planning a great project for dummies

8/10/2019 Planning a Great Project for Dummies

1/76


2/76
http://www.facebook.com/deltekinchttp://www.deltek.com/


3/76

Planning aGreat Project

Deltek Special Edition

These materials are 2014 John Wiley & Sons, Inc. Any dissemination, distribution, or unauthorized use is strictly prohibited.


4/76

Planning a Great Project For Dummies, Deltek Special Edition

Published byJohn Wiley & Sons, Inc.

111 River St.Hoboken, NJ 07030-5774www.wiley.com

Copyright 2014 by John Wiley & Sons, Inc., Hoboken, New Jersey

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any formor by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except aspermitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior writtenpermission of the Publisher. Requests to the Publisher for permission should be addressed to thePermissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011,fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.

Trademarks:Wiley, For Dummies, the Dummies Man logo, The Dummies Way, Dummies.com, MakingEverything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons,Inc. and/or its affiliates in the United States and other countries, and may not be used without writtenpermission. affiliates in the United States and other countries, and may not be used without writtenpermission. Deltek and the Deltek logo are trademarks or registered trademarks of Deltek, Inc. Allother trademarks are the property of their respective owners. John Wiley & Sons, Inc., is not associ-ated with any product or vendor mentioned in this book.

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NOREPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESSOF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUD-ING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WAR-RANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE

ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION.THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED INRENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONALASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULDBE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGESARISING HEREFROM. THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO INTHIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOESNOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGA-NIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READ-ERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGEDOR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ.

For general information on our other products and services, or how to create a customFor Dummiesbook for your business or organization, please contact our Business Development Department in

the U.S. at 877-409-4177, contact [email protected] , or visitwww.wiley.com/go/custompub.For information about licensing theFor Dummiesbrand for products or services, contactBrandedRights&[email protected].

ISBN 978-1-118-92950-6 (pbk); ISBN 978-1-118-93015-1 (ebk)

Manufactured in the United States of America

10 9 8 7 6 5 4 3 2 1

Publishers Acknowledgments

Some of the people who helped bring this book to market include the following:

Development Editor:Steve Kaelble

Project Editor:Jennifer Bingham

Acquisitions Editor:Constance Santisteban

Editorial Manager:Rev Mengle

Business Development Representative:Sue Blessing

Custom Publishing Project Specialist:Michael Sullivan

Project Coordinator:Melissa Cossell

http://www.wiley.com/http://www.wiley.com/go/permissionsmailto:[email protected]://www.wiley.com/go/custompubhttp://www.wiley.com/go/custompubmailto:BrandedRights&[email protected]:BrandedRights&[email protected]://www.wiley.com/go/custompubmailto:[email protected]://www.wiley.com/go/permissionshttp://www.wiley.com/


5/76

Table of ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

About This Book ........................................................................ 1

Foolish Assumptions ................................................................. 2

Icons Used in This Book ............................................................ 2

Beyond the Book ........................................................................ 2

Chapter 1: Understanding Schedule Maturity . . . . . . . . .3

Defining a Project ....................................................................... 3

Why Should You Care about Planning? ................................... 4

How Are Schedules Built Today? ............................................. 5

What Are the Challenges? ......................................................... 7

Introducing the S1 // S5 Schedule Maturity Framework ....... 8

Chapter 2: S1: The Schedule Basis . . . . . . . . . . . . . . . . .11

The Building Blocks of a Schedule ......................................... 11Different Types of Project Dates ............................................ 12

Planning Versus Control ......................................................... 16

The Perfect Level of Detail ...................................................... 16

Single and Multiple Projects ................................................... 17

Working Backward ................................................................... 17

Chapter 3: S2: Critiquing the Schedule . . . . . . . . . . . . . .19

What Are You Trying to Establish at S2? .............................. 19What Metrics Should You Use? .............................................. 21

How Well Did You Score? ........................................................ 24

Logic, Logic, Logic ................................................................... 26

2D Schedule Analysis............................................................... 26

Now the S2 Schedule Looks Worse! ....................................... 27

Chapter 4: S3: Analyzing Risk . . . . . . . . . . . . . . . . . . . . . .29

Qualitative Risk Identification ................................................ 30

The Risk-Adjusted P Schedule ................................................ 31Capturing Uncertainty and Risk Events ................................ 33

Capturing Duration Uncertainty ............................................ 33

Risk Analysis ............................................................................. 39

Risk Reporting .......................................................................... 40

Now Mitigate! ............................................................................ 43



6/76

Planning a Great Project For Dummies, Deltek Special Editioniv

Chapter 5: S4: Acceleration and Optimization . . . . . . . .45

Goal-Based Schedule Acceleration ........................................ 46Setting the Acceleration Goal ................................................. 46

Defining Acceleration Criteria ................................................ 47

Generate the Scenario ............................................................. 48

The Benefit of Goal-Based Acceleration ................................ 49

When Should Schedule Acceleration Be Carried Out? ........ 49

Faster Completion, but at What Price? ................................. 50

Chapter 6: S5: Gaining Team Buy-in . . . . . . . . . . . . . . . .53

Accepting or Rejecting Acceleration S4 Candidates ........... 53Acceleration Means More Risk? ............................................. 55

Consensus-Based Planning ..................................................... 55

Repeat . . . Repeat . . . Repeat . . . ........................................... 57

Chapter 7: Beyond Scheduling: The Bigger Picture . . .59

Cost- and Resource-Loaded Schedules ................................. 60

S1 // S5 and Earned Value ....................................................... 62

Feed the ERP Using Your Schedule ....................................... 63

Tie Everything Together ......................................................... 64

Chapter 8: Ten Thoughts About Schedules,Plans, and S1 // S5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65



7/76

IntroductionT

hats quite a balancing act youre expected to perform.Youre planning a project, and the stakeholders want it

done in a crazy-short timeframe, they expect it to come inunder budget, and of course, it absolutely must be done right.

Those are three expectations that often pull you in opposingdirections, and its your job to make it all work.

At the heart of any project is the schedule. Theres no wayyoure going to make it all work if you cant make the schedulework. Obviously, a lousy schedule is unlikely to deliver thedeliverables on time. But a poorly crafted schedule is alsolikely to blow the budget, and could well contribute to shoddywork. Yes, getting the schedule right is the key to success.

Fortunately, youve got great tools at your disposal, includ-ing CPM or critical path methodology scheduling tools.Theyre very effective at building schedule forecasts, but ifyou dont know some tricks, youre not likely to come out witha forecast thats realistic.

About This BookThe whole purpose ofPlanning a Great Project For Dummies,Deltek Special Edition, is to help you use CPM tools in a waythat yields a realistic schedule forecast. It outlines a five-stageprocess that will help you craft a schedule that is well formed,risk adjusted, and optimized worthy of the buy-in of all thekey players on the team.

The process is known asS1 // S5,and it begins with your

first draft of a schedule, straight out of your CPM tool. Readthrough the book and youll learn new secrets for critiquingthe schedule to make it better, then adjusting it to accountfor various risks that might cross your critical path. Youlllearn how to take that risk-adjusted schedule and optimizeit, accelerating where possible in order to keep those eagerstakeholders happy. Youll find out tips for gaining the buy-inof the team, because a schedule without buy-in is doomed.



8/76

Planning a Great Project For Dummies, Deltek Special Edition2

And youll explore how to ensure youve got the resourcesyou need to succeed, when you need them.

