Hulett david
Upcoming SlideShare
Loading in...5
×
 

Like this? Share it with your network

Share

Hulett david

on

  • 13,314 views

 

Statistics

Views

Total Views
13,314
Views on SlideShare
13,314
Embed Views
0

Actions

Likes
0
Downloads
27
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Hulett david Presentation Transcript

  • 1. Integrated Cost / Schedule Risk Analysis A presentation to the PM Challenge February 6-7, 2007 Moody Gardens, Galveston, TX David T. Hulett, Ph.D. Hulett & Associates, LLC Los Angeles, CA (310) 476-7699 / info@projectrisk.com www.projectrisk.com © 2007 Hulett & Associates, LLC. 1
  • 2. Agenda• Schedule Risk Analysis – One-path schedule, two paths and the “merge bias” – Highest risk path – risk criticality – Probabilistic branching• Integrated Cost – Schedule Risk Analysis – Basics – risks in time-related and time-independent costs – Schedule in Project, Costs in Excel – Resources in the schedule – integrated simulations using Monte Carlo and Pertmaster on Primavera P3 schedules © 2007 Hulett & Associates, LLC. 2
  • 3. Risk of an Individual Activity• Simple activity duration estimates are risky 30d Design Unit 1 © 2007 Hulett & Associates, LLC. 3
  • 4. Probability Distributions Available Date: 1/13/2003 5:21:27 PM Date: 1/13/2003 5:18:35 PM Samples: 3000 Samples: 3000 Unique ID: 3 Unique ID: 3 Name: Design Unit Name: Design Unit 0.09 1.0 0.16 1.0 0.08 0.9 0.9 0.14 Cumulative Probability Cumulative Probability 0.07 0.8 0.8 0.12 0.7 0.7 0.06Frequency Frequency 0.6 0.10 0.6 0.05 0.5 0.08 0.5 0.04 0.4 0.06 0.4 0.03 0.3 0.3 0.02 0.04 0.2 0.2 0.01 0.1 0.02 0.1 6/21 7/3 7/15 6/21 7/2 7/15 Completion Date Completion Date Uniform Distribution Triangular Distribution Uniform Triangular © 2007 Hulett & Associates, LLC. 4
  • 5. Probability Distributions Available (continued) Date: 7/10/2002 3:19:37 PM Date: 7/10/2002 3:20:30 PM Samples: 3000 Samples: 3000 Unique ID: 3 Unique ID: 3 Name: Design Unit Name: Design Unit 0.20 1.0 0.22 1.0 0.18 0.9 0.20 0.9 Cumulative Probability Cumulative Probability 0.16 0.8 0.17 0.8 0.14 0.7 0.7Frequency Frequency 0.15 0.12 0.6 0.6 0.13 0.10 0.5 0.5 0.10 0.08 0.4 0.4 0.3 0.08 0.3 0.06 0.04 0.2 0.05 0.2 0.02 0.1 0.03 0.1 6/21 7/3 7/15 6/21 7/1 7/13 Completion Date Completion Date Normal Distribution Beta Distribution Normal BETA © 2007 Hulett & Associates, LLC. 5
  • 6. Comparison of Four Distributions• The three distributions have different characteristics – The uniform expresses most risk (mean, Standard deviation) – Triangular is fairly conservative – The Beta is the least risky Comparison of Probability Distributions (20d, 30d, 45d) Mean Standard Deviation Uniform 33d 7.2d Triangular 32d 5.1d Normal 33d 4.1d Beta 31d 3.4d © 2007 Hulett & Associates, LLC. 6
  • 7. Risk Along a Contiguous Schedule Path• Path risk is the combination of the risks of its activities Design Build Test Start Finish Unit Unit Unit © 2007 Hulett & Associates, LLC. 7
  • 8. Really Simple Schedule • This schedule finishes on September 3 – 7-day weeks, like a model changeover, refinery turnaroundID Task Name Duration Start Finish May June July August Septembe1 Project 95 d 6/1 9/32 Start 0d 6/1 6/1 6/13 Design Unit 30 d 6/1 6/30 6/1 6/304 Build Unit 40 d 7/1 8/9 7/1 8/95 Test Unit 25 d 8/10 9/3 8/10 9/36 Finish 0d 9/3 9/3 9/3 • If we can get into trouble with this simple schedule, we can get into trouble with real project schedules © 2007 Hulett & Associates, LLC. 8
