Project Management Series By Himadri Banerji: The New Frontiers From Himadri Banerji

Success Driven Project Management Vladimir Liberzon www.spiderproject.ru

Introduction Modern project management methods and tools developed and used in Russia have many advantages that are yet unknown to the international project management community. Some of them will be described in this presentation.

Introduction We will discuss the proven methodology of project planning, performance analysis and project control that we call Success Driven Project Management (SDPM). This methodology integrates scope, time, cost, and risk management and may be of particular interest for the Critical Chain theory supporters because both approaches have some common features.

Introduction We will also discuss some notions and methods of project planning and performance analysis that are common in Russia and necessary for SDPM understanding. We will illustrate the approaches described in this presentation using project management software package Spider Project that is most popular professional PM tool in Russia.

Introduction We shall start with the definitions and the first of them is the definition of the Critical Path. We use the term Resource Critical Path (RCP) to specify our interpretation of the classical PMBOK Guide ® definition. We believe that project Critical Path , Resource Critical Path and Critical Chain a) imply the same set of activities and b) the traditional interpretation of the critical path is not correct.

Critical Path A Guide to the Project Management Body of Knowledge  defines the Critical Path as those activities with float less than or equal to a specified value, usually zero. Float is the amount of time that an activity may be delayed from its early start without delaying the project finish date. Early start is the earliest possible point in time at which the uncompleted portions of an activity (or the project) can start, based on the network logic and any schedule constraints .

Critical Path Project schedule constraints include resource constraints, finance and supply constraints, calendar constraints and imposed dates. The float should be calculated with all schedule constraints as well as the network logic taken into account. The total float determined by most PM packages shows the time reserve for the execution of activity, however the availability of resources is completely ignored. It is not the actual activity float as defined by A PMBOK Guide  .

Resource Critical Path True critical path should account for all schedule constraints including resource and financial limitations. We call it Resource Critical Path (RCP) to distinguish it from the traditional interpretation of the critical path definition. The calculation of RCP is similar to the calculation of the traditional critical path with the exception that both the early and the late dates are calculated during forward and backward resource (and material, and cost) levelling.

Resource Critical Path It appears that by adding financial and supply constraints to the Critical Chain definition as well as the way of the Critical Chain calculation, we will obtain something very similar to RCP. RCP can consist of activities that are not linked to each other. Traditional critical path approach assumes that this may be due to the different activity calendars and imposed dates. In case of RCP calculation, it can also be due to resource constraints and financial and supply limitations.

Activity Volume Projects are often planned (especially in the construction and manufacturing) basing on the federal, local, industrial or corporate norms and standards. These standards usually refer to resource productivity on the certain activity types, costs and materials per unit of activity volume (volume of work to be done on activity). Usage of these norms affects the planning of project activities.

Activity Volume Activity volume can be measured in meters, tons, etc., planned work hours, percents or any other units. Activity volume is often used as an initial activity information instead of duration. If assigned resource productivity is defined in volume units per hour then activity duration may be calculated during project scheduling. Activity volume does not depend on assigned resources.

Resource Productivity Calculation of activity duration basing on assigned resource productivity has many advantages. We have already mentioned the possibility of applying corporate norms. Changing the norm we change the planned duration of all activities of certain type. It is especially useful for the forecasting of project duration and estimating uncertainties.

Resource Analysis Resource analysis is an essential part of project execution analysis. It is vital for project time analysis to be able to forecast resource productivity. Monitoring of the actual resource performance allows to determine trends and to make necessary adjustments of resource productivity databases.

Resource Analysis The usage of project resources varies at the different project phases. The forecasting that accounts for these differences is considerably more accurate than the methods of Earned Value Analysis. Methods of risk analysis and simulation should include estimations and simulations of activity volumes, resource productivity, resource availability, etc.

Resource Analysis The main problem with the traditional methods of risk simulation is their initial assumption that cost and duration deviations of different activities are independent of each other. Activities performed by a set of resources will have correlated duration. Not taking this into consideration leads to producing wrong risk simulation results.

Sample Project Let’s illustrate the basic concepts described earlier using sample project consisting of only three independent activities and two resources. Project data are shown at the next slide.

Sample Project - Critical Path At this slide you see project schedule before resource leveling. Activity 1 is critical. Other activities have 5 day float.

Sample Project - RCP After resource leveling activities 2 and 3 became critical while activity 1 has 20 day float ( resource float ). So RCP consists of activities 2 and 3.

Activity Resource Float Activity resource floats have one large advantage over the total floats calculated by most PM software. This advantage is feasibility . Traditional total float shows the period for which activity execution may be postponed if project resources are unlimited. Activity resource float shows the period for which activity execution may be postponed within the current schedule with the set of resources available in this project.

