project control methodologies
TRANSCRIPT
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Vladimir Liberzon
Project Control
Methodologies
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Project Control Methodologies
In this presentation we will discuss methods and
tools of project planning and performance analysis.
Some of these methods are widely used and we will
touch them very briefly, others are known andapplied by advanced teams in complex projects.
There are also very efficient methods used in
Russia and Eastern Europe but not known in the
West.
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Project Control Methodologies
We will discuss project control methodologies
evolution and advanced methods and tools ofproject control using simple sample project.
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Critical Path Method A start to modern project management development was done
when Critical Path Method was created and applied in late 50-s. Basing on CPM it became possible to calculate project duration
and estimate the consequences of management decisions before
their application. CPM includes calculating forward and backward schedules,
determining activity total floats (an interval between early and
late dates), selecting activities with zero total floats (critical)
and determining the sequence of linked critical activities fromproject start to project finish milestones.
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Critical Path Critical Path is the longest sequence of linked activities.
In our example it contains activities 4-1, 4-2, 4-3 that are shown
in red. Critical Path duration is the same as project duration (41
days in our example).
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Critical Path But if the schedule contains imposed dates like Start No Earlier
Than, or use different activity and resource calendars, CriticalPath (consisting of activities with zero total float) may include
only one final activity as in the example below.
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Considering uncertainties It looks like we can decide that planned project duration of our
sample project shall be set as 41 days. But for setting reliable targets it is necessary to consider project
risks, uncertainties and restrictions.
Potential risk events may change project scope, activitynetwork, project budget and resource requirements. Estimates
of project parameters like activity durations, costs, resource
requirements are uncertain.
Project targets shall be set taking into account all risks and
uncertainties.
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Three estimates Let's collect optimistic, expected and pessimistic estimates of
our sample project parameters.
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CPM Duration Distribution Risk simulation shows that expected duration (41 days) has less
than 35% probability to be achieved.
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Critical Indices Most critical activities with Criticality Indices 0.39 (critical in
39% of all simulations) belong to the path with minimalduration and thus need most attention.
Critical activities have the least Criticality Index.
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Resource Constraints But Critical Path Method does not consider resource
limitations. With limited resources, supplies, financing it maycreate schedules that are not feasible.
In our example sample project has limited resources A and B,
two units of each. But the schedule created by CPM requires
more resources than are available as shown in the next slide.
In resource constrained schedule activities are delayed because
resources needed for their execution are busy performing other
activities.
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CPM Schedule Resource Histograms Resources are overloaded
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Resource Constrained Schedule Resources are leveled but project finish delayed.
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Resource Critical Path Resource Critical Path shows the longest sequence of project
activities in the schedule (if the schedule has no imposed dates).Activities that belong to Resource Critical Path have zero
resource constrained floats.
Another name for RCP is Critical Chain.
But RCP depends on the leveling algorithms used by the
scheduling software. Resource constrained schedules createdfor the same projects by different software packages may be
different and most software packages calculate wrong resourceconstrained floats and thus show wrong RCP, as shown in the
next slide.
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Schedule Comparison In the left schedule RCP consists of activities 3-1, 1-2, 2-3, but
the software shows activities 2-1, 2-2, 2-3 as critical thoughfirst two activities of this path have positive resource
constrained floats.
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Risk Simulation of Constrained Schedule If to apply risk simulation to resource constrained schedule
project duration probability distribution will depend on thesoftware leveling algorithm. If to use one algorithm for Monte
Carlo simulation and another for project resource management
the results of MC simulation will be useless.
So using external software (add-in) for MC simulation is
feasible only for the schedules where resources are not limited.
Next slide shows sample project duration probability curve if
the software at each iteration searches for an optimal resourceconstrained project schedule.
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Project Duration Distribution It shows that with constrained resources project will certainly
last much more than 41 work day and it is reasonable to set 50days as target duration for reliable execution.
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Project Duration Distribution But if to use most common resource allocation rule (activities
with least total float have highest priorities) a probability to
finish in 50 days will become only 23.47% instead of 73.52% ifresource allocation decisions were optimized.
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Resource Constrained Criticality Indices Criticality Indices show which activities require most attention
and again some non-critical activities (4-2, 4-3) have larger CIthan resource critical.
Without risk analysis this could be missed.
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Cost Planning The same approach is used for planning costs and other project
parameters. Entering three estimates of initial data permits to simulate
uncertainties and set reliable targets.
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Cost Probability Curve Risk simulation shows that calculated project budget (3700)
will be met with only 37.3% probability.
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Cost Target Let's set 4000 as the target budget that has 80.1% probability to
be met.
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Setting Multiple Targets Setting multiple project targets requires special attention.