  • 9. Add Duration Risk to the Schedule using Triangular DistributionsID Task Name Rept ID Min Rdur ML Rdur Max Rdur Curve 1 Project 2 0d 0d 0d 02 Start 0 0d 0d 0d 03 Design Unit 0 20 d 30 d 45 d 24 Build Unit 0 35 d 40 d 50 d 25 Test Unit 0 20 d 25 d 50 d 26 Finish 0 0d 0d 0d 0 © 2007 Hulett & Associates, LLC. 9
  • 10. What is a Simulation?• How do you find total project results? – Cannot add distributions – Must combine distributions• Combining distributions using simulation – Almost all possible combinations of durations – “Perform” the project many times © 2007 Hulett & Associates, LLC. 10
  • 11. Combine Distributions by Simulation• Monte Carlo simulation – Very General – 50-year old method• Computer “performs” project many times – Exercise is a “simulation” – Each calculation is an “iteration”• Brute force solution – All combinations of possible costs or durations © 2007 Hulett & Associates, LLC. 11
  • 12. Monte Carlo Simulation Results for Really Simple Schedule CPM date is not even the most likely – That’s about 9/10 Date: 2/18/2006 3:56:56 P M Com pletion S td Deviation: 8.75 d S am ples : 3000 95% Confidenc e Interval: 0.31 d Unique ID: 2 E ac h bar repres ents 3 d Nam e: P rojec t 0.14 1.0 Com pletion P robability Table 0.9 Cumulative Probability 0.12 P rob Date P rob Date 0.8 0.05 8/31 0.55 9/14 0.10 0.7 0.10 9/2 0.60 9/16Frequency 0.6 0.15 9/4 0.65 9/17 0.08 0.5 0.20 9/6 0.70 9/18 0.06 0.4 0.25 9/7 0.75 9/19 0.3 0.30 9/8 0.80 9/21 0.04 0.35 9/10 0.85 9/23 0.2 0.02 0.40 9/11 0.90 9/25 0.1 0.45 9/12 0.95 9/29 8/21 9/13 10/10 0.50 9/13 1.00 10/10 C o mp le tio n D a te 80% Target is CPM date is&<15% Likely to be met © 2007 Hulett Associates, LLC. 9/21 12
  • 13. Risk at Merge Points: The “Merge Bias” • Many parallel paths merge in a real schedule • Finish driven by the latest converging path • Merge Bias has been understood for 40 years Design Unit 1 Build Unit 1 Test Unit 1Start Finish Design Unit 2 Build Unit 2 Test Unit 2 © 2007 Hulett & Associates, LLC. 13
  • 14. This Schedule has Three Parallel PathsID Task Name Rept ID Min Rdur ML Rdur Max Rdur Curve May June July August Septemb1 Project 2 0d 0d 0d 02 Start 0 0d 0d 0d 0 6/13 Unit 1 1 0d 0d 0d 04 Design Unit 0 20 d 30 d 45 d 2 6/1 6/305 Build Unit 1 0 35 d 40 d 50 d 2 7/1 8/96 Test Unit 1 0 20 d 25 d 50 d 2 8/10 9/37 Unit 2 1 0d 0d 0d 011 Unit 3 1 0d 0d 0d 015 Finish 0 0d 0d 0d 0 9/3 Two paths are collapsed Each path has exactly the same structure © 2007 Hulett & Associates, LLC. 14
  • 15. Evidence of the Merge Bias Date: 2/18/2006 4:04:12 PM Date: 2/18/2006 3:56:56 PM Samples: 3000 Samples: 3000 Unique ID: 2 Unique ID: 2 Name: Project Name: Project 0.16 1.0 0.14 1.0 0.9 0.9 0.14 Cumulative Probability Cumulative Probability 0.12 0.8 0.8 0.12 0.7 0.10 0.7Frequency Frequency 0.10 0.6 0.6 0.08 0.08 0.5 0.5 0.4 0.06 0.4 0.06 0.3 0.04 0.3 0.04 0.2 0.2 0.02 0.02 0.1 0.1 8/31 9/21 10/14 8/21 9/13 10/10 Completion Date Completion Date Three Path Project One Path Project © 2007 Hulett & Associates, LLC. 15
  • 16. Evidence of Merge Bias (continued)C o m p le t io n S t d D e via t io n : 6 . 9 5 d C o m p le t io n S t d D e via t io n : 8 . 9 3 d9 5 % C o n fid e n c e In t e rva l: 0 . 2 5 d 9 5 % C o n fid e n c e In t e rva l: 0 . 3 2 dE a c h b a r re p re s e n t s 3 d E a c h b a r re p re s e n t s 3 d C o m p le t io n P ro b a b ilit y Ta b le C o m p le t io n P ro b a b ilit y Ta b leP ro b D ate P ro b Date P ro b D ate P ro b D ate0.05 9/10 0.55 9/22 0.05 8/31 0.55 9/140.10 9/13 0.60 9/23 0.10 9/3 0.60 9/150.15 9/14 0.65 9/24 0.15 9/4 0.65 9/170.20 9/15 0.70 9/25 0.20 9/6 0.70 9/180.25 9/16 0.75 9/26 0.25 9/7 0.75 9/200.30 9/17 0.80 9/27 0.30 9/8 0.80 9/210.35 9/18 0.85 9/29 0.35 9/9 0.85 9/230.40 9/19 0.90 10/1 0.40 9/11 0.90 9/250.45 9/20 0.95 10/3 0.45 9/12 0.95 9/290.50 9/21 1.00 10/14 0.50 9/13 1.00 10/15 Three Path Schedule One Path Schedule © 2007 Hulett & Associates, LLC. 16
