Introduction
In this paper we will discuss Corporate Project Management System tools and techniques. These tools include:
- Corporate dictionaries:
- Project, Phase, Activity, Resource, and Department coding structure
- Cost components
- Cost accounts
- Activity and Resource types
- Corporate databases:
- Resource Crews
- Resource Skills
- Cost and Material requirements per volume unit of typical activity
- Resource productivity on typical assignments
- Cost and Material requirements per time or volume unit of typical assignment
- Corporate Libraries and Templates:
- Library of typical project fragments
- WBS templates
- CBS templates
- RBS templates
- Document templates
- Contract templates
- Risk Register
- Issue Register
- Other templates
Some of these tools, like Document and Contract templates, refer to implementation of standard approaches to typical processes, others refer to project computer modeling. In this paper we will discuss corporate computer modeling tools and techniques.
The project and portfolio computer model will include the following features:
▪ It will be based on the corporate standards (dictionaries, databases and libraries),
▪ It will calculate resource constrained schedules taking into account all limitations including resource, financial and supply constraints,
▪ It will take into account project priorities,
▪ It will be able to assign resources basing on their skills,
▪ It will calculate Resource Critical Path and feasible time, cost and material reserves,
▪ It will simulate expenses and revenues that allow management of project and portfolio cash flows
▪ It will simulate project risks and uncertainties,
▪ It will supply top management with the integrated information that reflects not only status data but also trends of project and portfolio performance that are necessary for timely decision making,
▪ It will keep project and portfolio history.
Tools and techniques discussed in this paper are used by many enterprises and have proven their efficiency.
Organizing data
Requirements
Corporate project management systems have specific requirements that are vital for successful implementation. It is necessary to be sure that:
- Project costs have the same structure in all projects (same cost components are used),
- Cost Accounts are the same in all projects,
- The same Project, Phase, Activity, Resource, and Department coding structures are used in all projects,
- Resources that are used in all projects belong to the corporate resource pool,
- Resources of the same type share the same characteristics (like rate, material consumption per work hour),
- Activities of the same type have the same characteristics in all projects (like unit cost, material requirements per work volume unit, etc.),
- Typical resource assignments have the same characteristics in all projects (like productivity, cost and material requirements),
- Typical processes are modeled in the same way in all projects.
These, and project performance simulation requirements, define the necessary data structures that have some distinctions described below.
Data Structure
The main elements of any project computer model are project activities, activity dependencies, resources and their assignments, calendars, costs, and Work, Resource and Cost Breakdown Structures.
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, etc., planned work hours, percents or any other units. Activity volume is often used as initial activity information instead of duration. If assigned resource productivity is defined in volume units per hour then activity duration may be calculated during project scheduling. 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 activity volume unit.
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. The problem with time lags is that if the preceding work has started but is executed slower than it was planned, the time lag may be satisfied earlier than the planned volume of work is fulfilled. The time lags call for special attention and regular adjustments.
Resources will be divided into two classes:
- renewable (human resources and mechanisms) and
- consumable (materials).
This way we will be able to assign materials to resources defining their consumption per resource work hour or work volume unit. Example: a car consumes gas. 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, etc.). If multi-resource is assigned to activity it means assignment of all resources comprising the multi-resource. Resources sharing the same skills comprise Resource Assignment Pools. Resources belonging to the same Pool are interchangeable though individuals in a pool may have different productivities performing the same activities.
The calendars will be set for all activities, resources and time lags. Availability of all these calendars is important for the proper project performance simulation.
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 pools.
If the activity's initial information is work volume, one should set the productivity of at least one of the assigned resources, to enable the calculation of the work duration. It should be noted that, when the pools are assigned, activity duration can be calculated only in the process of scheduling. In assigning resource assignment pool, one should either set a total number of pool resources necessary for the execution of activity or their aggregate productivity.
Example: a pool consists of the dump trucks with different carrying capacity. One may set a number of trucks necessary for the execution of this activity or the aggregate productivity (dependent on capacity) of assigned trucks.
If more than one team is assigned then resources belonging to the different teams work on an activity independently of each other. One may set the volumes or duration of work for each team, but it is not obligatory. When the volume or duration of 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, that 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 – variable resource assignments. Example: You may define that the number of resources that may be used at some work is between 2 and 4, and 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 their time, and the team may be increased if additional resources become available. Finishing other assignments resources may apply more of their time to the specified assignment but not more than 80%.