Foolish AssumptionsIn preparing this book, were assuming a few things about you,the reader:

You plan and schedule major projects for a living, usingone of the CPM tools on the market.

Youre convinced that there must be a better way tobuild a schedule thats not only beautiful, but workable.

Youre super-busy (who isnt?), and youd appreciatesome quick insights for improving your scheduling.

Icons Used in This BookYou have, no doubt, seen quite a fewFor Dummiesbooks outthere, and like the others, this one uses icons to help you spotspecific types of information.

You could say this whole book is one big tip for project-scheduling success, but this icon points out a particularlyhelpful tidbit.

If youre hurrying through the pages of this book, please dontmiss the paragraphs next to this icon, because they containsome key points.

Were trying for some light reading here, but if you want todig into some of the more technical details, dont miss theseparagraphs.

There are a thousand ways a project and its schedule forecastcan go wrong, and this icon alerts you to a reminder we hopewill help you steer clear of the danger.

Beyond the BookFor more information on how Deltek can help you plan andexecute your projects successfully, visit www.deltek.com.

http://www.deltek.com/http://www.deltek.com/


9/76

Chapter 1

Understanding ScheduleMaturity

In This Chapter

Defining what a project is

Caring a lot about planning

Understanding the schedule-building process

Facing the challenges

Introducing the S1 // S5 maturity framework

Successful project management ultimately boils down toharmonious planning. And if successful execution is the

result of adherence to a great plan, then project failure in suchcases is really driven by poor and inaccurate planning. In thischapter, we introduce a concept for improving the accuracy

of a schedule forecast through a maturity framework calledS1 // S5.

Defining a ProjectExperts have written many formal definitions of aproject. Forexample, a project:

Is a unique, temporary endeavor

Contains a defined start and finish

Is an individual or collaborative enterprise that is care-fully planned and designed to achieve a particular aim



10/76


These are certainly useful descriptions, but consider a dif-ferent way of looking at a project. Think of a project as being

like a chemical reaction: A process through which one set ofchemical substances is transformed into another. A chemicalreaction usually needs to be triggered by a catalyst.

When you think about it, projects are similar to chemical reac-tions. Projects are the transformation of raw materials into anasset that creates value. Specifically, a project takes physicalor intellectual property and transforms it into, for example, abuilding or a software product. To make this transformation

happen, you must execute project work, such as the build-ing work or the software coding. This work requires capitalinvestment.

One important thing to consider about projects is that theydont generate wealth or revenue. Theyre expenditures,pure and simple. A project is the precursor to operations,and thats the phase of the asset lifecycle when assets startto claw back the project investment, then begin reaping the

rewards that lead to long-term profit and net present value(thats NPV for short).

With that in mind, think of project management as the disci-pline for properly managing this investment of time, materials,and money. If you spend too much money on being the cata-lyst, your project runs over budget. But if you spend too little,you run the risk of delivering an asset that doesnt satisfy theobjectives of the project in the first place.

Why Should You Careabout Planning?

You may think of running a marathon as one of the ultimatephysical accomplishments. But consider this: By the time a

runner gets to the starting line, the hardest work has alreadybeen done. This runner has gone through months of carefulpreparation and intense training, preparing for what shouldbe a comparatively simple execution of a well-rehearsed plan.Barring any unforeseen hurdles such as extreme weather oran injury, the runner will finish the race.



11/76

Chapter 1: Understanding Schedule Maturity 5

The same is true for projects. If you accurately define thescope of work required to complete a project asset, then

execution really should be nothing more than an exercise ofgoing through the motions. Just stick to the plan, and youreguaranteed success, right?

Why, then, do capital expenditure or capexprojects pose sucha risk to the project owners investment? Many projects arefrequently plagued by cost overruns and delays.

A lot of things can go wrong with a project. In that way, proj-

ects are similar to baking. And baking can go wrong in wayssimilar to the potential pitfalls facing your project planning:

You used the wrong ingredients for baking a cake.Todays scheduling tools offer so many different buildingblocks that you may end up using the wrong ingredientsto represent your plan.

You didnt estimate the quantities correctly.Even if youchoose the correct ingredients when baking a cake,you may get the quantities wrong. Developing a projectschedule poses the same risks. You can establish the per-fect plan with regard to sequence of work and logic andcritical paths, but what if your duration estimates arewrong?

You didnt plan for the antiplan.Perhaps you didntaccount for the humidity being too high to bake theperfect cake, or the impact that baking at high altitudes

can have. These two factors represent the project riskto your cake, or what we like to call the antiplan. If yourplan doesnt include contingency or allocation for poten-tial risks and uncertainties, then your plan is naturallyaggressive and overly optimistic, which dramaticallyincreases the chances that you will fail.

Overcome these factors and youre a long way toward makingyour project a success.

How Are Schedules Built Today? These days, generating a time forecast(often known as a

schedule, of course) typically involves critical path method-ologyscheduling tools, or CPM. Modern commercial CPM



12/76


scheduling tools have extremely broad functionality, buttheyre all based on the simple premise of the CPM algorithm.

At their core, these CPM tools assign the dates associatedwith projects based on the scopeand sequence of workthatthe project requires. These determinations take into accounta set of core ingredients, and perhaps some optional ingredi-ents, too.

The core ingredients include:

Work breakdown structure:This is a matter of breakingdown the project charter or overarching objective intomanageable chunks of scope, which are known as WBSelements. These elements are the deliverables them-selves, notthe work required to deliver them.

Activities or tasks:This is the work required to achievethose deliverables. In order to establish the requiredactivities, youll have to define the durations, costs, andresources needed to execute the work.

Logic:This refers to establishing the sequence of work(no, logic isnt just for Mr. Spock). Youll often see itreferred to asprecedence logic, and CPM tools typicallyoffer four different types of logic links.

Beyond these core ingredients, youll need some additionalbuilding blocks when creating a CPM schedule. For example,different disciplines often follow different working hours

per week (these are the calendarsyou must consider). Also,contract requirements may determine when work can begin(these are known as constraints). And some tasks for exam-ple, the curing of concrete require specific waiting periodsthat your CPM tool will refer to as lagsor durationson logiclinks.

Such building blocks help create a more realistic plan, with ahigher chance of success during execution. Use these ingredi-

ents as necessary, but onlywhere necessary.

The CPM algorithm is the catalyst for the chemical reaction . . .that is to say, your schedule. A CPM analysis consists of whatis known as a forward passand a backward pass. These calcula-tions take into account the rules youve defined through thedurations, calendars, logic links, and so forth. The forward pass



13/76


moves forward through the project to calculate what are knownas the early start and finish dates, which are the earliest possi-

ble times the project can start and be completed. The backwardpass begins at the end of the project and moves backward todetermine the latest possible time an activity can begin withoutdelaying the project. The algorithm also determines a durationentity known as float.

The result of all of this work is a CPM schedule. One of themost basic but important points is that the project scheduledates are the outputfrom a CPM analysis, not the input. The

CPM building blocks are duration-based, while the resultsare date-based.

All too often, inexperienced planners build plans by firstestablishing the dates, rather than following the steps. Thistotally defeats the purpose and premise of CPM scheduling to introduce one more idiom not related to scheduling, chem-istry, or baking, its putting the cart before the horse. Whenyou embark on a project, you dont know how long the project

is going to take. What you do know (or at least you shouldknow) is the scope of work required to execute the project.Based on this, use the CPM tool to establish the net durationand associated dates for project completion.