  • 17. Graphical Evidence of the Merge Bias The "Merge Bias" 100% 90% 80% 70% One 60% Path b. Cum.Pro Three 50% Path 40% Merge Bias 30% 20% 10% 0% 8/11 8/21 8/31 9/10 9/20 9/30 10/10 10/20 Date © 2007 Hulett & Associates, LLC. 17
  • 18. Cost and Schedule Risk Integration RiskProject Schedule Cost Risk Risk “Burn Rate” Time Independent Time Costs Time Dependent Project Costs Cost Risk © 2007 Hulett & Associates, LLC. 18
  • 19. Cost Estimating Basics• Cost estimates can be constructed by multiplying: – Workers assigned – Daily rate – Duration of task• Uncertainty in any of these variables leads to uncertainty in project cost estimates• Cost risk estimating can be more accurate and the reasons for risk better illuminated when time and cost factors are addressed individually rather than as one cost uncertainty distribution © 2007 Hulett & Associates, LLC. 19
  • 20. Cost / Schedule Risk Using a Schedule • Simple schedule • Starts June 1, finishes without risk on September 6ID Task Name Duration Start Finish May June July August SeptembO0 Integrated Cost-Sched 98 d 6/1 9/61 Start 0d 6/1 6/1 6/12 Design 28 d 6/1 6/28 6/1 6/283 Build 45 d 6/29 8/12 6/29 8/124 Test 25 d 8/13 9/6 8/13 9/65 Finish 0d 9/6 9/6 9/6 © 2007 Hulett & Associates, LLC. 20
  • 21. Add Resources to the Simple Schedule• Designers, builders and testers are assigned and cost data are specified ID Task Name Duration Start Finish Resource Names 0 Integrated Cost-Schedule 98 d 6/1 9/6 1 Start 0d 6/1 6/1 2 Design 28 d 6/1 6/28 Designers[5] 3 Build 45 d 6/29 8/12 Builders[10] 4 Test 25 d 8/13 9/6 Testers[8] 5 Finish 0d 9/6 9/6 Resource Name Type of Resource Rate Designers Work $90/hr Builders Work $80/hr Testers Work $105/hr © 2007 Hulett & Associates, LLC. 21
  • 22. Computing Schedule Risk when Time and Resources are in MS Project• Using Risk+, simulate the MS Project schedule, collecting cost results for the project• Inputs – 3-point estimates for duration of tasks• Outputs – Pairs of cost and date for each iteration• Note: the cost of each resource per time period is fixed in this method © 2007 Hulett & Associates, LLC. 22
  • 23. Inputs to Schedule Risk AnalysisID Task Name Rept Min Rd ML Rdu Max Rd Curve0 Integrated Cost- 2 0d 0d 0d 01 Start 0 0d 0d 0d 02 Design 0 20 d 28 d 40 d 23 Build 0 35 d 45 d 60 d 24 Test 0 15 d 25 d 40 d 25 Finish 0 0d 0d 0d 0 © 2007 Hulett & Associates, LLC. 23
  • 24. Schedule Risk Analysis: Dates Date: 2/18/2006 9:49:40 AM Completion Std Deviation: 8.25 d Samples: 3000 95% Confidence Interval: 0.29 d Unique ID: 0 Each bar represents 3 d Name: Integrated Cost-Schedule 0.14 1.0 Completion Probability Table 0.9 Cumulative Probability 0.12 Prob Date Prob Date 0.8 0.05 8/29 0.55 9/12 0.10 0.7 0.10 8/31 0.60 9/13 Frequency 0.6 0.15 9/2 0.65 9/14 0.08 0.5 0.20 9/4 0.70 9/16 0.06 0.4 0.25 9/5 0.75 9/17 0.3 0.30 9/7 0.80 9/18 0.04 0.35 9/8 0.85 9/20Source: 0.2 0.40 9/9 0.90 9/22 0.02Risk+® 0.1 0.45 9/10 0.95 9/25 8/17 9/11 10/7 0.50 9/11 1.00 10/7 Completion DateSept. 6 is 25 – 30% likely. 80th percentile is Sept. 20 for a 2-week contingency © 2007 Hulett & Associates, LLC. 24
