Jpunch 02-16-2012
- 1. Assessing Project Alternatives through Trade-off Analysis In A Strategic Project Management Environment Johnnetta Punch, PMP 1
- 2. Introduction The current federal-deficit crisis is requiring agencies to achieve their mission under constrained flat-line budgets, thereby making cost reduction a priority for the customer. This economic condition presents a particular problem for project managers within the space flight program. Assessing project alternatives through trade-off analysis is a risk control methodology that provides the project manager a tool from which to balance project constraints while shortening the length of the project. For high risk (high liability) projects, this task examines from a strategic project management perspective, a systems approach for assessing project alternatives through trade-off analysis. The focus of this task is trade-offs during the project implementation phase. However, it should be emphasized that this analytical technique is done often and continuously throughout the lifecycle of NASA projects. The current project environment is difficult and requires that we adapt a systematic approach for strategic planning and tradeoff analysis. The opportunity exists for improved up-front planning that facilitates decision making inherent in the trade-off analysis methodology as opposed to relying on a process based on history. 2
- 3. Assessing Project Alternatives through Trade-off Analysis In A Strategic Project Management Environment The focus of this session is to examine a systematic approach to strategic planning and project trade-off analysis. A systematic approach is a proactive decision making methodology that: – Promotes setting project goals – Ensures a methodical, organized effort in which to carry out decisions – Requires detailed up-front planning that usually necessitates increased effort by the project management team. 3
- 4. Strategic Project Project Management Model Strategic project management combines comprehensive up-front planning with detailed downstream planning to ensure that strategic and tactical issues are addressed early in the project. 1. Defining customer expectations and priorities early in the Risks project lifecycle Obtain a comprehensive, exact understanding of the customer’s requirements Technical Performance Understand the nuances of assignments *Strategic Project Management Model 3. Delivering the Project Scope and Metrics Establish an integrated project baseline 1. Defining Customer 5. Conducting a Situational Review and Assessment Expectations and Answer questions: What’s happening now? What 8. Tactical Deliverables 2. Establishing Project Guidelines happened in the past? What is likely to happen in the Execution future? Strategic 3. Delivering 7. Decision and the Project Project Utilize strategic/concurrent systems engineering as a Alternative Analysis Planning Scope and Total Quality Management Tool Metrics • Improve communication while breaking down functional silos, parochial thinking and hidden 6. Problem and 4. Organizing Opportunity the Project agendas Analysis Team 5. Situational • Reduce total project cycle time Review and Assessment 7. Decision Making and Alternative Analysis Identify those alternatives necessary to achieve project * Strategic Project Management 4 objectives Michael J. Termini
- 5. Strategic Project Management Risks A method for clarifying customer expectations Technical Customer Performance Fails to indentify and prioritize customer Ask requirements Confirm Listen Makes unfounded assumptions instead of Project Manager obtaining the facts Requirements Project Team Fails to quantify and prioritize deliverables or Expectations project expectations Document Specifications Repeat Schedules Relies generally on blind faith in the Costs/budget expertise and directions of those above them Contingencies Metrics Listen Confirm Repeat Suppliers *Strategic Project Management 5 Michael Termini
- 6. Delivering the Project Scope and Metrics Tie the project budget and schedule to project expectations and scope Generally, the project scope is difficult to define and requires: • Fundamental project control systems for technical, cost and schedule to mitigate unplanned changes Once the project deliverables and scope have been clearly defined, everything must be in writing, preferably in a single document. • Project scope and deliverables Risks • All performance specifications Technical Performance • Estimated project schedules and budget • Projected project costs and returns • Expected resource requirements and the timing of their use or consumption • Project metrics and their associated data support systems • Decision and corrective action procedures • The assigned level of empowerment and all project approval 6 requirements
- 7. Tactical Project Management Model Scheduling techniques used to control and monitor the project, assess performance against established *Tactical Project Management Model project objectives, and initiate corrective actions Development of the Work Work Breakdown Breakdown • Breaks the project down into major sub level activities Trade-off Structure Activity Listing Analysis Detail Activity listing detail • Must be sequenced with associated dependencies Dependency Analysis Tactical Project Dependency Gant Chart Execution Development Analysis • Dependencies can be serial or resource sensitive • Personnel, funding, information, data, or materials Cycle Time Calculation PERT Critical • Total consumed time from the beginning of the activity Path and Slack Cycle Time Calculation to completion Time Analysis Calendar Time Calendar Time Conversion Conversion • Projects are planned on calendar time PERT Critical Path and Slack Time Analysis Gant Chart Development • Utilizes computer models to calculate critical path and • Illustrates timeline for all project activities, slack time within the project schedule and value is predicated upon the accuracy of the data and the planning Trade-Off Analysis *Project Management A systems approach to planning, scheduling and controlling by • Decision making based on a systems Harold Kerzner approach for assessing project alternatives 7