Resources can consume materials in the process of their work. Besides 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.
Usually it is not enough just 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, etc. Sometimes it is necessary to allow for multiple currencies. So there is a need to define and assign cost components.
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 by the quantity of work they have done. It means that labor resource cost that is usually defined by the cost of work hour is not enough. Frequently it is necessary to set costs for resource assignments (fixed or per unit of volume). Cost of assignment is one example of setting contract costs for the project.
Setting costs for the components of the project expenses, materials and resources 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 Breakdown Structures or Centers:
- Material center can include any group of materials.
- Resource center can include any group of resources.
- Cost center includes selected cost components.
It is also very useful to have an opportunity to get project reports that aggregate project data different ways. Usually we use at least three Work Breakdown Structures in our projects: based on project deliverables, project processes and responsibilities. The use of multiple breakdown structures allows not only to obtain different project reports as seen from the different standpoints, but also to provide that the project model is truly comprehensive.
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 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.
Another feature that is necessary for the proper project control is an ability to keep project history. 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 to assess the progress in project execution for the last week, last month, last year, compared to the baseline, etc.
Corporate Databases (Reference Books)
Corporate project management has to be based on the corporate standards. These standards will include not only processes and document templates that should be used in all projects but also estimates of the typical activity and assignment parameters. Activities, resources and assignments belong to the same type if they share the same characteristics like unit costs, material consumptions per work volume unit, productivity, etc.
Corporate databases (Reference books) that should be created for activity and assignment types should include at least:
- Activity cost and material requirements per activity type volume unit,
- Resource assignment cost and material requirements per assignment type volume unit,
- Resource assignment productivity,
- Assignment work load.
Fragment Library
Another necessary thing – to create a library of typical project fragments. Project fragments usually describe typical processes and technologies that are used more than once. Creating project computer models using the corporate library of typical fragments will help to avoid inconsistencies and assures that the project model follows corporate standards. A library of typical fragments is a very important tool for the development of corporate culture and management standards.
An interesting side effect of the use of typical fragment library is the technology of work breakdown structure development not top-down, as usual, but bottom-up. In such structure typical fragments serve as work packages. Since we commonly use several Work breakdown structures top-down and bottom-up technologies are used in parallel, complementing each other.
Resource constrained scheduling and Resource Critical Path
The problems solved with the help of project management software usually include:
- Project scheduling without the resource limitations taken into the consideration,
- Project resource constrained scheduling (resource leveling),
- Determination of critical path and time float for project activities,
- Determination of the project requirements for finance, materials and equipment for any time period,
- Determination of renewable resources utilization in time,
- Risk analysis and development of the project schedule and other project parameters allowing for the risks,
- Project performance measuring,
- Project performance analysis and forecasting main project parameters.
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 PM packages, provided that initial data are identical. All other problems are solved using different approaches and yielding different results.
Resource constrained scheduling
Resource constrained schedules produced by different PM software are different. The software that calculates shorter resource constrained schedules may save a fortune to 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's 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 selected earlier project schedule).
Resource Critical Path
Traditional notion of Critical Path works only in case of unlimited resources availability.
Let us consider a simple project consisting of five activities, presented at Exhibit 1.
Activities 2 and 5 are performed by the same resource
Exhibit 1. Sample schedule before leveling
At Exhibit 2 you may see the results of resource constrained scheduling (leveling). Please pay attention to activities that became critical (red on the diagram). Now delaying each of the activities 1, 2 and 5 will delay the project finish date. And though these activities are not linked we call them Resource Critical and their sequence comprises Resource Critical Path.
In many projects it is necessary to simulate financing and production, and calculate project schedules taking into account all limitations (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 (RCP) to distinguish it from the traditional interpretation of the critical path definition. The calculation of RCP 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 to obtain resource constrained floats. Activity resource constrained floats have one large advantage over the total floats calculated by most PM software. This advantage is feasibility. Activity resource constrained float shows the period for which activity execution may be postponed within the current schedule with the set of resources available in this project.
Exhibit 2. Sample schedule after leveling
It appears that by adding financial and supply constraints to the Critical Chain definition as well as the way of the Critical Chain calculation, we will obtain something very similar to RCP. Thus the proven technology of project management based on RCP that is described further may be of particular interest for the Critical Chain theory supporters.