Let's assume that set duration target has 70% probability to beachieved and the same probability has budget target. If to
suppose that activity duration and cost estimates do not depend
on each other the probability to meet both targets is 49% and it
is not sufficient.
Setting multiple targets requires multidimensional risk analysis.
Cost-Schedule Scatter Diagram shown in the next slide is a toolfor setting complex target.
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Scatter Diagram Probability to meet both targets (50 days project duration and
4000 budget) is 58.89% though probabilities to meet each ofthese targets separately exceeded 70%.
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Integrated Target Setting multiple targets makes management decisions
complicated. It does not answer to the question if projectexecution is successful if the project is late but saves money, if
it makes sense to pay additional money for acceleration, etc.
That is why we advice to estimate the cost of one day of project
finish delay and acceleration and set one integrated target
project budget that includes cost of the time.
Next slide shows expected integrated budget distribution if to
set that one day of project finish delay costs 300 and one day offinish acceleration saves 50.
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Integrated Target Budget Distribution Meeting 4000 budget and finishing in less than 50 days means
the same as setting 4000 cost target in the following costprobability distribution that takes into account potential
penalties and awards.
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Working Schedule Setting reasonable project targets means to create project time
and cost buffers. There are two options: to create and to use the schedule that
finishes on target date and to assign costs that constitute target
budget or to use tight schedules and budgets but to add and to
manage project time and cost buffers.
The usual approach is to create and manage two schedules:
Contract schedule that has target duration and budget, and
Working schedule that is tight, with project finish earlier thanthe target date and the budget that is lower than target budget.
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Parkinson LawWork expands so as to fill the time available for its completion
To avoid Parkinson Law problems it is necessary to set tighttargets for project workforce and to keep contingency reserves
for management to deal with risks and uncertainty.
Using tight schedule for project management and managingproject buffers is an approach common to Critical Chain and
Success Driven Project Management (CCPM and SDPM)
methodologies.
CCPM suggests to use most probable estimates and SDPM
suggests to use optimistic estimates of activity durations in the
working schedule and analyze project performance by
estimating buffer penetration.
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Working Schedule This slide shows optimistic schedule that is selected as Working
compared with most probable schedule that can be used as thebaseline, though its duration and budget are not the same as the
target duration and budget. Besides, there is different Critical
Path.
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Some Conclusions Critical Path Method is used for creating project schedules
when resources are not limited or these limitations are notknown.
Feasible schedules shall take into account resource, supply
and financing constraints and usually are longer than
produced by CPM. Different software packages use differentleveling algorithms and may produce different resource
constrained schedules for the same project.
Collecting three point estimates and analyzing project risks isnecessary to set reliable project targets and understanding
which activities require most attention.
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Some Conclusions Monte Carlo risk analysis shall use the same leveling rules
as the software that will be used for project management. Setting multiple targets makes management complicated and
achieving them all less probable. It makes sense to set
integrated project success criterion that helps to justify
project management decisions.
Working schedule shall be tight and time and cost
contingency reserves created and managed.
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Performance Analysis Methods Project Performance Analysis (further PPA) is necessary for:
1) Estimating past project performance,
2) Forecasting future project performance,
3) Making decisions on necessary corrective or preventive actions
Methods of PPA include^
1) Variance Analysis
2) Earned Value Analysis
3) Trend Analysis
4) Success Probability Trend Analysis
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Variance Analysis Variance Analysis compares current schedule with the baseline
or some previous project version and finds those parametersthat were changed and need attention.
It helps to find the origins of delays and cost overruns for
analysis and decision making.
In the next slide current schedule was compared with the
Baseline (most probable schedule) and initial Working schedule
(optimistic).
The difference between current and baseline values of activity
durations and costs are shown in corresponding columns.
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Variance Analysis Duration and Cost variances with the baseline are shown also as
signals (red if duration is longer than in the baseline, cost islarger than in the baseline, yellow if they are the same).
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Earned Value Analysis Earned Value Analysis is widely used in large construction
programs. It is based on comparison of the following three parameters:
EV (Earned Value) is the budgeted (baseline) cost of the work
actually performed, PV (Planned Value) is the baseline cost to the current moment,
AC (Actual Cost) is the actual cost of the work performed.
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Earned Value Analysis Comparing EV and PV we can estimate time performance if
we have done more or less work than was planned.
Schedule Variance SV=EV-PV is positive when the budgeted
cost of the work done exceeds budgeted cost of the work
scheduled in the baseline.
Schedule Performance Index SPI=EV/PV shows the ratio of the
Earned Value and Planned Value and exceeds 1 when project
time performance is successful.
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Earned Value Analysis Comparing EV and AC we can estimate cost performance if
we have spend more or less than was planned.
