From Russia with love
truly integrated project scope, schedule, resource and risk information
Russell D. Archibald, PMP, Archibald Associates
The need for planning and control information that integrates project scope, schedule, resources, and risk has long been recognized as important for effective project planning and control. However, most of the current methods and supporting software packages do not satisfy this need properly. Developments and experience over a ten year period in Russia have produced a set of methods that does truly integrate scope, schedule, resource, and risk information. This paper describes the proven Russian methods that are called Success Driven Project Management (SDPM) and are used to satisfy this need, and compares them with more widely used Western methods, including earned value and the critical chain approach. (Archibald 2003, pp. 361-377).
SDPM is based on a set of indicators measuring project performance and forecasting its final success. This methodology is supported by software tools capable of supplying the project management team with the following information.
During the planning stage:
- Project target dates, costs and material requirements that could be achieved with the user defined probability.
- Probability of achieving implied project (phase) goals (scope, time, cost, and material requirements) – “success probability”.
- Time, cost and material contingency reserves that should be assigned to support achieving project goals with the necessary or implied probability.
During execution and control:
- Current probability of achieving various project goals.
- Success probability trends that could be used for determining necessary corrective actions (it is worth mentioning that these trends depend not only on project performance but also on changes in project risk characteristics).
- Current contingency reserves.
To be successful as a business enterprise the project usually should be finished as soon as possible with the minimum budget necessary to achieve the project goals. A contradictory task is to develop a project plan that could be reliably executed that guarantees that the planned project dates and costs will be achieved with 100% probability. But there is a danger that this project plan will not be competitive. In developing a realistic, competitive project plan the manager chooses the desired probability of project success to make its successful execution probable but still attractive to the project stakeholders. The suggested, preliminary project plan is then negotiated and other target dates and costs could be proposed and evaluated. The project manager can then calculate the probabilities of successfully achieving the proposed, agreed target dates and costs, thus enabling a well-informed decision whether or not to proceed with the project as planned.
During project execution the project manager should control the current success probability and its trends. This information is the most useful for estimating project performance and deciding if and what corrective action is necessary.
The SDPM methodology is based on the resource critical path approach. This approach has common features with the Critical Chain theory and includes
- Calculating the critical path taking into consideration all schedule constraints including resource and financing constraints.
- Calculating resource constrained activity floats (analogue of the CC feeding buffers).
- Calculating resource constrained assignment floats and determining critical resources.
- Project risk simulation and calculation of the success probabilities
- Calculation and management of the contingency reserves (analogue of CC project buffer).
By controlling current values and trends of the project success probabilities, the project managers obtain powerful tools that make project performance analysis very informative and even easier than the traditional Earned Value methods.
Integration Need and Methods
Need for Integrated Information
Effective project planning and control requires that the information regarding project scope, schedules, resources, finances and related risks be integrated at detailed and summary levels. This requirement has been recognized for many years but it has not often been achieved in practice.
There is a need for the project performance measurement tools that:
- Supply managers with reliable information on the project performance status taking into consideration not only project performance results but also project risks and uncertainties,
- Motivate project managers to execute first those activities that are most risky. If the most risky activities are executed as soon as possible then the project completion cost will be minimized.
As we will show, the methods used by most of the currently available project management packages do not provide truly integrated management information. The methods described here reflect over 10 years of practical application and experience in Russia.
Integration Methods Used
Integrated scope, schedule, financial and risk management for projects is achieved in the SDPM approach using these methods:
- Scope is defined systematically using appropriate breakdown structures that interrelate all project information. The work scope or volume is estimated for each task, work package, or activity, together with the types of resources required and the planned rate of usage or resource productivity for each activity.
- Sequential, logical dependencies of work and deliverables are defined using appropriate network planning methods.
- Resources are:
- a) defined as consumable and renewable; they can be utilized and produced on project activities;
- b) estimated as independent units, units in teams or crews, or interchangeable units within assignment pools;
- c) assigned to project activities;
- d) considered as constraints when their limits of availability are reached in calculating the project critical path, in both forward and backward pass calculations.
