Project Management Institute

Project management tools for modern project and portfolio management

Peter Berndt de Souza Mello, SpS, PMP, X25,
Victoria Shavyrina, PMP, Spider Project Team


In this paper, we will discuss proven tools and techniques that are used for corporate project management by many companies around the world. The topics discussed in this paper are supported by Spider Project software.

Corporate Project Management System Requirements

Project computer models must be based on the corporate standards. These standards must include WBS templates, typical fragnets, production norms, unit costs, material requirements per physical volume unit, and so on. Without these norms it is very difficult to estimate project plans and to measure resource performance.

Resource-constrained schedules need to be calculated, taking into account all limitations, including resource, financial, and supply constraints. Financial constraints are usual in project portfolio management. It is necessary to simulate not only expenses but also revenues, especially on the portfolio level. Portfolio management means the management of the portfolio cash flow, using Net Present Value and Internal Rate of Return in the decision-making process.

Resource management often includes assigning resources based on skills. The corporate scheduling software must support skill scheduling. Resources are always limited. If the software is used for project or portfolio resource management, then it is necessary to determine those activities that are truly critical. By “critical activities” we are referring to those that have zero float. If the execution of these activities will be delayed, then the project will finish later. Critical activities need to be determined, taking into account all schedule constraints, including resource, supply, and financial constraints.

Quantitative risk analysis increases the reliability of created plans. Our research showed that the probability of meeting project targets for projects in which risk analysis was not performed can be estimated to be 20 percent to 35 percent. Risk analysis and simulation can help to set project targets that have a high probability of being achieved.

Project and portfolio performance management tools must include obtaining those data that supply top management with the integrated performance measurement information. These methods and tools include earned value analysis, but there are other methods that must be used with or instead of earned value management. One of them is trend analysis. Project status does not give sufficient information for decision making. Only status plus trend can show if corrective action is necessary.

Performance archives are necessary for project performance analysis and potential legal actions. They are also necessary for restoring performance trends.

Organizing Project and Portfolio Data (Templates and Databases)

Data organization must also follow corporate standards that include the following:

  • Typical projects must use similar work breakdown structures (WBS); therefore there is a need for creating corporate WBS templates.
  • Project costs must have the same structure, and thus there is a need for creating cost breakdown structure and other cost grouping templates, including corporate cost accounts.
  • Corporate coding structure for resources, costs, activities, and so on shall be developed and used in all corporate projects.
  • Different projects use the same resources; therefore there is a need to create and use the same resource pools in all projects.
  • Resources of the same type share the same characteristics (e.g., rate, material consumption per work hour).
  • Activities of the same type have the same characteristics in all projects (e.g., unit cost, material requirements per work volume unit).
  • Typical resource assignments have the same characteristics in all projects (e.g., productivity, cost, and material requirements).
  • Specific use-defined project norms or rules must be applied to all projects of the organization.
  • Typical processes must be modeled in the same way in all projects. This can be achieved by creating the library of typical fragnets. Project fragnets usually describe typical processes and technologies that are used more than once. Creating project computer models using the corporate library of typical fragnets will help to avoid inconsistencies and assures that the project model follows corporate standards. A library of typical fragnets is a very important tool for the development of corporate culture and management standards.

Special Requirements

The main elements of any project computer model include:

  • Work, resource, and cost breakdown structures
  • Project activities
  • Activity dependencies
  • Resources assignments
  • Material requirements
  • Activity, resource, and lag calendars
  • Activity, resource, material, and assignment costs

In this section, we will describe special requirements for the description of these elements and other project parameters that are missed in many project management software packages.

Work, Resource, and Cost Breakdown Structures

It is very useful to have an opportunity to obtain project reports that aggregate project data different ways. For activity data, this can be achieved by using multiple WBS in the same project or project portfolio. Usually there is a need to use at least three WBS: those based on project deliverables, those based on project processes, and those based on responsibilities.

Resource breakdown structures (RBS) are especially important in the corporate project management. Matrix organizational structure determines the necessity of obtaining the reports on both project RBS and functional RBS. Portfolio computer model provides the information on resource usage (and corresponding costs) for the organization functional departments.

Cost breakdown structure defines organization cost accounts that will be used in all portfolio projects.