- 8. Trade-off Analysis When unforeseen problems throw the project off schedule or create an over budget condition, the Project Manager must bring the project back in control by : Focusing on the customer’s priorities Balancing project constraints with the delivery priorities Making compromises without sacrificing project success in the eyes Risks of the customer Technical Executing trade-off analyses in strict accordance to customer Performance Renegotiating, if necessary, with the customer to bring the remaining variables (either cost, time or performance) in as planned 8
- 9. Categories of Project Constraints In reality, every project has latitude for some compromise to be made without sacrificing success in the eyes of the customer. Example Scenarios Most Research and Development projects *Categories of Project Constraints portray situation A-3. • The performance of a R&D project is usually well defined, and it is cost and time that may be allowed to vary. Capital equipment projects fall into situation A-1 or B-2, where time is of the essence. • The sooner the piece of equipment gets into production, the sooner the return of investment can realized Non process-type equipment necessary to comply with regulatory requirements develops a scenario around situation B-3. • Performance is fixed *Project Management • Commercially off-the-shelf (COTS) A systems approach to planning, scheduling and controlling by Harold Kerzner The professional consulting firm operates primarily under situation B-1. 9
- 10. Assessing Project Alternatives through Trade-off Analysis A systems approach for decision making when performing trade-off analysis is considered proactive management Recognizes that the smallest change in the project or system could easily affect all the organization’s system, i.e., business systems Incorporates a six step process for decision making relating to managing project time, cost, and performance trade-offs. Steps include: 1. Recognizing and understanding the basis for project conflicts 2. Reviewing project objectives 3. Analyzing the project environment and status 4. Listing and analyzing alternative course of actions 5. Revising the project plan 6. Obtaining management approval and re-planning the project The alternative to systematic planning is decision-making based on history. – Generally results in reactive management leading to crisis management, conflict management, and fire fighting 10
- 11. Step 1: Recognizing and Understanding the Basis for Project Conflicts Project conflicts may include: • Uncertain /Unexpected Problems • Too many concurrent projects An outdated project management cost and control system • Labor contract expiration • Compares actual versus planned cost • Change in project leadership • Possibility of project cancellation • Provides early warning cost data, not • Overcommitted company resources necessarily tested or validated through • Conflicting project priorities information intelligence • Cash flow problems • Labor contact disputes Human errors/failures • Delay in material shipment • Impossible schedule commitments, due to lack • “Fast-track” people having been promoted off of resources and/or available skill the project • Poor control of design changes • “Temporary” employees having to be returned • Poor project cost accounting to their home base • Machine failures • Inaccurate original forecast • Failure to receive a critical input • Change in market conditions • Failure to receive anticipated approvals • New standards having been developed 11
- 12. Step 2: Review Project Objectives Look for the inflexibilities within the project objectives Reviewing project documentation to understand the degree of inflexibility imposed by the customer requires the project team to: • Complete a review of project objectives • Integrate project and sponsor’s objectives • Review the statement of work to: • Ensure adequacy of content with project and functional specialists • Review schedule, cost, and technical performance specifications • Assess resources consumed and projected 12
- 13. Step 3: Analyzing the Project Environment and Status Identify problems through a comprehensive review and status of each project work package with functional managers. Assessing the Project Metrics • Time-to-complete • Cost- to- complete • Work –to- complete Assessing quickly the significance of a particular variance • Inadequate planning • A lack of detailed plans or technical, cost and schedule changes • Scope changes • Changes that are permitted without formal incorporation in the project plan or increase in the resources authorized for the project • Poor performance • Poor performance by one team member may quickly undermine the performance of the entire team • Excess performance • An overzealous team member will unintentionally distort the planned balance between cost, schedule, and performance on the project • Environmental restraints • Third party approval, or dependency on outside resources projects 13
- 14. Step 4: List and Analyze Project Alternative Course of Actions Quantify and plot the result of the analysis in order to determine the crashing cost for shortening the length of a project. Time • Will the time delay change the completion date for other To use this graphical technique, the customer projects and other customers? drives which of the three project constraints to • What is the cause for the time delay? hold fixed. • Can resources be committed to meet the schedule? • What will be the cost for the new schedule? Plot graphically Scenarios 1-3 • Will the increase schedule give us added value? 1. Trade-off cost with technical • Will an extension of this project cause a delay on other projects hours performance held fixed Cost • What is causing the cost overrun? 2. Trade-off technical performance with • What can be done to reduce the remaining cost? cost held fixed • Should we absorb the extra cost ? • Can we renegotiate time or performance standards to stay 3. Trade-off cost with time held fixed. within cost? Completing the project on schedule can • Will there be any net value gained for the increase in funding ? be extremely important in certain cases • Is this the only way to satisfy Performance? Technical Performance • Can the original specification be met • Are the specification negotiable • Are we increasing or decreasing performance • Will the customer accept a change • Will the change in specifications cause a redistribution of project resources 14