Cost Variance CV=EV-AC is positive when the budgeted cost
of the work done exceeds actual cost of the same work.
Cost Performance Index CPI=EV/AC shows the ratio of theEarned Value and Actual Cost and exceeds 1 when project cost
performance is successful.
Looking at SV, SV, SPI and CPI it is easy to understand if
project performance up to date was successful or not.
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Earned Value Analysis EVA also forecasts future performance basing on past
experience.
Estimate At Completion (EAC) is expected project cost that is
calculated by formula:
EAC=AC+PF*(BAC-EV) where BAC is Budget At Completion Baseline Budget,
PF is Performance Factor
Default PF=1/CPI but other values may be applied. In particularit is recommended to apply PF=1/(CPI*SPI)
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Earned Value Analysis EVA shall be applied carefully for the following reasons:
It does not distinguish between the works done on criticalactivities and activities with sufficient floats. A project could be
late but EVA will not notice this problem if Earned Value
exceeds Planned Value.
It motivates project managers to do expensive tasks first
delaying cheaper activities that could have higher priorities,
It suggests to forecast future performance basing on past
experience that may be wrong if resources that planned to be
used in the future are not the same as in the past,
It does not allow for risks and uncertainties
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Earned Value Analysis In the projects with expensive materials and equipment it is
reasonable to apply EVA to the cost of work only.
So EVA is usually applied to cost components and cost centers,
man-hours, and other parameters that may be used for
measuring work scheduled and work done.
Application of EVA will be further discussed at the special
Earned Value Management track and round table.
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Trend Analysis Management decisions shall be based on trend analysis.
If the project schedule is 10 days ahead of the baseline it couldbe good if one month ago it was 5 days behind the baseline, or
bad if one month ago it was 25 days ahead of the baseline.
Project managers shall fight poor trends before they will causeserious problems.
Analyzing trends of major project parameters and applying
corrective actions to improve negative trends is the best way to
prevent small problems to become big.
k l d d l
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Risk Simulation and Traditional
Performance Analysis Risk simulation and setting targets that do not belong to the
current schedule create problems with the application of
traditional methods of performance analysis.
First of all: project targets do not belong to any schedule and
thus there are the problems with setting some baseline schedule.
Creating project time and cost buffers means that PV at any
moment is uncertain. It is necessary to estimate project
performance by analyzing buffer penetrations.
Probabilities to achieve project targets (Success Probabilities)
show if buffers are utilized faster of slower than expected.
If the probability to achieve some target is growing then project
buffer is penetrated slower than expected that is fine.
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Success Probability Trend Analysis Looking at success probability trends we not only analyze past
performance but also look to the future.
The performance could be perfect but if new risks were
identified and require additional contingency reserves that were
not included in the initial project buffers then success
probability will go down.
Success probability trends are integrated project performance
indicators that can be used for high level reporting and
management decisions. They integrate scope, schedule, cost, and risk performance
analysis and are the best project performance analysis tools.
E l f P f A l i
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Example of Performance Analysis
Diagrams
Row 1 Row 2 Row 3 Row 4
0
2
4
6
8
10
12
Column 1
Column 2
Column 3
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Some Conclusions There are four main methods of performance analysis: Variance
Analysis, Earned Value Analysis, Trend Analysis and Success
Probability Trend Analysis.
VA EVA analyze project status comparing current data with
the baseline or some other project version.
TA and SPTA analyze not only statuses but also tendencies.
VA, EVA and TA were developed and are used for analyzing
deterministic schedules.
SPTA is used with probabilistic analysis.
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Some Conclusions EVA is widely used but shall be applied very carefully and
together with other methods because it may provide wrong
motivation of project teams and does not consider activity
network dependencies.
Trends shall be used for timely management decisions because
they show problems ASAP.
SPTA is the best performance analysis method integrating
scope, cost, schedule and risk information.
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Program Management Office Corporate Project Management System requires the usage of
the common approaches, tools, corporate norms, coding system,
cost components and cost centers, risk register and risk
management approaches, compliance with the corporaterequirements to schedule models, to contract conditions, to
reporting and change management, etc. Without common approach to project management within the
organization program and portfolio management cannot be
effective.
Implementation, development and maintaining of the corporate
Project Management System is main function of the Program
Management Office (PMO).
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Program Management Office Main functions of the PMO include:
1) development, implementation and management of common PMmethodology, processes, knowledge bases and archives,
2) Development and maintaining of the corporate databases (like
unit costs, production rates, material requirements per workvolume unit, etc.)
3) Computer based support of project management processes,
4) Portfolio (program) management
5) Audits of project management process, consulting and training
of project personnel.
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Vladimir Liberzon
Thank you!