- Activity durations are calculated, when appropriate, by combining work scope or volume with resource usage or productivity rates.
- Risks are calculated by simulating risk events and using a range of three estimates where appropriate for 1) work scope and volume, 2) resource usage and productivity rates, 3) activity duration when estimated directly, and 4) calendar variation for weather and other factors, to produce predicted probabilities of meeting the desired target schedule dates and budgets.
- Project schedules are produced in the usual manner by processing the network plans, but most importantly the true critical path is calculated to reflect logical and all schedule constraints, including resources, in both the forward and backward pass calculations of the network plans. This has become known as the resource critical path (RCP) to emphasize that resource constraints have been used in determining which activities are truly critical to project completion, and in the calculation of available float or allowable delay.
- Actual expenditures of time, money, and resources are compared with plans, schedules and budgets to enable effective project monitoring and control.
- The current probabilities of success in all areas (schedules, resources, financial) are calculated, and their trends are determined and presented graphically through analysis of frequently revised and retained project plans. Initially the desired targets for project dates, costs, and material or other resource requirements are calculated based on the desirable probabilities set by the project manager and planner. If the target data are set then the system calculates and the project planner evaluates the probability of their successful achievement.
Discussion of Unique SDPM Methods
Several of these eight methods are well known to project management practitioners and need no further discussion. However, the methods that are believed to be unique to the SDPM approach require further comment.
Systematic Project Scope Definition
The well-established concept of systematically breaking down a project to produce a project/work breakdown structure P/WBS provides the primary means for correlating project scope, schedule, resource, cost and risk information and summarizing it for analysis and management purposes. Rather than attempting to produce only one project/work breakdown structure that serves every purpose on a given project, the approach described here allows the use of a number of different structures, each designed for a specific purpose. These are used to break down and summarize project information in a variety of ways, such as by life cycle phase, deliverables, physical area, assignment of responsibilities, functional type of work, cost account, contract or subcontract, and others. The work scope or volume is estimated for each activity, together with the types of resources required and the planned rate of usage and productivity for each.
Resource Information and Analysis
Resource types include:
- Consumable: materials, supplies and other expendables.
- Renewable: labor, equipment, facilities.
The resources required to execute each activity are identified and estimated in units (individual people with specified skills and/or experience levels, equipment, machines, and so on), teams or groups of particular resource units (multi-resources), or assignment pools of interchangeable resource units that may have different productivity, cost and other features.
Projects are often planned (especially in construction and manufacturing) using federal, local, industrial or corporate norms and standards. These norms usually refer to resource productivity for certain activity types, with costs and materials per unit of activity volume of work. Usage of these norms affects the planning and definition of project activities.
Activity Duration Calculation or Estimation
Activity volume can be measured in meters, tons, etc., planned work hours, percents or any other measurable units. Volume is often used as the initial activity information instead of estimated activity duration. If the assigned resource productivity is defined in volume units per hour, then the activity duration can be calculated during project scheduling. Activity volume does not depend on assigned resources but the duration obviously does. Calculation of activity duration based on assigned resource productivity has many advantages. We have already mentioned the possibility of applying corporate norms. By changing the expected resource productivity we can change the planned duration of all activities of a specified type. This is especially useful to forecast uncertainties related to the project duration. When it is not feasible or appropriate to calculate activity duration based on work volume it is estimated directly in time units.
Project Schedules and the Resource (or True) Critical Path/RCP
A Guide to the Project Management Body of Knowledge® (PMI 2000, p. 200) defines the critical path as those activities with float less than or equal to a specified value, usually zero. Float is the amount of time that an activity may be delayed from its early start without delaying the project finish date. Early start is the earliest possible point in time at which the uncompleted portions of an activity (or the project) can start, based on the network logic and any schedule constraints.