Activity Data

Usually project activities are characterized by their duration. Besides duration, it is frequently necessary to set the activity's physical volume of work. Activity volume can be measured in meters, tons, and so on, planned work hours, percentages, or any other units. Unlike activity duration, activity volume does not depend on assigned resources. By introducing activity volumes, we will be able to use corporate databases that define cost and material requirements per typical activity volume unit.

Activity Dependencies

All standard activity dependencies are of the “no-earlier-than” type. An activity can be performed at or after the start of the condition or at the finish of the condition. Strict dependencies do not need to be defined when an activity can be performed not only no earlier but also no later than the condition defined by activity dependency was met.

Sometimes it is necessary to set more than one link between activities. Besides the positive and negative time lags, it is useful to set volume lags, which is preferable in many cases.

Resource Assignments

Resource assignment may have its own characteristics, such as resource assignment productivity or production rate and assignment cost fixed or per unit of time or volume.

Besides the individual resources, one may set resource crews (we call them multi-resources) and resource skills (roles). Multi-resources are the settled groups of resources working together (e.g., a team, a crew, a car with a driver). Assigning multi-resources, one assigns all of its resources. At any moment, the multi-resource assignments can be reconsidered by changing the multi-resource set. It makes what-if analysis much easier.

If resources can do the same work, then they belong to the same skill set. Resources with the same skills are interchangeable, although they may have different productivities performing the same activities. One resource can belong to many skills. It is useful to be able to assign not individual resources but resource skills and let the software select the optimal individual resource assignments (skill scheduling).

Assigning resources to activities implies the notion of a team---a group of resources working on an activity together. The team can include individual resources, multi-resources, and skills. If more than one team is assigned, then resources belonging to the different teams work on an activity independently of each other. When the volume or duration of team assignment is not defined, the team will continue working until the work on the activity is completed. This approach allows simulation of shift work.

Resources can be assigned to activities part time. In this case, one will set percentage of assigned resources' utilization together with resource quantity (not just the total percentage calculated by multiplying percents and quantities, which leaves the necessary amount of resources unclear; two resource units with 50% utilization are equivalent to one resource unit used to its full capacity).

Another useful option is variable resource assignments. For example, you may define that the number of resources that may be used for a specified work assignment is between two and four, and that their workload should be not less than 40% and not more than 80%. In this case, activity will start if two units of assigned resource are available not less than 40% of the time, and the team may be increased if additional resources become available. After other assignments are finished, resources may apply more of their time to the specified assignment but not more than 80%.

Material Requirements

Resources are divided into two classes: renewable (human resources and mechanisms) and consumable (materials). Resources can consume materials in the process of their work. In addition, materials can be assigned to activities or resource assignments directly. In some projects, it is necessary to simulate not only material consumption but also production of resources and materials on activities and assignments.


The calendars must be set for all activities, resources, and time lags. Availability of all of these calendars is important for the proper project performance simulation.

Cost Data

Usually it is not enough simply to define activity and resource costs. It is necessary to know project expenses and revenues, what will be spent on wages, on machinery and equipment, on taxes, and so on. Sometimes it is necessary to allow for multiple currencies. For this reason, cost components need to be defined and assigned.

Besides setting the cost of an hour of renewable resource work and the cost of material unit, it is necessary to be able to set the cost directly for activities and assignments. People may be paid not only for the hours spent on the task but also for the quantity of work they have done. So it is necessary to set costs for resource assignments (fixed or per unit of volume). Cost of resource assignment is one example of setting contract costs for the project. You may need to get different reports on the groups of cost components, materials, and resources. That is why it is necessary to define cost, material, and resource centers as follows:

  • Material center can include any group of materials.
  • Resource center can include any group of resources.
  • Cost center includes selected cost components.

Project Archives

The planners should be able to store project versions and to analyze the progress in project execution, comparing current project and portfolio schedules not only with the baseline, but also with any previous version. It enables assessment of the progress in project execution for the last week, month, year, and so on, compared with the baseline. It makes it possible to recreate and to analyze trends of the project data.