What Are the Challenges? To put it simply, the challenge is getting the plan right. But

there are a number of ways the plan can go wrong:

Neglecting the structural integrity of the schedule.Think of your schedule kind of like a painting, and yourscheduling tools like the blank canvas, brushes, andpaints. You may have the tools in hand, but youre a longway from being guaranteed a masterpiece. Schedulingtools dont provide all the guidelines or checks and bal-ances youll need in order to develop a plan. Your toolwill have logic links, for example, but doesnt know thatyou cant build the roof before youve built the wall struc-ture, and you cant build the walls before youve laid thefoundation.

Setting unrealistic durations.When considering thedurations associated with various activities, people tend



14/76


to be optimistic, often planning for the best-case sce-narios. For instance, you may neglect to allocate a buffer

or contingency for unknowns, instead estimating basedon the hope that everything will go according to plan.Thats not always realistic. What if a four-hour marathonrunner announces that shes going to run a marathon inthree-and-a-half hours? That would establish unneces-sary pressure and set up the potential for failure. Betterto underpromise and overdeliver.

Failing to consider external risks.If someone asked youwhere youll be precisely three years from now, youdprobably laugh, because there are too many unknowns tomake an accurate prediction. Why, then, do people thinkits reasonable to embark on multimillion-dollar projectsinvolving thousands upon thousands of man-hours ofscope, and expect to be able to predict the exact daywhen the project will be done? Isnt it more reasonableto give a window of outcomes based on potential knownsand unknowns? Its easier to take contractors seriouslywhen they offer a range of completion dates based onwhat they know, rather than promising completion on avery specific date.

Introducing the S1 // S5 ScheduleMaturity Framework

The rest of this book discusses a concept based on a maturityframework, designed to give you a much more realistic scheduleforecast. Get the plan right, accounting for potential unknownsduring execution, and youll be setting yourself and your organi-zation up for project success rather than project failure.

Here are the five components of this framework (see Figure 1-1):

Schedule basis:S1 is the starting point. It represents you,

the planner or scheduler, simply doing what you do best:building a project plan. No need to change your processor bring in new tools here. S1 // S5 is designed to provideadded value to your existing scheduling investment. YourS1 schedule is the noncritiqued, non-risk-adjusted sched-ule that you use as the basis for your journey towardschedule improvement.



15/76


Figure 1-1: The five-stage project maturity framework.

Diagnostics:S2 is where great things start to happen. S2is all about diagnosing your schedule. Its the process of

running your CPM schedule through checks and balances(metrics)to pinpoint shortcomings around structuralintegrity. For example, did you correctly use the CPMtools building blocks? Fail to establish a strong founda-tion and youll end up with a short-lived, problematichouse of cards.

Risk-adjusting:S3 is the step where you calibrate yourschedule forecast, accounting for risk and uncertainty, to

establish what is known as a risk-adjusted schedule. Youmay be thinking, this is where the forecast becomes non-deterministic, range-based, perhaps even fluffy. Wrong.Sure, if you believe youre operating with 100 percentcertainty, you end up with a single-point, deterministicforecast date. The difference is that a risk-adjusted fore-cast date also carries a confidence level and a range.Investment banks have been using this approach fordecades when establishing risk appetite. The bottom line

is that the process works, yielding a much more insight-ful view of the project.

Optimizing:S4 is a step many project managers dontrealize they should be taking. By the time a schedulehas been critiqued for structural integrity (S2) and hasbeen risk-adjusted (S3), youre likely to have a projectcompletion date thats significantly later than the original



16/76


completion date you had at S1. How is it that by doingthe right thing, conducting all of this additional due dili-

gence around schedule maturity, youve ended up with adate that is now worse than the original S1 date? Well, trylooking at it differently: You havent made the date worse,but rather have made it more realistic. That said, you stillhave the challenge of reporting this more realistic dateback to the project stakeholders who often already havebuilt their expectations around the original S1 date. S4is how you look into potential acceleration scenarios tohelp push the S3 date back toward the original S1 date

while still upholding S2 structural integrity along withadequate consideration of risk.

Team buy-in:Wouldnt it be great to have a computer-optimized schedule completely free of manual errors andshortcomings? Truth is, projects are planned and exe-cuted by humans humans who are the domain expertsin their field, humans who carry the ultimate knowledgeabout how long things will take and how much a scope ofwork will be required. S5 is a review process allowing keyproject stakeholders to consider the schedule improve-ments, risk mitigations, and optimizations suggested byS2, S3, and S4. Its a buy-in process that forms the basis ofsubsequent re-cycles of the entire S1 // S5 process. Thiscontinuous-improvement, iterative approach representsa huge step toward establishing schedule forecasts thatare as realistic as possible.

The end result of going through the five states of schedulematurity is that the project now has an established scheduleforecast that has been critiqued for structural integrity, thataccounts for risk and uncertainty, that has been optimized forany potential acceleration, and perhaps most important, nowhas the project teams buy-in.

Think about the phrase measure twice, cut once. Its notjust for building or sewing. If you follow the S1 // S5 process,you have the luxury of multiple attempts at getting a planright plus a structured set of tools and processes fordoing so.



17/76

Chapter 2

S1: The Schedule BasisIn This Chapter

Building a CPM schedule

Defining the different types of project dates

Understanding the purpose of the plan

Connecting multiple projects

Working backward

Wrapping up S1

To improve your schedule, you need a starting point. Inthis chapter, we walk through some scheduling basics and

introduce you to the S1 // S5 maturity framework at the mostlogical spot: S1.

The Building Blocksof a Schedule Building a schedule can be a treacherous process, mainly

because of the numerous modeling objects that are part ofyour scheduling tool. Here are some of the things youll find inyour toolkit:

Project:The overarching entity that encapsulates yourtotal scope.

Work breakdown structure:WBS is your breakdown ofproject deliverables (not to be confused with the workneeded to make these deliverables). Whats listed hererepresents value.



18/76


Activities:The work required to deliver deliverables.Unlike WBS, activities dont represent value, only

expenditure.

Logic links:The glue between activities. Logic linksdefine the sequence of work.

Leads and lags:These are durations on logic links. A lagis a positive duration, while a lead is a negative duration.An example of a lag is the drying period following a paint-ing activity. Theres no means for tracking performanceduring execution if the work scope is partially modeled

using leads/lags.

Resources:The labor and materials available to theproject.

Resource assignments:A rundown of how the labor andmaterials are used in order to execute the work.

Calendars:These define the working and nonworkingperiods.

Calendar assignments:Calendars can be applied to proj-ects, activities, or resources, as well as logic.

Constraints:These are the devil of CPM scheduling, andtheyre used to artificially drive schedule dates. There isa better way to plan, namely using the S1 // S5 maturityframework.

Different Types of Project DatesDates are the answeryou get from CPM analysis; theyre notthe input. (For more on this, see Chapter 1.)

Based on the duration and sequence of work inputs, CPMschedules provide insight into two primary entity types: datesand float. The dates arent just overall start and completion,but also interim milestones such as component delivery and

payment dates. All activities carry start and end dates, butthe story is a little more complex.

Early datesare the earliest start or finish dates associatedwith an activity. Early dates dont mean an activity will beearly! Theyre simply the earliest possible dates associ-ated with that activity, assuming activity begins as early as



19/76

Chapter 2: S1: The Schedule Basis 13

it can while still adhering to any logic ties and/or resourceconstraints.

Similarly, late datesdont mean the activity is late. They repre-sent the latest start or finish dates an activity can have with-out impacting the rest of the project.

