics
Identify portfolio cost and schedule drivers
Capture lessons learned to inform future planning
Manage project and portfolio risks
BSRM Helps Clients
Business Solutions & Risk Management Services
Project Management
Consulting
Multi-Criteria
Decision Analysis
Cost & Schedule
Risk Analysis
Portfolio Risk
Ranking
Project Controls
Earned Value
Analysis
Business
Analytics
PM Information
Systems
Project
Dash Boards
Probabilistic
Cost Estimation
Process &
Tools for
Reducing
Costs and
Increasing
Profits
The Project Management Process
15/02/2017
Why does project management methodology matter?
15/02/2017
Varying versions exist but cartoon seems to have been documented first in John Oakland's book Total Quality Management.
Project Planning and Control
15/02/2017
Develop Work
Breakdown Structure
Define resources, costs,
and durations
Schedule work packages
using network logic
Team consensus on
baseline cost-loaded
schedule
Plan
Track progress against
the baseline
Analyze Earned Value
metrics
Corrective action and
change management
Do – Check – Assess
The Work Breakdown Structure (WBS)
A deliverables-oriented decomposition of the work to be
executed by the project team to accomplish project objectives
and create the desired deliverables with each descending level
representing an increasingly detailed definition of the project
work
Deliverable: Any measurable, tangible or verifiable item that
must be produced to complete a project
In Practical Terms
The WBS is what to deliver
It is a fundamental tool to properly manage
the project scope
Common language for all team members
Defines and outlines scope
Work Breakdown Structure
15/02/2017
Site
Project CProject BProject A
ExcavationDewateringSite Prep Restoration
Site Controls Setup
Build Access Road
Remove and Stockpile OB
Build DeconPad
Determine the Resources and Quantity of Resources Required
for Work Packages
Estimate the Cost of Work Packages
Estimate the Duration of Work Packages
Plan Resources and Estimate Cost and Duration
Shows how changes in one task impact other tasks
Facilitates scheduling (and rescheduling) of people and equipment
Promotes analysis of tradeoffs and potential corrective action
Assign Network Logic
How is this project doing?
15/02/2017
Planned Cost
Actual Cost
Current Time
TIME
COST
Management Reserve
Earned Value Curve
15/02/2017
Planned Value
BAC
Actual Cost
Schedule Variance
Cost Variance
EAC
Current Time Planned
Completion
Date
Estimated
Completion
DateTIME
COST
Earned Value
Earned value metric calculations provide holistic
understanding of project progress
Earned Value Analysis
*Source: Modified from Practice Standard for Earned Value Management 2005
Early warning system• Early corrective action – cost/schedule variance correction
• Scope management – change orders for new scope
Scheduling Best Practices
15/02/2017
General Process for Developing Work Breakdown
Structures
15/02/2017
WBS Best Practices
15/02/2017
The names of the WBS elements should be easy to understand and
convey meaning to all project participants and stakeholders
The work packages should account for 2 to 10% of the total project
budget (exceptions can occur for very large or very small projects)
Activities or should not have durations beyond two project reporting
periods
Do not use the same task heading for activities performed by two
separately responsible groups
Include task and/or work packages in the WBS for work that will
performed outside parties, even if they do not involve a cost
(regulatory review, peer assists)
Break down items such as permits, regularly scheduled field events
and reports into their component activities
Whenever possible obtain estimates from individuals who have
performed similar activities in past
Have people who are responsible for performing a given task
provide duration estimates
Make all estimates realistic. It is best to consider most likely
amount of time needed, without a pessimistic or optimistic view
In general assume a normal workweek and normal workday
Use days as the time unit
Be willing to breakdown into smaller WBS elements if there is
difficulty in estimating the duration of a particular activity
Do not assume that office workers will have 8 hours of
uninterrupted time. Assume that office workers are 70%
productive and adjust durations accordingly
Duration Estimating Best Practices
15/02/2017
Do not link Summary Tasks
PM and Oversight tasks
Start when project starts and finishes when the last activity finishes
Set Constraints as little as possible
Instead, consider using Deadlines as they do not directly affect project
scheduling dates
For risk modeling you should not have any “must start” , “must finish or
similar constraints
Maximize concurrency whenever possible
Multiple finish to start activities off a given milestone
Use of start to start logic connectors
Minimize discretionary dependencies
Network Scheduling Best Practices
15/02/2017
Case Study
15/02/2017
Site Background Information
Former specialty petroleum manufacturing facility
Objective to prepare site for sale and use as mixed commercial / residential redevelopment
Project scope of work includes Removing and properly disposing of asbestos and regulated wastes from
manufacturing plant
Demolishing the building structure
Excavating and properly disposing of soil having concentrations above residential standards
Dewatering during excavation and discharging water to a publically owned treatment works
Obtaining all necessary permits prior to performing field activities
Business plan called for completing project by September 30, 2011 at cost of $4.6 million
Risk Elements included in Model Structure
Probabilistic cost and duration input parameters
Probabilistic resource assignments (i.e. employs RiskProjectResouceUse function) and resource unit prices
Durations for Level of effort or “hammock task” such as project management or driven by the uncertain duration of other tasks and network logic
Project risk register to address low probability high impact events (i.e., makes use of RiskProjectAddDelay function)
General Notes on Environmental Remediation Projects
Notorious for going over budget and schedule
One of the largest uncertainties is always associated with the volume of impacted material (soil, sediments) that must be addressed
Another large source of uncertainty is permitting and regulatory approvals.
The percentage of cost for project management higher than in other construction industries
Project carrying costs can be high
Model Demonstration and Results
15/02/2017
Model Cost Results
15/02/2017
Statistic Cost Duration Fnish Date
Minimum $4,220,738 123 days 8/29/2011
Maximum $6,293,115 388 days 9/13/2012
Mean $4,831,976 161 days 10/23/2011
Std Deviation $253,967 29 days 42 Days
Mode $4,459,579 150 days 10/6/201110% Perc $4,564,216 138 days 9/20/201125% Perc $4,660,188 145 days 9/29/2011
50% Perc $4,789,165 153 days 10/11/2011
75% Perc $4,948,141 165 days 10/27/2011
90% Perc $5,159,512 200 days 12/19/2011
Greenville Site Demolition and Remediation Cost
15/02/2017
Greenville Site Finish Date
15/02/2017
Cost Tornado Diagram
15/02/2017
Greenville Probabilistic Planned Value Box Plot
15/02/2017
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Ma
r-2011
Ap
r-2011
Ma
y-2
011
Jun
-2011
Jul-2
011
Au
g-2
011
Se
p-2
011
Oct-
2011
Nov-2
011
Dec-2
011
Jan
-2012
Fe
b-2
012
Ma
r-2012
Cu
mu
lati
ve C
ost
$M
illio
n
Maximum
80 Perc%
Mean
20 Perc%
Minimum
Trend Data for Probabilistic Earned Value Analysis
15/02/2017
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
Cu
mu
lati
ve C
ost
Deterministic
Minimum
20 Perc%
Mean
80 Perc%
Maximum
Actual Results
Project was completed for a cost of $ 4.9 Million and in May of 2012
Soil volume was 20% greater than planned
The selected contractor had an injury even at another site which created a stop work order at this site
Summary Cost Schedule Risk Analysis
Powerful tool for communicating potential cost and schedule outcomes
Enhances ability to identify and manage cost and schedule drivers
Simplifies estimating cost trends and improves net present value analysis
Opens the door for probabilistic earned value analysis –control chart approach
CSRA should remain dynamic and re-visited throughout project life cycle