project control methodologies

7/29/2019 Project Control Methodologies

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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

[email protected]

Thank you!

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