Scheduling Capabilities

Project and portfolio scheduling capabilities of the corporate project management software must include

•  Project scheduling without taking into consideration the resource limitations

•  Project resource constrained scheduling (resource leveling)

•  Project scheduling that takes into account not only resource but also material (supplies) and financial limitations

In creating a project schedule, the software must also determine the following:

  • Classical and resource-constrained critical path and feasible time float for all project activities
  • Project and portfolio resource, cost, and material requirements for any time period

The problem of project schedule development without allowing for resource constraints has a correct mathematical solution (critical path method), which would be the same for all project management packages, provided that initial data are identical. All other problems are solved using different approaches and yielding different results.

Resource-constrained schedules produced by different project management software are different. The software that calculates shorter resource-constrained schedules may save a fortune for its users. That is why we pay most attention to resource-constrained schedule optimization.

The schedule stability is no less important, especially at the project execution phase. That is why our project management software, Spider Project, features an additional option: the support of the earlier project version schedule (keeping the order of activity execution the same as in the selected earlier project schedule).

Sample Project before Resource Leveling

Exhibit 1 -- Sample Project before Resource Leveling

Sample Project after Resource Leveling

Exhibit 2 -- Sample Project after Resource Leveling

The traditional notion of the critical path works only in case of unlimited resource availability. Let us consider a simple project consisting of five activities, as presented in Exhibit 1. Activities 3, 4, and 5 are critical. Activities 2 and 5 are performed by the same Resource A. Resource A is therefore overloaded.

Sample Project after resource leveling is shown in Exhibit 2. It is important to pay attention to activities that become critical. Now delaying each of the Activities 2, 3, and 4 will delay the project finish date. We call these activities resource critical and their sequence comprises resource critical path. Activity 2 is not linked with Activities 3 and 4. Unlike traditional Critical Path, resource critical path may consist of activities without logical links. The sequence of their execution may be defined by resource limitations.

In many projects, it is also necessary to simulate financing and production and to calculate project schedules, taking into account all limitations (including the availability of renewable resources, material supply, and financing schedules). True critical path should account for all schedule constraints, including resource and financial limitations. We call it “resource critical path” to distinguish it from the traditional interpretation of the critical path definition.

The calculation of resource critical path is similar to the calculation of the traditional critical path with the exception that both early and late dates (and corresponding activity floats) are calculated during forward and backward resource (and material and cost) leveling. This technique permits resource-constrained floats to be obtained. Activity resource-constrained float shows the time period for which activity execution may be postponed without delaying project finish within the current schedule with the set of resources available in this project. It appears that by adding financial and supply constraints to the critical chain definition as well as the way in which the critical chain is calculated, we obtain something very similar to the resource critical path.

Project and Portfolio Success Criteria

Construction Project before Financial and Supply Leveling

Exhibit 3 -- Construction Project before Financial and Supply Leveling

If project success criteria are set as finishing the project on time and within budget, then proper decision making will be complicated. Project managers will not be able to estimate the effect of their decisions to spend more money but to finish the project earlier. If a project is business oriented, then this project must have business criteria for its success or failure.

One potential option is to set the profit that should be achieved at some point in time based on the forecast of the revenues that will be obtained after the project delivers its results. Such a success criterion will permit time and money-making managerial decisions to be weighted.

Exhibit 3 shows a project schedule that is calculated without allowing for project financing and supply restrictions. In this schedule, periods occur during which a project has no money with which to proceed and necessary materials (wall frames) are absent. But if the project manager finds enough money and materials, then project total profit to some imposed date will be close to $225,000.

However, if project resource, financing, and supply-constrained schedule are calculated, total profit is more than $35,000 lower (see Exhibit.4). Maybe it is reasonable to borrow money or to find some other solution?

Construction Project after Financial and Supply Leveling

Exhibit 4 -- Construction Project after Financial and Supply Leveling

To be able to weight options and to select the best, it is necessary to simulate not only expenses but also financing and revenues. This approach is especially important for project portfolio management.

The simplified approach that works similarly is to define the cost of the day. If the project finish is delayed, this means that the money loss is calculated by multiplication of the delay time (in days) by the cost of the day. The same approach is applied to project execution acceleration. As a result, instead of several success criteria it is possible to set one success criterion: project total cost.

Risk Analysis and Success-Driven Project Management

Our experience of project planning shows that the probability of successful implementation of deterministic project schedules and budgets is very low. Therefore, project and portfolio planning technology should always include risk simulation to produce reliable results.

Risk simulation may be based on Monte Carlo simulation or use the three-scenario approach.