Some people like to plan their lives adopting early dates tostart and finish a task as early as possible. Others prefer toleave the task until the last minute. Both approaches are okay,as long as theyve properly forecast the time it will take to

execute the task.

If that forecast is wrong, youll quickly face the consequencesof delay. Given that, if you have some flexibility regarding whenyou can execute a task, starting as soon as possible usuallygives the best opportunity for remediation should things notgo according to plan.

The difference between an early and a late date is known as

float. Float can be associated with the start or finish of anactivity, and it can relate to either the project as a whole orsimply to an adjacent activity. Think of float as the wiggleroom in a project.

Take a look at the simple two-path example in Figure 2-1.Activity A has a duration of ten days, while Activity B has aduration of eight days. That means Activity B has two daysof float. This float can be used as a buffer, because Activity B

can be completed up to two days late without impacting theoverall project.

Figure 2-1: Float, as seen in a simple two-path network.



20/76


Depending on the overall structure of a project plan, someschedules can be highly spongy,meaning theres more float,

more opportunity to absorb risk or even accelerate the sched-ule. On the other hand, a project plan with very little totalfloat has a lot less room for error during execution. Giventhat, you can see that float isnt necessarily a bad thing.

However, negative float in a schedule is no laughing matter.Often known as a schedule bust,its an indication that yourschedule forecast is impossible to accomplish. You wontachieve on-time completion with a negative float schedule

unless you make some changes.

Heres another kind of date for you: the baseline date. Think ofbaseline dates as a means for providing an audit trail on yourproject. Its one thing to have a very up-to-date schedule, butif your plan is undergoing constant change, how do you trackthe history of the changes? Thats where baselines come in.

Baselines are at best complete snapshots of a project plan

at any given time. At worst, theyre simply an additional setof dates tagged onto your project plan that show a previousiteration of your schedule forecast.

When tracking baseline dates, youre best off using them as acomplete snapshot of your project schedule. Baselines dontjust relate to dates. Baselines can be applied to durations,costs, logic, calendars literally every entity within yourschedule can have a baseline.

Baseline your plan early and baseline often. A lot can changebetween the real world time now and your project plandata date or time now date.

As the name implies, actual datesare the start and end dates ofactivities that indicate when the work really did start and finish.By tracking actual dates against a set of planned dates, you canstart to gauge the execution performance of your project.

Its tempting to compare actual dates with planned dates inorder to track performance, but be careful in doing so. Truthis, just because an activity has an actual finish date thatsmuch later than its planned finish date doesnt necessarilymean it was a poorly executed activity. What if the activitywasnt able to start on time because a preceding activity wassignificantly delayed?



21/76


Instead of using dates when you need to track time perfor-mance of an activity, compare the difference between actual

duration and planned duration. This comparison gives you amuch better representation of the true performance of thatactivity.

Target datesand constraint datesare often badly misused inCPM schedules. Target dates should be for reference only.Target dates in CPM schedules have no bearing on the sched-ule dates.

Constraint dates on the other hand, definitely do have animpact on the calculations during a CPM analysis. Constraintdates essentially override the ability of a CPM network tohave free-flowing logic.

For example, say you plan to lay the foundation on Monday,build the walls on Tuesday, and then put on the roof onWednesday. If you add a constraint date against the roof stat-ing that you will start roof construction on Tuesday, that

would go against the naturally free-flowing logic, because roofconstruction cant begin until Wednesday, after the walls havebeen built.

To be sure, valid situations for using constraint dates exist,such as contractually forced delivery dates. But always usethem with extreme caution.

If your project is tasked with completion by a particular date,

the worst thing you can do is plug that target or deadline intoyour CPM schedule as a constraint date. Instead, simply usetarget dates to compare against calculated scheduled dates.

For example, if the CPM schedule shows the project can becompleted by November 30, but the project stakeholderwants it done by October 30, it would be poor planning toput in a constraint date artificially showing an October 30completion.

A much better approach is to compare the target of October 30with the scheduled November 30 date, then figure out howyoure going to proceed given the disparity. Do you need toreplan? Do you need to reset expectations with the projectstakeholder? Do you need to look at acceleration scenarios?



22/76


Planning Versus Control A project plan really does serve two purposes. First, its a

communication vehicle informing a project team when toexpect to complete a project. Second, its a mechanism fortracking execution performance. Performance can only bemeasured by comparing against either a set of rules or guide-lines, or in the case of a project, the project plan itself.

Many ways to track project performance exist, and each one

could have its own book (and no doubt does). For the pur-pose of schedule maturity, assume that your project is usingone of the accepted techniques, such as:

Straightforward actual V planned date tracking

Earned schedule

Earned value

The Perfect Level of DetailHeres a common question: How much detail should I planto? And heres the best answer: Break down your projectinto as many manageable small chunks (activities) as needed,enough for you to have sufficient insight to be comfortablereporting the forecast during planning as well as tracking howwell youre performing during execution.

Notice that the answer doesnt give an actual number. Ifyour project is building a garden shed, breaking it down into100,000 activities actually hinders your ability to see the bigpicture. On the other hand, on a highly complex refinery turn-around project, 100,000 activities probably wont give youthe granularity you need to track performance down to theworking-shift level.

Beyond being tracked against a plan, project performancemore and more is being measured using industry benchmark-ing. Its one thing to come in on-time against the agreed-uponplan, you should also find out how you actually rankedagainst other similar-sized projects of a similar nature.



23/76


Single and Multiple ProjectsTheres been a lot written about the management and asso-ciated roll-up and drill-down of multiple projects within aprogram/portfolio.

Regardless of your project hierarchy projects, programs,portfolios, business units simply think of your project aspart of a neverending hierarchy. CPM scheduling tools allowthe creation of hierarchies through the use of indenting.

Sometimes, such hierarchies are used to depict WBS struc-tures within which sit activity hierarchies. Projects, programs,and portfolios are no different. Build a corporate projectstructure that simply suits your needs with regard to slicingand dicing project scope.

You may be wondering why even nest projects together atall? Theres huge value in segmenting projects into separateentities, while having them sit within a hierarchy. Doing

so enables fast and easy cross-project analysis, enterpriseresource scheduling, and corporate cash flow modeling. Thisall falls under the realm of portfolio management.

Enough said.

Working BackwardNot all projects start with a defined start date that leads to acalculated finish date. Some start with a defined finish, lead-ing to a calculated start. Clear as mud?

For example, toy factories plan backward from the holidayseason. The objective is to determine when the toy develop-ment cycle should begin in order to ensure delivery to theretail market by early November.

This type of planning is really no different from the more typi-cal fixed-start type of project. CPM tools are equally valuablefor this type of project.



24/76


Working backward is not the same as as late as possible orALAP planning. ALAP planning assumes that float will be con-

sumed before an activity starts. This is different from workingto a given completion date. You can certainly still have activi-ties carrying float in a working-backward plan.



25/76

Chapter 3

S2: Critiquing the ScheduleIn This Chapter

Defining purpose at S2

Picking the best metrics

Tallying up the score

Evaluating the level of logic

Analyzing in 2D

Checking out the impact on the dates

When you get to S2, you already have a schedule in hand(creating that was S1). The task now is to figure out

how that schedule can be improved.

In this chapter, we explore some of the metrics available forcritiquing the schedule, discuss how much logic is the rightamount, and explore ways to chart the quality of the schedule.

What Are You Tryingto Establish at S2?

S2 is all about improving the structural integrity of the sched-ule. In laymans terms, this boils down to the following question:Is the logic in your schedule sufficient, without any missingdetail, so that the schedule is a free-flowing sequence of workwith a naturally occurring critical path or paths, all leading toa reasonable set of completion dates?