Project Success Criteria
If project success criteria are set as finishing project in time and under 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 some project is business oriented then this project has to have business criteria of its success or failure. One of potential options – to set the profit that should be achieved at some point in time basing on the forecast of the revenues that will be obtained after the project will deliver its results. Such success criterion will permit to weight time and money making managerial decisions.
Exhibit 3. Project model before material and cost constrained scheduling.
At Exhibit 3 you may see the project schedule that is calculated without allowing for project financing and supply restrictions. There are periods when project has no money to proceed and necessary materials (wall frames) are absent. But if project manager will find enough money and materials then project total profit to some imposed date will be close to $219,000.
Exhibit 4. Project model after resource, cost and material constrained scheduling
If to calculate project resource, financing and supply constrained schedule than total profit will become more than $25,000 less. Maybe it will be reasonable to borrow money or to find some other solution? To be able to weight options and to choose the best it is necessary to simulate not only expenses. This approach is especially important for portfolio management.
Risk Simulation
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 three scenarios approach that will be described further. Monte Carlo simulation is very time consuming and not practical for the large projects. Current practice of its implementation mostly do not consider correlation between activity duration and cost estimates that exists if activities are performed by the same resources, do not consider risk events that may change a set of project activities. Even if everything is properly simulated the number of necessary iterations is too high for receiving reliable results in the reasonable time. A project planner may be happy with the probability estimates that has plus or minus 10% accuracy but only if the error will be stable. If it may change from one calculation to another then these estimates can not be used as performance management tool.
Risk Simulation – three scenarios approach
A project planner obtains three estimates (optimistic, most probable and pessimistic) for all initial project data (duration, volumes, productivity, calendars, costs, etc.).
Risk events are selected and ranked using the usual approach to risk qualitative analysis. Usually we recommend to include risk events with the probability exceeding 90% in the optimistic scenario, exceeding 50% in the most probable scenario, and all selected risks in the pessimistic scenario. These data are used to calculate optimistic, most probable and pessimistic project schedules and budgets. 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 the result project planner obtains three expected finish dates, costs and material consumptions for all major milestones. They are used to rebuild probability curves for the dates, costs and material requirements. Defining desired probabilities of meeting project targets a project planner obtains desired finish dates, costs and material requirements for any project deliverable.
Success Probabilities
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. Probabilities to meet approved project targets 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 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 to use optimistic schedule for setting tasks for project implementers and manage project reserves. Project planner obtains not only the set of target dates but also a critical schedule – a project schedule calculated backward from target dates. Usually this schedule is based on most probable estimates of activity durations and the difference between current and critical dates shows current schedule contingency reserves (buffers).
At Exhibit 5 critical schedule is shown in blue.
There are time, cost and material buffers that show contingency reserves not only for a project as a whole (analogue of Critical Chain project buffer) but also for any activity in the optimistic project schedule. Time buffer for activity is defined as the difference between activity starts (finishes) in the current and critical schedules. During jroject execution it is necessary to estimate if these buffers are properly utilized.
Exhibit 5. Results of risk simulation
Success Probability Trends
The best way to measure project performance is to estimate what is going on with the project success probabilities. If they raise it means that contingency reserves are spent slower than expected, if they drop it means that project performance is not as good as it was planned and corrective actions are needed. In any case if the project meets project targets then corresponding success probabilities will reach 100% before project finish.
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 going on around the project. We consider success probability trends as the really 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.
Exhibit 6. Example of Success Probability Trends
If project performance is estimated by success probability trends then project managers are encouraged to resolve uncertainties ASAP. This can increase success probabilities even with activity finish delays & cost overruns.
Postponing problem activities leads to negative trends in success probabilities.
This attribute of success probability trends is especially useful in new product development project management.
On the corporate level it is very useful to know trends and current probabilities of meeting targets for all portfolio projects.
Conclusions
Corporate Project Management requires implementing special tools and techniques that include:
▪ Organizing data in a way that supports proper resource work simulation and application of corporate norms and standards.
▪ Creating a set of reference-books and the fragment libraries that are obligatory for creating project computer models.
▪ Calculating Resource Critical Path and resource constrained floats for every project and project portfolio.
▪ Risk assessment and simulation.
▪ Defining project success and failure criteria that reflect achieving project business goals.
▪ Defining project targets (and corresponding contingency reserves) that may be achieved with reasonable probabilities.
▪ Regularly recalculating the current probabilities of meeting project targets during execution and analyzing success probability trends. Negative success probability trends require corrective actions.