A project planner obtains three estimates (optimistic, most probable, and pessimistic) for all initial project data (e.g., duration, volumes, productivity, calendars, costs). Risk events are selected and ranked using the usual approach to risk qualitative analysis. Usually we recommend including risk events with the probability exceeding 90 percent in the optimistic scenario, exceeding 50 percent in the most-probable scenario, and all selected risks in the pessimistic scenario. The most probable and pessimistic project scenarios may contain additional activities and costs due to corresponding risk events and may employ additional resources and different calendars than the optimistic project scenario. As a result, project planner obtains three expected finish dates, costs, and material consumptions for all major milestones. These are used to rebuild probability curves for the dates, costs, and material requirements.

By defining the desired probabilities of meeting project targets, a project planner obtains the desired finish dates, costs, and material requirements for any project deliverable. If the targets were approved, then it is necessary to calculate the probabilities of meeting required project targets. If they are reasonable, then they may be accepted. The probabilities of meeting approved project targets are what we call success probabilities. These targets may include all project parameters that will be controlled (profit, expenses, duration, material consumption). Target dates do not belong to any schedule. Usually they are between the most probable and pessimistic dates. A set of target dates and costs (analogue of milestone schedule) is the real project baseline. But baseline schedule does not exist. We recommend using an optimistic scenario schedule for setting tasks for project implementers and managing project reserves.

In Spider Project, the project planner obtains not only the set of target dates, but also a critical schedule: a project schedule calculated backward from target dates. The difference between current and critical dates shows current schedule contingency reserves (buffers). There are time, cost, and material buffers that show contingency reserves not only for a project as a whole (the time buffer may be considered as the analogue of critical chain project buffer), but also for any activity in the project schedule.

The best way to measure project performance is to estimate what is occurring with the project success probabilities. If they increase, it means that contingency reserves are spent slower than expected; if they decrease, it means that project performance is not as good as was planned and corrective actions are needed. Success probabilities may change due to

  • Performance results
  • Scope changes
  • Cost changes
  • Risk changes
  • Resource changes

Thus success probability trends reflect not only project performance results, but also what is occurring around the project. We consider success probability trends to be the truly integrated project performance measurement tool. Success probability trends may be used as the only information about project performance at the top management level because this information is sufficient for performance estimation and decision making.

We call the described methodology success-driven project management. On the corporate level, it is very useful to know trends and current probabilities of meeting targets for all portfolio projects.

Project Portfolio Management

Project portfolio management includes creating portfolio schedule, taking into account

  • Project priorities
  • Resource constraints
  • Supply constraints
  • Financial limitations

Projects that are included into portfolio shall increase portfolio value. The value may be rather complex. One simple example is portfolio NPV or IRR.

Shorter project schedules are usually the best. This is not always true for portfolio scheduling. The schedule in which the last project finishes later but the first project finishes earlier is frequently more attractive because the profits are achieved earlier and it may lead to larger portfolio NPV and IRR. We recommend applying project priorities and finding the best priority order that leads to better portfolio value.

Corporate resources are always limited. By adding a new project to the portfolio, we may postpone other projects. It is not easy to estimate if adding new project will increase or decrease portfolio value. Only by comparing portfolio schedules before and after adding a new project can we decide if the project shall be included in the portfolio.


  • Corporate project and portfolio management system must:
  • Organize the data in a way that supports proper resource work simulation and application of corporate norms and standards.
  • Use a set of reference books and the fragnet libraries that are obligatory for creating project computer models.
  • Calculate resource critical path and resource-constrained floats for every project and project portfolio.
  • Assess and simulate project and portfolio risks.
  • Define project and portfolio success and failure criteria that reflect achieving company business goals.
  • Define project and portfolio targets (and corresponding contingency reserves) that may be achieved with reasonable probabilities.
  • Regularly recalculate the current probabilities of meeting project and portfolio targets during execution and analyze success probability trends. Negative success probability trends require applying corrective actions.
  • Apply programs and projects priorities creating a portfolio schedule to increase Portfolio Value and to avoid multi-tasking.
This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2008, Vladimir Liberzon, Peter Mello, Victoria Shavyrina
Originally published as a part of 2008 PMI Global Congress Proceedings – São Paulo, Brazil



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