Schedule Cost Risk Integration                       for Major Infrastructure Projects Presented by: Pedram Daneshmand Sen...
Agenda•   Brief Introduction•   Project Delivery – Myths•   Project Delivery – Facts•   Top 5 Causes of Failure      p•   ...
At the end of today you will …•   Know more about Quantitative Risk Analysis (QRA) for    project schedule/cost/risk manag...
blueVisions Introduction•   International consultancy with offices Australia-wide, Dubai,    Abu Dhabi and Singapore•   Pr...
Project Delivery: Myths•   We have a good PM system in place, don’t worry.•   Trust our very experienced team. Everything’...
Project Delivery: Facts•   Of the 20,821 projects that were    closed in the past 12 months in    the fi     h firms surve...
Project Delivery: Facts•          Australian oil project, Kipper           Development including the Tuna           and T ...
Project Delivery: Facts•          Woodside – Pluto LNG Project,           WA       •        The first                Th fi...
Project Delivery: Facts•        Australia’s resources sector has         been hit by more than $8B in         mega-project...
Project Delivery: Facts         Railway Stations                                                 High-rise Buildings      ...
Project Delivery: Facts       Engineering Projects                                              Oil and Gas Projects      ...
Project Delivery: Facts                                                                             Planning & Controls   ...
Myths vs Facts                 I want to be confident                 in my project delivery.                   What can I...
Top 5 Causes of Failure•   REQUIREMENTS: Unclear, lack of agreement, lack of    priority, contradictory, ambiguous, imprec...
Schedule, Cost, Risks                             COST               SCHEDULE                          RISK       Schedule...
Project Time Management (PTM)                  SCHEDULE                                       Schedule Cost Risk Integrati...
PTM – Process•       Activity Definition•       Activity Sequencing ( g )               y q          g (logic)•       Acti...
PTM – Schedule Development•         The Schedule Development process includes selecting          a Scheduling Method, Sche...
PTM – Schedule DevelopmentPMI – Th P ti St d d f S h d li      The Practice Standard for Scheduling, 2007                 ...
PTM – Schedule Dev. Methods•     Logic-based Scheduling Methods (LSM)    •    Deterministic Techniques        •     E.g. C...
PTM – Schedule Dev. Inputs•     Planners develop the project schedule by using:    •    Available templates    •    Availa...
PTM – Schedule Dev. Outputs•     The outputs of Schedule Development process are:    •    (Deterministic) Project Schedule...
PTM – Major Challenges•   Uncertainties due to assumptions•   Logic, constraints, resources, calendars and activity    dur...
Project Cost Management (PCM)                   COST                                       Schedule Cost Risk Integration ...
PCM – Process•       Cost Estimating – developing an approximation of the        costs of the resources needed to complete...
PCM – Tools & Techniques•   Analogous Estimating•   Determine Resource Cost Rates•   Bottom-up Estimating•   Parametric Es...
PCM – Inputs•     Estimators develop the project estimate by using:    •     Available organisational process assets    • ...
PCM – Outputs•     The outputs of the Cost Estimating process are:    •    (Deterministic) Activity Cost Estimate    •    ...
PCM – Software•   Software, like cost estimating software applications,    computerised spreadsheets, and simulations and ...
Project Risk Management (PRM)                   RISK                                       Schedule Cost Risk Integration ...
PRM – Process                                              Establish Context                                       SULT   ...
PCM – Risk Assessment•     Risk Assessment includes:    •    Risk Identification (both Uncertainties and Events)    •    R...
PTM, PCM and PRM•   Every Schedule has uncertainties and assumptions•   Every Cost Estimate has uncertainties and assumpti...
PTM, PCM and PRM                            COST              SCHEDULE                         RISK      Schedule Cost Ris...
S/C/R Integration – Overview•     Available data gathering and validation•     Schedule and Cost Estimate Development•    ...
S/C/R Integration – Data•     Required information for a SCR Integration:    •    Well-developed project scope    •    Qua...
S/C/R Integration – Review•     How to review the deterministic Schedule & Cost?    •     Validation of        •     Quant...
S/C/R Integration – R&O Register•     The elements of the R&O Register:    •    The identified risks & opportunities    • ...
S/C/R Integration – Model•   Major risks and opportunities been identified•   Uncertainties and Events•   The likelihood a...