Were not suggesting that S2 gives special insights or knowl-edge regarding which logic links should be assigned to specific



26/76


types of work, or what sequence the activities should follow.For example, S2 isnt about applying the knowledge that a roof

cant be built before the walls are finished. Thats a totally dif-ferent concept.

Instead, the purpose with S2 is ensuring that your schedulecontains a blended balance of sufficient detail, rather thansomething thats overly complex. At this point, you want tomake certain you use free-flowing logic, rather than building aschedule with missing logic. Youre on the lookout for issuessuch as negative float and schedule busts. In short, youre

ensuring that your basis is as strong as possible, so that youcan then further investigate the realism of durations andsequence of work.

You conduct these checks and balances using a series of met-rics.Theres been an explosion of this kind of metrics in thepast five years or so.

For example, generic BI (business intelligence) techniques

have trickled into the project planning arena and becomepart and parcel of many corporate planning guidelines. CPMscheduling has been advanced to the next level by suchthings as DCMAs 14 Point Schedule Assessment and Delteksmetric-based philosophy on planning.

Different organizations use different criteria for their metrics.But the widespread adoption of metrics as a way to critiqueproject schedules has without a doubt been one of the biggest

advances in CPM scheduling in recent years.

The value of metric analysis goes beyond promoting better-quality schedules. It has also helped to undo the negativeimpact of the recent brain drain effect in CPM scheduling. Thenewer, younger generation of CPM planners can now applythese schedule check metrics to learn and self-assess whenbuilding CPM schedules, ensuring that the frameworks theyrebuilding are as solid as possible. Its a huge step in the right

direction with regard to more realistic planning.



27/76

Chapter 3: S2: Critiquing the Schedule 21

What Metrics Should You Use?Here are nine core metrics that are invaluable when establish-ing a sound schedule basis. We dont fully define each one.There are plenty of other metrics, of course. As an example,Deltek Acumen Fuse has hundreds of metrics available forcritiquing project schedules. That sounds impressive, butthe truth is that most successes happen by making complexthings simple, and metrics are no exception. Consider weight-ing the relative importance of your schedule checks, then

combining them into an overarching score. If you need moredetail, please check the reference library at www.deltek.com/products/ppm/schedule-index-calculator/

fuse-schedule-index.

Missing logicIn theory, all activities should be associated with at least one

predecessor and one successor (except, of course, the projectsstart and finish, if youre being picky). Making certain you donthave any missing logic ensures that you have an accurate setof logic paths through your schedule, and also differentiationbetween those paths that carry float(noncritical) and thosepaths with no float(critical).

Logic Density This metric calculates the average number of logic links per

activity. If your average is less than two, its likely that theressome missing logic. On the other hand, an average greaterthan four suggests overly complex logic, with a high likeli-hood of redundant links. Therefore, Logic Density should fallbetween two and four.

This is an incredibly useful metric. Its a great indicator ofwhere and when in your schedule you have insufficient logic,and where the logic is overly complex. Figure 3-1 shows anactivity (Activity B) with a Logic Density of 4. In this case,one activity has four logic links (two predecessors and twosuccessors).

http://www.deltek.com/products/ppm/schedule-index-calculator/fuse-schedule-indexhttp://www.deltek.com/products/ppm/schedule-index-calculator/fuse-schedule-indexhttp://www.deltek.com/products/ppm/schedule-index-calculator/fuse-schedule-indexhttp://www.deltek.com/products/ppm/schedule-index-calculator/fuse-schedule-indexhttp://www.deltek.com/products/ppm/schedule-index-calculator/fuse-schedule-indexhttp://www.deltek.com/products/ppm/schedule-index-calculator/fuse-schedule-index


28/76


Figure 3-1: Activity B has a Logic Density of 4.

Comparatively, in Figure 3-2, Activity B has a logic density of 2.

Figure 3-2: Activity B has a Logic Density of 2.

Number of concurrentcritical paths Theres nothing inherently good or bad about critical activi-

ties in a schedule. It is, however, useful to analyze the numberof parallel critical (or near-critical) paths. If your schedulehas a number of parallel, critical (or near-critical) paths, youhave more risky work fronts than you would if your projecthad just a single critical path, even a very dominating one. A

schedule with a single big problem to solve is preferable overmultiple medium-sized problems all occurring simultaneously.Figure 3-3 illustrates the difference between a dominant andnondominant path.

Hard constraintsScheduling theory recommends avoiding hard or two-way

constraints such as Must Start On or Must Finish On. Theyrepoor schedule-building blocks (constraintsare date overridesthat take precedence over the naturally occurring calculateddates during CPM analysis).



29/76


Figure 3-3: Comparing a scenario with a single dominant path to one with

two dominant paths.

Use one-way constraints with caution. Remember that con-straints really go against the premise of a naturally flowingCPM network. As a rule of thumb, the only time you shoulduse a one-way constraint is if you can absolutely defend itsuse and simply cant use any of the other building block.

Negative floatNegative float is a result of an artificially accelerated or con-strained schedule, and its an indication that a schedule isntpossible based on the current completion dates. Quite simply,this is a schedule bust. Its an easy problem to spot: Simplypinpoint your negative float areas and these will be the areasthat wont be executed on time. Negative float indicates ahigh-risk area without any need to conduct a risk analysis!

Insufficient detail Activities with a high duration relative to the duration of the

project as a whole suggest poor schedule definition. If any ofyour activities take up more than 10 percent of the total proj-ect duration, you probably should go back and further definethe scope of work. You dont want to back a capex project ifyou dont know the scope to within plus or minus 10 percent.



30/76


Number of lags A lag is a duration applied to a logic link thats often used to

represent nonworking time between activities. Lags arentnecessarily a poor planning technique, but they lead to prob-lems when tracking performance execution. Lags tend to hidedetail within the schedule and cant be statused like normalactivities. For that reason, you should convert lags to actualactivities with durations. No excuses on this one convertthem all!

Number of leadsA lead, also known as a negative lag, is often used to adjustthe start or end date of a successor relative to the logic link.This is a poor practice, because it can result in the succes-sor starting before the start of the predecessor. Leads havethe same problems that lags do, and should be treated in thesame way. That is to say, avoid them end of discussion.

Merge hotspotA merge hotspot indicates how complex the start of an activ-ity is. Its defined as the number of incoming logic links lead-ing into an activity. If the number is greater than two, theresa high probability the activity will be delayed. Thats becauseall of the links will have to be completed on time for the activ-

ity to start on time.

How Well Did You Score?It must be human nature to want to know the score. Quantifyingor scoring and the associated use of indices happen all the time,all over from determining who won a football game to gaug-

ing your credit when obtaining a loan to measuring the outsidetemperature.

However, scores are really all just relative. Next time youchat with a Martian, ask whether 90 degrees is warm or not.The Martian will have no idea. Give that Martian a welcometo Earth gift of a typical analog thermometer labeled from



31/76


40-below up to 120 degrees, and the Martian might be betterable to answer whether 90 is warm or not. The point is, scor-

ing is a great way of comparinghow well youre doing, but youneed something to compare it to.

The Deltek Acumen Fuse Schedule Index is a single score (0 to100) based upon the weighted results from some of the metricsdescribed in the previous section. Of course, establishing theperfect set of schedule-critique metrics is in itself an ongoingproject, but its very valuable to have a single score that youcan use to critique the quality and underpinnings of a project

schedule.