The true critical path must be based on all schedule constraints. Project schedule constraints include resource constraints, finance and supply constraints, calendar constraints and imposed dates. Activity float should be calculated with all of these schedule constraints as well as the network logic taken into account. However, most project management software packages calculate late starts based on the network dependencies while completely ignoring the availability of resources. The resulting total float is not the true activity float as defined by the PMBOK Guide®. When all schedule constraints (including resource, financing and supply constraints) are included in the activity float and the critical path calculation we call the results activity resource floats and the resource critical path (RCP) to distinguish it from the traditional interpretation of the critical path definition that ignores these resource and other constraints. Activity resource float has one major advantage over the total float calculated by most PM software. This advantage is feasibility. Traditional total float shows the period for which the execution of an activity may be postponed if project resources are unlimited. Activity resource float shows the period for which activity execution may be postponed within the current schedule with the set of resources available to this project at that particular time.
It appears that by adding financial and supply constraints to the critical chain definition as well as the method of calculating the Critical Chain the result will be something very similar to the RCP.
Risk Simulation and Success Probability Analysis
Our experience in project planning shows that the probability is very low of successful implementation of deterministic project schedules and budgets based on single estimates of the most probable activity duration, material requirements and costs. Therefore project planning technology should always include risk simulation to produce reliable results. As an example of how this can be accomplished we will describe the approach to project planning and risk simulation that is supported by Spider Project, a widely used software package developed in Russia over the past 10 years.
The project planner obtains three estimates (optimistic, most probable and pessimistic) for all initial project data. These data are used to calculate optimistic, most probable and pessimistic project schedules and budgets. The most probable and pessimistic project versions will often contain additional activities and costs and may employ other resources and different calendars than the optimistic schedule. Based on optimistic, most probable and pessimistic project (phase) data the probability distribution is created for project (phase) finish date, cost, material requirements.
The planner defines the desirable probabilities of meeting target dates, costs, and material consumption rates for the main elements of the primary project work breakdown structure. Based on these probabilities, the package calculates corresponding desired project target dates, costs, and material requirements. These desired data form the basis for contract or other authorizing negotiations and decision making.
Negotiations may result in establishing new target data. Project risk simulation results help the negotiations by answering the questions on probability to meet any restrictions on time and on budget. The probability of meeting target data (cost, time, quantity) is called the success probability. Success probability is the best indicator of the current project status during project execution. In addition, the package calculates the target schedule. The target schedule is the backward project resource constrained schedule using the most probable activity duration, resource and material requirements, costs, and target dates of the project phase completion.
Contingency reserves or buffers for time, cost, or materials are calculated as the difference between activity start times (cost, material requirements) in the optimistic and target schedules.
Success Probability Trends
The current success probabilities are calculated each time the project is analyzed and the results are stored. The project performance status can be estimated by the current level of success probabilities and by their trends. The negative trend of the success probability shows that corresponding parameter contingency reserves utilization rate is higher than expected and the corrective action is necessary. Vice versa – the positive trend of the success probability shows that the recent project performance is satisfactory.
Current success probabilities may change not only due to performance deviations but also because risk estimates were changed, causing changes in pessimistic and most probable project versions. This can cause changes in the probability distribution curves and thus the changes in current success probability data. Using success probability trends as the estimate of project performance, senior management encourages project managers to solve uncertainties as early as possible. Solving uncertainties can increase current success probabilities even when this involves activity finish delays and cost overruns. Postponing execution of problem activities leads to negative trends in success probabilities. This attribute of success probability trends as the performance measure is especially useful in new product development project management.
Illustration Using an Actual Project
Our forum presentation and discussion at the PMI Global Congress-Europe in The Hague will include illustration of the application of SDPM to an actual project. Because of the size of the documents and the amount of detail included it is not feasible to include this illustration in this paper. Exhibit 1 shows a simple illustration of how the success probability trends are presented.
Exhibit 1. Illustration of Success Probability Trends for a Sample Project
The project schedule in the Exhibit 1 is compared with the baseline and success probability trends below the Gantt chart show that the project will be late though under budget. In this project the expensive activities were executed faster than planned and the less expensive activities – slower.