S/C/R Integration – Special Conditions•     Special conditions that require extra attention:    •    Probabilistic Branchi...
S/C/R Integration – Simulation•   The S/C/R Model should be simulated with multiple    scenarios of the project using rand...
S/C/R Integration – Treatment Plan•   The accuracy of the S/C/R Integration outcomes should    be improved through a numbe...
Case Study•     Project: Electricity Transmission Cable Tunnel•     Part of $1B Program•     Tier 1 Contractor•     Scope:...
Case Study – Schedule Review         Confidential                                      Schedule Cost Risk Integration     ...
Case Study – R&O Register                                   Schedule Cost Risk Integration                             for...
Case Study – S/C/R Model                                  Schedule Cost Risk Integration                            for Ma...
Case Study – S/C/R ModelLost Day Facto (LDF)   t         or                                  Schedule Cost Risk Integratio...
Case Study – MCS SimulationConfidentialConfidential                                        Schedule Cost Risk Integration ...
Case Study – Simulation ResultsConfidential                                       Deterministic PC Date                   ...
Case Study – PC DatesConfidential                             Deterministic PC Date                             99% ---17/...
Case Study – Criticality IndexConfidentialConfidential                                                          AL        ...
Case Study – Criticality PathConfidential                                 The Criticality Path Report                     ...
Case Study – Criticality DistributionConfidentialConfidential                                      Criticality Distributio...
S/C/R Integration – Benefits to bottom line•       Increase certainty in achieving p j                         y          ...
Question, Comment?                            Schedule Cost Risk Integration                      for Major Infrastructure...
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PD - Contract and Risk Conference - Integrated Schedule Cost Risk Analysis for Major Projects 31 Mar 11

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The presentation will discuss the fundamentals of the schedule cost risk integration concept and its applications for major projects. It will also review the implementation in a tunnel case study.

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PD - Contract and Risk Conference - Integrated Schedule Cost Risk Analysis for Major Projects 31 Mar 11

  1. 1. Schedule Cost Risk Integration for Major Infrastructure Projects Presented by: Pedram Daneshmand Senior Associate Director 4th Annual Contract Selection and Risk for Major Projects, March 2011
  2. 2. Agenda• Brief Introduction• Project Delivery – Myths• Project Delivery – Facts• Top 5 Causes of Failure p• PTM, PCM and Project Risk Management (PRM)• Schedule Cost Risk Integration g• S/C/R Integration Process• S/C/R Integration Outcomes g• Case Study Schedule Cost Risk Integration  for Major Infrastructure Projects | 2
  3. 3. At the end of today you will …• Know more about Quantitative Risk Analysis (QRA) for project schedule/cost/risk management• See a technical approach to analyse risks and opportunities• A better understanding of Schedule Cost Risk Integration Think about how to use these tools for YOUR PROJECT. Schedule Cost Risk Integration  for Major Infrastructure Projects | 3
  4. 4. blueVisions Introduction• International consultancy with offices Australia-wide, Dubai, Abu Dhabi and Singapore• Project Management Services focused on increasing certainty and reducing risk including; Governance, Planning & Controls, Contract Services & Training Our experience with construction: p • Rail • Road • Telecommunications • Commercial • Water • Engineering • Health • Federal, Federal State & Local gov Schedule Cost Risk Integration  for Major Infrastructure Projects | 4
  5. 5. Project Delivery: Myths• We have a good PM system in place, don’t worry.• Trust our very experienced team. Everything’s fine.• No problem, everything is under control.• No worries, we have been there, done that.• Please, we don’t need anything new.• Another new technology, another tool, again! gy, , g So, So they know what they are talking about. Right? Schedule Cost Risk Integration  for Major Infrastructure Projects | 5