This year, the average Fuse Schedule Index has increased byclose to 20 percent. Figure 3-4 shows the improvement of theFuse Schedule Index across thousands of projects. If nothingelse, thats a true indication that projects are adopting metricanalysis and are generating more realistic schedules.

Figure 3-4: Improvement of the average Fuse Schedule Index over

12 months.

Using an accepted scoring method is also a great way tobenchmark the quality of your schedule, and there are manythings to which you can compare it. Benchmark it againstitself over time. Benchmark it against other projects in yourorganization. Benchmark it against other similar projects out-side your organization. Those are all helpful scores to know.



32/76


Logic, Logic, LogicIts impossible to stress how important logic is to a soundCPM schedule. Identifying missing logic is key, but equallyvaluable is the identification of redundant logic.

Schedules often carry too much logic complexity. Put anotherway, single activities carry too many predecessors and/or suc-cessors, which makes the management of the schedule verydifficult.

In some cases, some logic links actually are completely redun-dant, because theyre outclassed by other, more detailed,driving logic. Figure 3-5 illustrates a redundant link betweenActivity A and Activity C you already have logic flowingthrough A to B to C.

Figure 3-5: Redundant logic.

Removing redundant logic helps make your project scheduleclearer and also lessens the overhead of maintaining riskmodels.

2D Schedule AnalysisAlthough metrics are useful at the project level, theyre evenmore valuable to slice and dice a project, pinpointing hotspots. Slicing a project isnt a new concept. The application ofwork breakdown structures and code fields enable this type ofslicing, but they can only segment data in a single dimension.

Figure 3-6 shows an example of a two-dimensional slice-and-dice of a project (time is on the horizontal axis and contractoris on the vertical). Its particularly useful to overlay the sched-ule metrics against these two dimensions, so you can see notonly when in time any schedule quality issues arise, but alsowhich contractors scope of work is most problematic.



33/76


Figure 3-6: Standard S2 analysis performed in Deltek Acumen Fuse.

This type of reporting mechanism doesnt just count theissues, it pinpoints them. And pinpointing a problem is the

first step toward resolving it.

Now the S2 ScheduleLooks Worse!

After you build your schedule, run metrics against it, and pin-

pointed and resolved the shortcomings lo and behold, thefinish date is now worse than when you started!

Correction: its not worse, its more realistic. What youveestablished is a much more sound basis of schedule uponwhich to firm up the durations and account for potential riskevents. Thats S3. Read on!



34/76




35/76

Chapter 4

S3: Analyzing RiskIn This Chapter

Creating a qualitative risk assessment

Understanding the risk-adjusted P schedule

Capturing uncertainty

Quantifying risk events

Conducting risk analysis

Reporting your risks

Beginning to mitigate

Yes, the word risk is in the title of this chapter, but theoverarching goal is the opposite of risk, the counterbal-

ance. This chapter discusses certainty and confidence, andhow to establish those things in your schedule forecast.

Project schedules are tools for forecasting, used to generate

an educated estimate regarding when a project will finish andwhat happens on the way to that point. But project schedulesfall short in accounting for or differentiating between theknown scope of work (activities) and the uncertainty sur-rounding this work (in other words, scope uncertainty).

Even worse than that, CPM schedules arent designed to natu-rally account for external risk events, those discrete eventsthat have an impact typically negative but occasionally

positive on ability to execute the plan.

This is where project risk management comes into play. In thischapter, we discuss the varying levels of maturity of projectrisk management.



36/76


Qualitative Risk Identification At the most superficial level, a qualitative risk assessmentis

conducted through the means of what is known as a risk reg-ister. The risk register is simply a list of identified risks alongwith optional tracking of their probability of occurrence andtheir potential impacts on the project. Its often captured insomething as simple as a spreadsheet.

Figure 4-1 shows an example risk register where the risks have

been sorted from high (most risky) to low (least risky). Thescores by which theyre sorted are based on the intersectionof each risks probability and impact, using a risk matrix orprobability impact grid (which everyone likes to call a PIG).

Figure 4-1: A risk register.

Figure 4-2 shows an example risk matrix, or PIG, where a riskevent with a very high probability of occurring and a verylow impact receives a score of 25. This kind of approach iscertainly a good starting point for managing project schedulerisk, but it falls short of any true quantification of risk, and inreality can be highly misleading.

Consider the risk register shown in Figure 4-1. Based on thescores, the risk register suggests focusing your efforts on thetop risk, which is the risk of delay due to fabrication yardconstraints.



37/76

Chapter 4: S3: Analyzing Risk 31

Figure 4-2: A risk matrix defines the scoring thresholds used in a risk

register.

Makes sense that this type of risk would be at the top of thelist of risks, but theres more to consider. If the top risk has apotential schedule impact of 30 days, that certainly soundsbad. But what if that failure would impact an activity in aschedule that happens to have 60 days of float? If I were theproject manager making risk mitigation decisions, I would letthis risk potentially occur, because I know that the 60 daysof float is more than enough to absorb the 30 days of riskimpact, if that failure even happens.

In other words, the risk register doesnt properly take intoaccount the ability for a schedule to absorb risk rather thanbe impacted by risk.

The moral of the story is that a traditional qualitative riskassessment using a risk register doesnt give true insight intoschedule risk impact. Thats the reason why these days, moreproject-led organizations are adopting a truly quantitative riskassessment that leads to a risk-adjusted schedule.

The Risk-Adjusted P ScheduleA risk-adjusted (P) scheduleis a schedule that takes intoaccount any uncertainty of duration along with identified riskevents. To avoid any confusion, its a schedule with a singleset of dates and a truly deterministic finish date not a rangeof dates nor a statement of We may finish anywhere between

here and here. It is truly a schedule.

The real difference between an S3 P schedule and the S1 orS2 schedules that you generated in earlier steps is that theS3 schedule accounts for uncertainty, risk, and potentialopportunity. Its a much more realistic forecast, because inthe real world, the future always holds some uncertainty andpotential risk.



38/76


So what about that P in its title? The P stands for percentile,and is an indication of confidence. Heres a secret: You could

actually generate multiple risk-adjusted schedules, coveringanywhere from what is called P0 all the way to P100. A P50schedule is a schedule for which youre 50 percent certainyou wont overrun. A P0 schedule is the best-case scenario,while a P100 schedule is the worst-case outcome, based onwhat you know today. Its worth noting that many organiza-tions will both plan and finance a project using a P schedule(S3) rather than the original S1 non-risk-adjusted schedule.

In fact, in the energy sector, where projects can cost tens ofbillions of dollars, its common to present a P75 or P80 sched-ule to the sanction or finance board. That means the bankersare already looking at scenarios that are approaching theworst case. From that perspective, the investment then car-ries an overrun risk exposure of no greater than 25 percent fora P75 schedule or 20 percent for a P80 schedule. Its a sophis-ticated way of living out that adage, Plan for the worst andhope for the best.

Dont hold your project execution team to an S3 risk-adjustedP schedule hold them instead to the S2 schedule. Becausea P schedule factors in risk and uncertainty (which is typi-cally known as contingency), most P schedules show a longerduration and a later completion date. Thats fine, becauseyoure simply planning for risk, and the additional duration isa buffer to take possible problems into account. But if you letthe folks on the project team count this risk allocation as part

of their normal allocation of time for execution, you can bettheyre going to take it.

We call this student syndrome.Give a student a deadline andthat student will take the full window of time to complete thetask, absorbing any buffer rather than trying to complete theassignment as early as possible. Youd think the student mightwant that free time at the end of the task before the dead-line occurs, but odds are the students going to just be less

productive.