Success Driven Project Management and Earned Value Analysis
Success Probability trends show current project status and performance problems taking into consideration not only performance results, but also network dependencies and project risk evolutions. Other integrated methods like Earned Value Analysis do not account for network logic and project risks.
Exhibit 2. Cost and Schedule performance indexes trends for a Sample Project
Exhibit 2 shows trends of Cost and Schedule Performance Indexes for the project presented in the Exhibit 1. Notice that Schedule Performance Index exceeds 100% on August 11, though at that moment the probability of meeting baseline finish date is equal to zero as shown in Exhibit 1. The Earned Value Management approach to the project performance analysis is not totally integrated – it considers sunk costs but not network logic dependencies, project risks and resource performance.
Earned Value Analysis problems could be illustrated considering the simple project consisting of only 3 activities shown in Exhibit 3. Activities 1 and 3 should be performed by the same resource.
Exhibit 3. Sample Project Gantt Chart
If the project execution will start from the activity 3 as shown in the Exhibit 4 then the project finish date will be delayed though SPI for this project will be perfect (10 or 100% after the first week) project timely performance became impossible.
Exhibit 4. Sample Project performance status
Success Driven Project Management and the Critical Chain
The described integrated approach and the critical chain (Goldratt, 1997) method obviously have a lot in common:
- The resource critical path is the same as the critical chain.
- Therefore the critical chain “project buffer” may be regarded as an analogue of the “contingency time reserve”.
- The critical chain “feeding buffers” are similar to our “resource floats.”
- Both approaches recommend using optimistic estimates for setting the task schedules for project implementers.
SDPM has been used in Russia for many years and methods and software tools for calculating RCP (and Critical Chain), contingency time reserves (reasonable project buffers), and resource floats (feeding buffers) are widely used in construction, software development, telecommunications, defence, ship building and many other application areas. The Critical Chain approach is more qualitative than quantitative. Success probability trends show if the project time and cost reserves for a given phase were spent faster or slower than expected. This is believed to be more effective than trying to estimate qualitatively whether or not the critical chain project buffers were properly utilized.
But there are differences, too:
- We cannot agree with the critical chain theory's assumption that one should always avoid multitasking.
- Usually there are many subcritical activities belonging to the different network paths and even minor delays in the execution of subcritical activities can lead to the changes in the RCP. This comes into conflict with the critical chain theory's assumption that the critical chain never changes during the project execution.
- The assumption that only one project drum (in our terminology - critical) resource exists is also dubious. Our experience of using RCP since 1992 shows that RCP may change during project execution and the critical resources are different during the different phases of the project lifecycle.
Success Driven Project Management Implementation
Here are several recommendations for implementing the integrated information methods described. We call this approach success driven project management to emphasize that the focus is on the actions needed to successfully complete the project on schedule and within budget.
1. Simulate project risk events and uncertainties to obtain probability distribution of project costs, finish dates and material requirements.
2. Determine the desired level of the probability to meet project finish dates, costs and material requirements and calculate the corresponding parameters.
3. Use this data to negotiate realistic target finish dates, costs and material requirements with the approving authorities.
4. Set target finish dates, costs and material requirements as the result of these negotiations. Calculate the probabilities of meeting target parameters (success probabilities).
5. Set optimistic targets for the project implementers and manage the calculated contingency reserves.
6. Control risks, regularly revise risk simulation results and recalculate success probabilities taking into consideration actual progress data, corrective planning changes and risk estimation updates.
7. Use success probability trends as the most valuable indicator of the project performance status. If the trends are negative then corrective actions are necessary regardless of the current level of success probabilities.
The described methods have been proven to be practical on a large number of projects in various industries over a period of more than ten years. By truly integrating scope, schedule, resource, financial, and risk information the likelihood of project success is increased significantly. Success driven project management can be applied without restriction on essentially all types of projects.
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