- 15. Step 4 List and Analyze Project Alternative Course of Actions Continues…. Fixed Performance - Identify available alternatives and plot the results to determine the crashing costs for shortening the length of the project Scenario 1: Trade-off with fixed performance If the critical project constraint most important to the customer is technical performance, consider the *Cost is expressed as a function of time following alternatives actions • Adding additional resources or capital to the project , if required • Applying other technological, processes or methodologies available to the team • Redefining the scope or deleting • Minimizing cost growth through the use overtime (salaried personnel) *Project Management A systems approach to planning, scheduling and controlling by Harold Kerzner 15
- 16. Step 4 Developing an Alternative Actions continue……. Fixed Cost - Identify available alternatives and plot the results to determine the crashing costs for shortening the length of the project * Cost is held Fixed If the critical project constraint most important to the Scenario 2: Trade-off with Fixed Cost customer is fixed cost, consider the following alternatives Performance is expressed as a function of time actions. • Allocate unused or excess funds from other activities within the projects to offset current or projected overruns • Allocate activities to lower level personnel where Technical risks of failure is minimal • Outsource where control and risk management dictate a low probability of failure • Re-engineer process for a reduction in activity or process costs or overhead costs – some activities may be eliminated all together, thus saving cost. • Eat the cost overrun rather than pass it along to the customer *Project Management A systems approach to planning, scheduling and controlling by 16 Harold Kerzner
- 17. Step 4 Developing an Alternative Actions continues…….. Fixed Time - Identify available alternatives and plot the results to determine the crashing costs for shortening the length of the project If the critical project constraint most important to the customer is fixed time, consider the following alternatives actions: *Scenario 3: Trade-off with fixed time • Reallocate resources not on the critical path (slack time activities) to activities on the critical path that have shown Cost varies with performance some slippage. • Reprioritize or eliminate one or more noncritical path activities • Apply additional resources • Employ other compression techniques like concurrency • Utilize overtime • Assign some of the remaining noncritical project activities to either administrative or clerical personnel Technical • Re-engineering to assess the critical path activities in descending cycle times sequence to determine which activity can be re-engineered *Project Management A systems approach to planning, scheduling and controlling by Harold Kerzner 17
- 18. Step 5: Analyzing and Selecting Feasible Alternatives Decision Analysis – Choosing the solution that minimizes the overall impact on project objectives in the eyes of the customer Analytical techniques involves: Decision Matrix Objective • Comparing and ranking alternatives in the order of perceived Meet importance Specified Meet Meet Cost Increase Maximize Delverable Schedule Requirements Business Profits Total • Identifying relevant factor to evaluate Applied Weights 0.20 0.50 0.25 0.025 0.025 1 Alternative: • Constructing a decision tree or matrix to aid managers in Request Extension 100% 0% 95% 50% 100% 48 choosing a solution that minimizes the overall impact Absorb added cost 90% 85% 100% 75% 0% 87 Miss delivery 95% 0% 80% 100% 90% 42 • Selecting the appropriate completion strategy, and beginning Add Resoruces 95% 95% 50% 90% 0% 81 implementation with management approval Reduce Quality 0% 85% 85% 15% 0% 66 Decision Tree • Preparing a formal project update report including alternative work scopes, schedules, and cost to achieve • Minimum cost and schedule overruns • Conformance to project objectives • Presenting to internal and external project management the alternatives along with an estimate of success probability • Providing corrective actions for time, cost & performance 18
- 19. Step 5: Analyzing and Selecting Feasible Alternatives continues…. Some other viable alternatives include: Renegotiating the project technical performance criteria Completing the project on schedule, to a minimum quality level Controlling costs and technical performance, but permitting the schedule to slide could result in a dissatisfied project sponsor Maintaining schedule and cost performance by allowing quality to slip Cancelling the project in an effort to limit exposure beyond that already encountered 19
- 20. Step 6: Obtaining Management Approval and Re-Plan the Project The basis of decision-making for selecting alternatives Top management usually make decisions based on: • Policies on quality, integrity, and image • Ability to develop a long-term client relationship • Type of project (R&D, modernization, new product) • Size and complexity of project • Other projects on the way or planned • Company’s cash flow • Bottom line (ROI) • Competitive risks • Technical risks • Impact on affiliated organizations From the list of alternatives, management chooses a course of action that may require • Detailed re-planning • New schedules, PERT Charts • Work Breakdown Structures and other key benchmarks 20
- 21. Summary Throughout the lifecycle of a project it is important to: • Focus on customer expectations and priorities • Comprehensive up-front planning with detailed downstream planning typically yields a significant return-on-investment in terms of benefits to the project down stream • Recognize the value of a proactive systems approach to planning and trade- off analysis 21
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Editor's Notes
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