That doesnt mean you cant negotiate terms, secure funding,and agree to payment milestones based on a P schedule while still tracking the project to the non-risk-adjusted sched-ule. Thats perfectly normal.



39/76


Similarly, if you want to finish your project in 12 months,plan an 11-month schedule with a buffer of contingency built

it. Worst case, you come in on time. Best case, you finish amonth ahead of schedule, which makes you look like a projectsuperhero!

Capturing Uncertaintyand Risk Events

There are three main things you need when building a Pschedule:

A sound schedule (yes, thats rather obvious). You havealready established this at S2.

Ranges of uncertainty for the durations of the activitiesin the schedule.

Your list of risk events (both threats and opportunities),and how they map into the schedule. Which activities doyou think they are going to impact?

Capturing Duration UncertaintyHow realistic are the durations of activities that are in yourschedule? Capturing duration uncertaintyis the process of

answering that question. This is done by establishing a rangeof values for each activity duration typically a three-pointestimate that shows the best case, the most likely case, andthe worst-case scenario.

This hasnt always been easy to do. When schedule risk toolswere in their infancy, capturing these ranges meant the enduser had to define arguably complex statistical factors, suchas distribution types and optimistic and pessimistic duration

values.

Project stakeholders generally couldnt care less about a sta-tistical distribution type they just want to get the job doneand get it done well.



40/76


To get through this bottleneck of accurately capturing domainexperts knowledge and translating it into three-point esti-

mates and distribution types for use in a mathematical riskanalysis model, use the Uncertainty Factor method.

Figure 4-3 shows an example of an Uncertainty Factor templatedefined through five different categories: Very Conservativethrough Very Aggressive. Each category represents a range ofuncertainty based on the minimum, most likely, and maximumpercentages. Apply these categories to activity durations andthey translate into absolute duration ranges. Project teams

find it easier to relate to this type of approach instead of beingforced into statistical discussions.

Figure 4-3: Uncertainty Factor approach.

Many large capex projects are modeled using schedules con-taining thousands of activities. Can you imagine what wouldhappen if you bring the project team together in a risk work-shop and ask members to range every one of those thousandsof activities? The team would tune out quickly.

The solution is to follow a top-down categorization approachusing the Uncertainty Factor method. Rank groups of activi-ties (perhaps by WBS or discipline). Each activity within theranked group gets the ranking assigned to the parent group-ing. If necessary, you can make some exceptions to the parentgroup rankings for certain individual activities or subgroups.



41/76


That way you end up with the best of both worlds: A detailedschedule that is ranked in its entirety without taking up days

of project time, yet you still retain exceptions and detailwhere needed.

Figure 4-4 shows a schedule grouped at the project WBS levelproviding the ability to quickly assign uncertainty. Adopta top-down ranking approach and youll do more than justaccomplish the uncertainty loading of very large schedules indrastically reduced amounts of time. Youll also eliminate theneed for the alternate approach of manually creating rolled-up

summary representations of the true schedule to be createdand used for the risk model. Doing that would be a fundamen-tally flawed approach. You simply cant recreate or emulatedetailed logic from a 1,000 activity in a higher level 100 activ-ity CPM network. You may build the worlds best risk model,but youre building a model on a schedule thats not your trueproject schedule!

Figure 4-4: Using a top-down approach to risk-loading the schedule.



42/76


You may recall aSeinfeldepisode that warned of double-dipping: dipping a chip into the chip dip after youve already

taken a bite. If youre not careful when determining uncer-tainty ranges, you could end up double-dipping in a differentway, skewing your pessimism by accounting for the impactof potential risk events (youll capture those separately inthe risk register). To keep this from happening, ask yourself,Under normal working conditions, in the absence of anyexternal, discrete events, can we complete the work in thetime shown on the schedule?

Quantifying risk eventsThe third input you need for building your risk model is a setof agreed-upon quantified risk events. We say agreed-uponbecause its paramount that the scores captured in the riskregister really do represent the teams consensus.

Calibrate your scoring mechanism Before you capture risk events, you must make sure that the

categories for both probabilities and impact types are alignedwith the project size and complexity. If youre planning athree-year project, its not going to be very helpful to have fivecategories of schedule-impact ranging from one day to fivedays. Such short durations arent going to capture the realimpact of project risks on a three-year project.

Similarly, if you define too large a range of impact types rela-tive to the size of the project, youll end up artificially puttingthe majority of the risk events in the lower end brackets. Thatgives a skewed representation of risk distribution.

Also, take care if youre inheriting probability scales from HSE(health, safety, environmental) risk registers. These typesof risks tend to have extremely low probabilities, such as 1

in 10,000 chance of a fatality. Such probability ranges arentapplicable to project schedule risk.

A good rule of thumb for calibrating a schedule risk matrixis to take 20 percent of the project duration and make thisyour largest category. Then use an approximate exponentialscale moving downward, with the smallest category rounding



43/76


to team-friendly values. Heres an example for a 30-monthproject:

Very Low < 1 week

Low < 1 month

Medium < 3 months

High < 6 months

Very High > 6 months

How many categories do you need? A 5x5 risk matrix is common,

but some organizations prefer a 4x4 matrix. Even-numberedmatrices force risk workshop participants to choose either a lowor a high score rather than simply selecting the middle value.Weve also seen some projects use 7x7 or even 9x9 risk matrices,but we challenge the wisdom of this. Project teams have a hardenough time in risk workshops without being faced with 81different score combinations.

Separate the impact typesWhen youre capturing risk impacts, its important to scoreschedule impact separately from, say, cost or any otherimpact type you may also be tracking. Thats because a highschedule risk may not necessarily also be a high cost impact.

Similarly, though this isnt a hard-and-fast rule, very high-impact risks typically carry a low probability of occurrence,and vice versa. No, thats not always the case, but its a goodlitmus test when agreeing on probability and impact scores.

Track current andmitigated statesOne question youll run into when capturing risk events isThe score as of when? Theres no point in capturing risk

scores from the past, but theres real value in capturing thescore as of today, plus another score the team members feelthey can achieve in the future if they work to mitigate the risk.

By capturing two sets of data (current state and mitigatedstate), you can generate two risk models with comparisonsthat show how effective mitigation plans may be. This is a



44/76


great way to defend your mitigation strategy and justify addi-tional investment for funding your mitigation plans. Its a true

return on investment analysis of your plan to reduce your riskexposure!

Track the cost of mitigationMitigation doesnt come for free it takes time, effort, resources,and, of course, money. When you forecast your mitigated riskstates, be sure to consider the cost of mitigation. By incorpo-

rating this additional overhead into your model, youll have atrue forecast that accounts for the fact that youll be spendingtime initially in order to save time later. Again, this leads to aclearer ROI view of your mitigation.

About black swan risksBlack swans are risks that carry an extreme impact but also a

very low probability of occurrence. Theyre outside the con-trol of the project. Be careful about including these in yourrisk model, because they tend to skew your risk exposureunfairly in the direction of pessimism. A black swan examplemight be a global recession that wipes out your organization(of course, in that case your project risk register becomesirrelevant anyway!).

By the way, if you happen to be building a schedule risk model

in Perth, Australia, youll encounter puzzled glances if youintroduce outlier risks as black swans. Why? Because blackswans are the norm in Perth, not the outliers!