  • 25. All Resource Types are “Work”• Each resource is assumed to work on a daily basis – Baseline cost is $556,800 – Each extra day of work is extra cost, dollar for dollar• Cost risk is determined by uncertain durations only ID Task Name Duration Total Cost 0 Integrated Cost-Schedule 98 d $556,800 1 Start 0d $0 2 Design 28 d $100,800 3 Build 45 d $288,000 4 Test 25 d $168,000 5 Finish 0d $0 © 2007 Hulett & Associates, LLC. 25
  • 26. All Resource Types are “Work” (2) Date: 2/18/2006 9:49:40 AM Cost Standard Deviation: $49,645 Samples: 3000 95% Confidence Interval: $1,777 Unique ID: 0 Each bar represents $25,000 Name: Integrated Cost-Schedule 0.20 1.0 Cost Probability Table 0.18 0.9 Cumulative Probability Prob Cost Prob Cost 0.16 0.8 0.05 $503,329 0.55 $589,111 0.14 0.7 0.10 $519,541 0.60 $595,793Frequency 0.12 0.6 0.15 $530,895 0.65 $602,967 0.10 0.5 0.20 $539,706 0.70 $610,397 0.08 0.4 0.25 $547,195 0.75 $617,877 0.06 0.3 0.30 $555,041 0.80 $626,705 0.35 $562,138 0.85 $636,646 0.04 0.2 0.40 $569,210 0.90 $649,900 0.02 0.1 0.45 $575,955 0.95 $667,044 $432,397 $583,479 $736,369 0.50 $583,082 1.00 $736,369 Cost Cost risk results differ because activity duration risks differ © 2007 Hulett & Associates, LLC. 26
  • 27. With Work-Type Resources, Cost and Time are Highly Correlated Scatter Plot of Time and Cost for Work-Type Resources 800,000 700,000 600,000 500,000Cost 400,000 300,000 200,000 100,000 0 8/11 8/21 8/31 9/10 9/20 9/30 10/10 Date © 2007 Hulett & Associates, LLC. 27
  • 28. Uncertainty in the “Burn Rate”• Usually resources are found in a spreadsheet• This enables us to deal with uncertain burn rates• Cost estimates are often at a less detailed level than the schedule• We also will often need schedule risk analysis for a summary task © 2007 Hulett & Associates, LLC. 28
  • 29. Cost Estimates are in a Spreadsheet / Schedules are in Scheduling Package• Process when schedule is in MS Project and costs are in MS Excel• Use schedule risk results from Risk+ for Project and Crystal Ball for Excel – Simulate MS Project with Risk+ for duration, not dates – Read the detailed iteration results into a spreadsheet – Estimate the Crystal Ball function that fits the best – Use that function in the cost estimate to represent uncertain duration in Crystal Ball simulation of cost risk © 2007 Hulett & Associates, LLC. 29
  • 30. The Cost Estimate may be at a Higher Level than the Schedule Summary Cost EstimateCost Element ValueAverage Workers 8Hourly Rate 88Hours/Day 8Days 98Total Cost 556,800 © 2007 Hulett & Associates, LLC. 30
  • 31. Determine the Best Crystal Ball Distributionfor the Uncertain Schedule Risk Duration: BetaSource: Crystal Ball® © 2007 Hulett & Associates, LLC. 31
  • 32. Distribution Parameters © 2007 Hulett & Associates, LLC. 32
  • 33. Insert Uncertain Burn Rate into Cost Model Summary Cost EstimateCost Element Value Minimum Most Likely MaximumAverage Workers 8 6 8 12Hourly Rate 88 84 88 100Hours/Day 8Days 98 Fitted Beta DistributionTotal Cost 556,800 © 2007 Hulett & Associates, LLC. 33
  • 34. Adding Uncertainty in Burn Rate Uncertain Duration, Workers and Rate per Hour 1,200,000 1,000,000 800,000 Cost 600,000 400,000 200,000 More Scatter, Less Tightly Correlated due 0 8/11 8/21 8/31 9/10 9/20 9/30 10/10to Uncertain Burn Rate Date © 2007 Hulett & Associates, LLC. 34
  • 35. Consider More Realism: Time-Independent Resources• Some resources’ costs are not determined by time – E.g., test equipment, materials• These are “use-type” or “material-type” resources• Their costs may not be known with certainty but they are not determined by activity durations © 2007 Hulett & Associates, LLC. 35