Risk simulation Our experience of project planning shows that the probability of successful implementation of deterministic project schedules and budgets is very low. Therefore project planning technology should always include risk simulation to produce reliable results. We will describe the approach to project planning that is supported by Spider Project.

Project Planning The project planner obtains three estimates (optimistic, most probable and pessimistic) for all initial project data. These data are used to calculate optimistic, most probable and pessimistic project schedules and budgets. The most probable and pessimistic project versions will usually contain additional activities and costs and employ other resources and different calendars than the optimistic schedule.

Desired Data The planner should define desirable probabilities of meeting target dates, costs, and material consumption rates at major project milestones. Basing on these probabilities, the package calculates corresponding desired project target dates, costs, and material requirements. These desired data form the basis for contract negotiations and decision making.

Target Data Negotiations may result in establishing new target data. Spider Project helps to negotiate by answering the questions on probability to meet any restrictions on time and on budget. Probability of meeting target data (cost, time, quantity) is called Success Probability . Success Probability is the BEST indicator of the current project status.

Target Schedule In addition, the package calculates the “target schedule”. Target Schedule is the backward project resource constrained schedule with the most probable activity duration, material requirements and costs and target milestone dates. Let’s apply the described approach to our sample project.

Risk simulation for Sample project We will make very simple assumption: Optimistic productivity of assigned resources is 20% higher and pessimistic is 20% lower than the planned ones. Let’s assume that we have no other risks :)).

Desired Data We want to be on time with 70% probability and under budget with 75% probability. The package will identify the desired finish date and the required project budget:

Target Data Let’s assume that after negotiating the contract we established project target finish date and target budget. The package will calculate the probability of meeting target parameters and we will see that we were lucky with time and should be very cautious with the project budget:

“ Most Probable” Data Let’s assume that the most probable version of our project was defined as the project baseline. The initial probabilities to meet most probable project parameters:

“ Most Probable” Data These probabilities are high because we did not simulate risk events. We will track the probabilities of meeting baseline data ($24000) and contract budget ($25000).

Project Execution Now let’s simulate Sample project execution. Let’s assume that the actual resource 1 productivity was 10% higher than expected (0.55), while the actual resource 2 productivity was 10% lower (0.27). Let’s assume that the productivity of these resources did not change during project execution. Our task - to estimate project performance, to forecast future project results, and to decide if corrective action is necessary.

Sample Project Execution - 1st week We will use Resource analysis, Success Probability analysis, and Earned Value analysis. We assume that estimates were done each week and will analize trends. Initial baseline data (estimate at completion): Project Finish - 10.05.2002 16:00 Project Cost - 24000.00

Sample Project Execution - 1st week After the first week:

Resource Analysis - 1st week Providing Resource Analysis we shall decide if the actual deviations in resource productivity are accidental or the planned productivity should be adjusted . Let’s adjust them raising productivity of resource 1 by 5% (0.525) and lowering the productivity of resource 2 by the same 5% (0.285). Our new forecast (estimate at completion): Project Finish - 15.05.2002 15:09 Project Cost - 24028.09

Resource Analysis - 1st week Advice: your project may be late and over budget

Success Probability Analysis – 1st week

Success Probability Analysis – 1st week The cost probability trends are positive, timely performance probability trend is negative. Advice – pay attention to resource productivity.

Earned Value Analysis – 1st week 1.025 SPI 1.025 CPI 80 SV 80 CV 3200 BCWS 3280 BCWP 3200 ACWP Advice – everything is fine. Your project will finish early and under budget

Resource Analysis - 2nd week New performance data show that the planned resource productivity should be adjusted again . Let’s adjust them raising productivity of resource 1 to 0.5375 and lowering the productivity of resource 2 to 0.2775). Our 2nd forecast (estimate at completion): Project Finish - 17.05.2002 10:35 Project Cost - 24107.63

Resource Analysis - 3rd week New performance data show that the planned resource productivity should be made equal to the actual because they did not change from the project start . Our 3rd forecast (estimate at completion): Project Finish - 20.05.2002 12:26 Project Cost - 24242.44

Resource Analysis These forecasts will not change later. The forecasts based on resource analysis might be very accurate but are not easy to make and require detailed performance reports. Besides they do not consider project risks that depend on factors other than resource performance.

Success Probability Analysis Success Probability shows current project status, Success Probability trends show project manager if corrective action is needed. Success Probability trends for our Sample project is shown in the next slide. In the same slide you will see Earned Value data for the Sample Project.

Success Probability Analysis Success probability trends show us that the project will be certainly late and probably over budget of $24000 though certainly under budget of $25000.

Earned Value Analysis Earned Value Analysis data do not show problems with our project too long. Quite contrary it shows that everything is fine till the end of the execution of activity 1. Trends of Earned Value data are shown in the next slide.