Accentuate the positivesRisks arent all bad. People dont always think in these terms,but the truth is, a risk event can present both a threat to theproject and an opportunity. It may feel counterintuitive whenbuilding a risk model, but be sure to give sufficient emphasisto brainstorming positive risks in the form of opportunities.After all, your team members are the experts on the projectand should be able to create opportunities for improvement,not just fight fires.



45/76


Risk Analysis After you capture your uncertainties and risk events, you

need to merge the risk events into your schedule. This isknown as risk mapping linking the identified risk events toactivities in the schedule. You need the help of team memberswho are extremely close to and knowledgeable about theschedule, or else this can be a painful process. Its often bestto do this exercise with a subset of the risk team (specifically,the lead planner and discipline leads).

When linking risk events, connect them to the earliest appro-priate activities in the chain of events, then let the logic inthe schedule reflect the knock-on effect. For example, whenlinking a risk of Customs delays risk event, map it to thedelivery of materials to site activity rather than the end ofconstruction. Of course, this risk will have an impact on con-struction, but let the knock-on effect from delayed deliverycascade through the construction activities. Youre trying to

pinpoint risk hot spots and bottlenecks so that you can fixthem right at the source of the trouble.

A risk analysis is typically a simulation, and the most commonis an approach known as Monte Carlo. It may seem intimi-dating at first, but a Monte Carlo simulation is actually verysimple. Youll execute a number of iterations, each one being astandard CPM analysis. The clever bit is that in each iteration,the activity durations vary depending on their uncertainty

ranges.

Add to this variation the fact that youll trigger risk eventsin each iteration. Run enough of these iterations and youllend up with a large sample population set, large enough todraw conclusions that are highly defendable. If you run 1,000iterations of a schedule risk Monte Carlo model, in effect youend up with 1,000 scenarios from which you can then deter-mine the most likely outcomes. Monte Carlo is a brute-force

approach that is really doing nothing more than simulatingthe execution of your project albeit simulating it thousandsand thousands of times over.



46/76


Risk ReportingWhy are you building a risk model and running your analysis?So you can gain insight into your risk exposure and under-stand what is driving this exposure. To help bring that insightinto focus, youll create schedule risk reports that fall intotwo categories: the whatand the why.The whatreports giveinsight into what is your risk exposure and what is your P50completion date. The whyreports explain why the exposure iswhat it is, and detail which events and/or activities are driving

this exposure.

The risk histogram (thewhat report)Use a risk histogram to report multiple risk exposure metrics,including those listed in the following sections.

Confidence level of achieving the S2 completion dateFigure 4-5 shows a project with a confidence level of only5 percent. That sure sounds like a risky project, doesnt it? Well,not necessarily. Confidence level can be a misleading metric.Confidence level is actually more driven by the complexityof converging logic in a schedule, rather than risk and uncer-tainty. Dont be alarmed to see your schedule completionconfidence level in the single digits.

Skeptical? Take a simple two-activities-in-parallel scheduleand apply a plus-or-minus five-day uncertainty spread toboth activities (each of which has 20-day deterministic dura-tions) and run a simple Monte Carlo simulation. You mightexpect the confidence level to be 50 percent, but its not evenclose! The chance of both activities finishing on time is actu-ally 50 percent times 50 percent, which equals 25 percent.Extrapolate this out across tens of activities with multiple

paths, and the confidence level quickly diminishes to singledigits.



47/76


Figure 4-5: The risk histogram (the whatreport).

P dateBased on your desired confidence level (such as 75 percentconfidence) you can determine the corresponding P date. The

example in Figure 4-5 shows a P75 date of 28 February com-pared to the S2 forecast of 24 January.

ContingencyContingency needs to be reported within the context of a con-fidence level, such as P75. Contingency is defined as the differ-ence between your S2 deterministic date and your P date. Inthis case, the P75 contingency is 35 days.

What does this number reveal? That youre 75 percent certainthat youll be no more than 35 days later than the 24 Januaryforecast. Adding contingency to a schedule is, in many ways, areactionary response to risk rather than a proactive means ofreducing risk. Contingency doesnt reduce your risk exposure,it simply absorbs it.



48/76


Risk rangeBy looking at the difference between the best-case scenario(P0) and the worst-case scenario (P100), you can establish arisk range. This is actually a much more valuable risk metricthan confidence level. It gives you context regarding the sizeof risk exposure.

Risk range factorTaking risk range a step further, compare the risk range to theremaining duration of the project. For example, a risk range

of three months relative to 30 months remaining equates toa 10 percent risk range factor. This gives sound insight intothe amount of variability looking forward that you are beingexposed to as a result of risk.

The risk tornado (the why report)The risk tornado(shown in Figure 4-6) reports what is causing

your risk exposure or contribution. Risk tornadoes can reportin multiple ways, such as criticality and schedule sensitivity,but these dont offer much true insight into actual durationcontribution.

Historically, metrics such as criticality have gotten a lot of thefocus. Criticality reports how many times an activity falls onthe critical path, with the idea being that the more times theactivity falls on the critical path, the more often it is going to

be a risk driver.

Problem is, criticality reports the frequency of being on thecritical path, but it doesnt give any indication of the size ordegree of impact it has on the critical path or the finish dateof the project. One activity can have a high criticality whilehaving only a couple of days impact on the project. Thats notas concerning as an activity that only falls on the critical path30 percent of the time, but when it does, it has a six-month

impact on the projects finish date.

The schedule contribution factoris a better metric. The schedulecontribution factor reports the biggest risk drivers in a sched-ule, and reports contribution to risk in terms of duration. It alsoseparates contribution from uncertainty and contribution from



49/76


risk events. Doing so clarifies whether it is the activity scope/certainty or indeed a risk event impacting the activity that

causes it to become a key risk driver.

Figure 4-6: The risk tornado (the whyreport).

Figure 4-6 shows not only which activities are the risk hot spotsbut also whether this is because of uncertainty or because ofspecific discrete risk events. This type of reporting helps deter-mine which risk events you should mitigate. More often thannot, the top risks in the risk register arent the ones that mostimpact the schedule.

Now Mitigate! Hurray! Your risk modeling is now almost complete. But

theres one more step. In order to understand the benefit ofyour planned mitigation strategy, you need to run a secondscenario using the mitigated risk scores. Compare this againstyour base model to determine the ROI of reduction of risk.

The example in Figure 4-7 compares an unmitigated risk sce-nario to the same project including mitigation. Mitigationsaved 26 days of delay!



50/76


Figure 4-7: Comparison of project risk with and without mitigation.



51/76

Chapter 5

S4: Acceleration andOptimization

In This Chapter

Accelerating the schedule

Setting the acceleration goal

Defining your criteria

Generating S4 scenarios

Benefiting from S4

Deciding when to conduct S4 analysis

Assessing the cost

So youve built an S3 P75 risk-adjusted schedule and, guesswhat? Your three-year forecast has jumped to three-and-a-

half years. All this diligence and improvement in your schedulebasis, and the expected completion date is now significantlylater than your original forecast.

Have no fear; all is not lost! Youre only partway through theschedule-development process. The next step is to explorealternate scenarios that better align with your original fore-cast. Is it possible to accelerate certain parts of the scheduleto regain some of the time lost to risk and uncertainty? Canyou assign additional resources in order to help accelerate?Can you conduct more work in parallel?

In this chapter, we discuss how you answer those questions.We demonstrate how you can set a new goal or target anddetermine whether its possible to achieve it (or at least movecloser).



52/76

Planning a Great Project For Dummies, Deltek Special Editi

planning a great project for dummies

Documents