  • 36. Add Test Equipment @ $200,000 Time and Material ResourcesResource Type Hourly Rate Rate per UseDesigners Work $90/hr N/ABuilders Work $80/hr N/ATesters Work $105/hr N/ATest Equipment Material N/A $200,000ID Task Name Duration Start Finish Cost Resource Names0 Integrated Cost-Schedule 98 d 6/1 9/6 $756,8001 Start 0d 6/1 6/1 $02 Design 28 d 6/1 6/28 $100,800 Designers[5]3 Build 45 d 6/29 8/12 $288,000 Builders[10]4 Test 25 d 8/13 9/6 $368,000 Testers[8],Test Equipme5 Finish 0d 9/6 9/6 $0 © 2007 Hulett & Associates, LLC. 36
  • 37. Add Risky Materials Cost Independent of Time Summary Cost EstimateCost Element Value Minimum Most Likely MaximumAverage Workers 8 6 8 12Hourly Rate 88 84 88 100Hours/Day 8Days 98 Beta DistributionTime-Related Cost 556,800Test Equipment 200,000 160,000 200,000 280,000Total Cost 756,800 © 2007 Hulett & Associates, LLC. 37
  • 38. Adding Materials with Time-Independent Risk Adding Time-Independent Equipment Cost Risk 1,400,000 1,200,000 1,000,000 800,000 Cost Series1 600,000 400,000More Scatter, 200,000 tightly Less Correlated due to0Uncertain Burn Rate and 8/21 8/11 8/31 9/10 9/20 9/30 10/10 DateRisky Time-Independent Material Cost © 2007 Hulett & Associates, LLC. 38
  • 39. Computing Schedule Risk when Cost and Schedule are in the Scheduling Program• Resources are identified and their hourly or daily cost are input into the scheduling software• Resources are assigned to tasks and costs of those tasks and the total project are computed• Uncertainty can be added by: – Probability distribution of the duration – Probability distribution of the burn rate – Use or material resources can also be risky and their costs varied• Jointly simulate the cost and schedule in the program © 2007 Hulett & Associates, LLC. 39
  • 40. Hardware / Software Build and Integrate Build the Schedule in Primavera Project Planner (P3) © 2007 Hulett & Associates, LLC. 40
  • 41. Modern Approach to Integrated C/S Risk: Import P3 Schedule to Pertmaster © 2007 Hulett & Associates, LLC. 41
  • 42. Pertmaster Risk from P3 Schedules Duration Risk Range © 2007 Hulett & Associates, LLC. 42
  • 43. Pertmaster Risk from P3 Schedules (2)Time-Independent Risk Range Burn Rate Risk Range © 2007 Hulett & Associates, LLC. 43
  • 44. Integrated Cost and Schedule Risk Results Overrun both Cost and Schedule Date and Cost Scatter plot from Pertmaster® schedule risk software © 2007 Hulett & Associates, LLC. 44
  • 45. Summary of Main Principles• Schedule Risk depends on the schedule logic and uncertainty in the activity durations• Monte Carlo simulation is the accepted method of estimating the uncertainty from all risks simultaneously• Simulation software allows Monte Carlo for schedules in several packages (e.g. Project, P3) © 2007 Hulett & Associates, LLC. 45
  • 46. Summary of Main Principles (2)• Cost risk depends in large part on elements of schedule uncertainty – The cost estimate is not secure if the schedule is slipping• Uncertain burn rates for time-dependent costs• Uncertain costs for time-independent costs © 2007 Hulett & Associates, LLC. 46
  • 47. Integrated Cost / Schedule Risk Analysis A presentation to the PM Challenge February 6-7, 2007 Moody Gardens, Galveston, TX David T. Hulett, Ph.D. Hulett & Associates, LLC Los Angeles, CA (310) 476-7699 / info@projectrisk.com www.projectrisk.com © 2007 Hulett & Associates, LLC. 47