Earned Value Analysis 95.26 95.56 95.88 96.25 102.5 102.5 102.5 102.5 102.5 SPI% 0.95 0.96 0.96 0.96 1.02 1.02 1.02 1.02 1.02 SPI 100.05 100.64 101.3 102.05 102.5 102.5 102.5 102.5 102.5 CPI% 1 1.01 1.01 1.02 1.02 1.02 1.02 1.02 1.02 CPI -4.74 -4.44 -4.12 -3.75 2.5 2.5 2.5 2.5 2.5 SV% -1080 -960 -840 -720 400 320 240 160 80 SV 0.05 0.64 1.3 2.05 2.5 2.5 2.5 2.5 2.5 CV% 10.89 130.89 250.89 370.89 400 320 240 160 80 CV 22800 21600 20400 19200 16000 12800 9600 6400 3200 BCWS 21720 20640 19560 18480 16400 13120 9840 6560 3280 BCWP 21709.1 20509.1 19309.1 18109.1 16000 12800 9600 6400 3200 ACWP 29.04.2002 22.04.2002 15.04.2002 08.04.2002 01.04.2002 25.03.2002 18.03.2002 11.03.2002 04.03.2002 Parameter

SDPM Project Management Technology We recommend using the optimistic project version for setting tasks for project implementers while the calculated contingency reserves should be used by the PM team for the management purposes. Start (finish) contingency reserves (buffers) are calculated as the difference between activity start (finish) time in the optimistic and target schedules. Contingency reserves are also calculated for the activity cost and material requirements.

Success Probability But the most valuable indicators of project performance are Success Probabilities - probabilities of meeting target project parameters. Trends of Success Probabilities show project manager if the corrective action is needed. The value of Success Probability shows current project status better than any other project parameter.

Project Control Parameters Project manager obtains the following estimates necessary for effective project control: Probabilities of meeting target project parameters (success probabilities), Target activity start and finish dates, resource and material requirements and cost, Planned activity start and finish dates, resource and material requirements and cost in the current schedule,

Project Control Parameters Activity resource floats that show the time for which activity execution may be postponed without delaying project finish date in the current schedule, Activity contingency reserves (buffers) for time, cost and materials calculated as the difference between the corresponding optimistic and target parameters. The following slide shows the optimistic and target schedules, and other scheduling and risk analysis information for our Sample project.

SDPM tips for the project control Plan day-to-day activities using the optimistic estimates but pay special attention to resource floats and to contingency reserves. Include the causes of delays in activity completion and cost overruns in performance reports. Regularly update the estimates in the optimistic, most probable and pessimistic project schedules. Regularly recalculate the success probabilities and analyse trends.

SDPM and Critical Chain - common You may notice that SDPM and Critical Chain approaches have a lot in common. Resource Critical Path is the same as Critical Chain . Therefore Critical Chain project buffer may be regarded as an analogue of SDPM contingency time reserve , feeding buffers are similar to resource floats . Both the SDPM and Critical Chain approaches recommend to use the optimistic estimates for setting the tasks for project implementers. But there are differences too.

SDPM and Critical Chain - different We cannot agree with the Critical Chain theory’s assumption that one should always avoid multitasking . Usually there are many subcritical activities belonging to the different network paths and even the minor delays in the execution of subcritical activities can lead to the changes in the RCP. This comes into conflict with the Critical Chain theory’s assumption that the Critical Chain never changes during the project execution. The assumption that only one project drum (in our terminology - critical) resource exists is also dubious. Our experience shows that critical resources are different at the different phases of project lifecycle.

Assess risks and create optimistic, pessimistic and expected estimations of activity duration and volumes, resource productivity and quantity, activity and resource cost, calendars, etc. SDPM technology steps: 1 Estimates are usually based not only on expert judgement but also on regulatory or corporate norms.

Calculate optimistic, most probable, and pessimistic resource and cost constrained project schedules. SDPM technology steps: 2

Calculate project and each phase desired finish dates and costs (with the desired probability of successful execution). SDPM technology steps: 3

Negotiate and define target finish dates and costs. SDPM technology steps: 4

Calculate target schedule with the most probable activity duration but target finish dates (backward resource constrained schedule). SDPM technology steps: 5

Determine time and cost buffers, and probabilities of meeting target parameters. SDPM technology steps: 6

Use the optimistic schedule as a plan for the employees. SDPM technology steps: 7 Using optimistic estimates, we increase our chances to obtain the reports on any deviations from the proper activity execution. This information is necessary for quality and risk analysis.

Control risks and regularly recalculate necessary time buffers and success probabilities. SDPM technology steps: 8

THANK YOU We would appreciate your comments on this presentation. We invite everybody interested in developing common approaches to contact Moscow PMI Chapter (E-mail: [email_address] ).

Project Management Series By Himadri Banerji: The New Frontiers From Himadri Banerji

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