  6. 6. Project Delivery: Facts• Of the 20,821 projects that were closed in the past 12 months in the fi h firms surveyed (by pmsolutions, d 2011), 37% were at risk and either recovered or failed!• Average $ at risk per firm: $74 million Schedule Cost Risk Integration  for Major Infrastructure Projects | 6
  7. 7. Project Delivery: Facts• Australian oil project, Kipper Development including the Tuna and T d Turrum ventures: • 1 year delay • $US1.7B over budget estimate of $US2.7 The Australian, 20/J /2011 Th A t li 20/Jan/2011 Schedule Cost Risk Integration  for Major Infrastructure Projects | 7
  8. 8. Project Delivery: Facts• Woodside – Pluto LNG Project, WA • The first Th fi t LNG shipment h hi t has been delayed 6 months (from a Mar 11 target to Sep 11), • $2B cost blowout on the original forecast of $ g $12B. The Australian, 01/D /2010 Th A t li 01/Dec/2010 Schedule Cost Risk Integration  for Major Infrastructure Projects | 8
  9. 9. Project Delivery: Facts• Australia’s resources sector has been hit by more than $8B in mega-project cost bl j blowouts iin the past 6 years News.com.au, 10/J /2011 N 10/Jan/2011 Schedule Cost Risk Integration  for Major Infrastructure Projects | 9
  10. 10. Project Delivery: Facts Railway Stations High-rise Buildings 79% behind schedule 67% behind schedule Ref: M R f Managing th Ri k of D l d Completion i th 21st C t i the Risk f Delayed C l ti in the Century, Survey by Ch t d I tit t of Building (CIOB) 2007 S b Chartered Institute f B ildi (CIOB), Schedule Cost Risk Integration  for Major Infrastructure Projects | 10
  11. 11. Project Delivery: Facts Engineering Projects Oil and Gas Projects 42% behind schedule 81% behind schedule Ref: M R f Managing th Ri k of D l d Completion i th 21st C t i the Risk f Delayed C l ti in the Century, Survey by Ch t d I tit t of Building (CIOB) 2007 S b Chartered Institute f B ildi (CIOB), Schedule Cost Risk Integration  for Major Infrastructure Projects | 11
  12. 12. Project Delivery: Facts Planning & Controls Tools• A bar-chart 54%• Partially/Fully linked 22%• Minutes of meetings 11%• Correspondence p 8%• Flow Chart 3%• Time Chainage g 1%• Line of Balance 1% Ref: M R f Managing th Ri k of D l d Completion i th 21st C t i the Risk f Delayed C l ti in the Century, Survey by Ch t d I tit t of Building (CIOB) 2007 S b Chartered Institute f B ildi (CIOB), Schedule Cost Risk Integration  for Major Infrastructure Projects | 12
  13. 13. Myths vs Facts I want to be confident in my project delivery. What can I do???? Schedule Cost Risk Integration  for Major Infrastructure Projects | 13
  14. 14. Top 5 Causes of Failure• REQUIREMENTS: Unclear, lack of agreement, lack of priority, contradictory, ambiguous, imprecise• RESOURCES: Lack of resources, resource conflicts, turnover of key resources, poor planning• SCHEDULES: Too tight, unrealistic, overly optimistic• PLANNING: Based on insufficient data, missing items, insufficient details, poor estimate i ffi i t d t il ti t• RISKS & OPPORTUNITIES: Unidentified or assumed, not managed* * Ref: Strategies for Project Recovery A PM Solutions Research Report pmsolutions survey 2011 survey, Schedule Cost Risk Integration  for Major Infrastructure Projects | 14
  15. 15. Schedule, Cost, Risks COST SCHEDULE RISK Schedule Cost Risk Integration Schedule Cost Risk Integration  for Major Infrastructure Projects | 15
  16. 16. Project Time Management (PTM) SCHEDULE Schedule Cost Risk Integration  for Major Infrastructure Projects | 16
  17. 17. PTM – Process• Activity Definition• Activity Sequencing ( g ) y q g (logic)• Activity Resource Estimating• Activity Duration Estimating y g• Schedule Development• Schedule Control PMBOK, PMBOK 2004 Schedule Cost Risk Integration  for Major Infrastructure Projects | 17
  18. 18. PTM – Schedule Development• The Schedule Development process includes selecting a Scheduling Method, Scheduling Tool, incorporating project specific d j ifi data within that scheduling tool to i hi h h d li l develop project specific Schedule Model, and generating Project Schedule Schedule. PMI – Th P ti St d d f S h d li The Practice Standard for Scheduling, 2007 Schedule Cost Risk Integration  for Major Infrastructure Projects | 18
  19. 19. PTM – Schedule DevelopmentPMI – Th P ti St d d f S h d li The Practice Standard for Scheduling, 2007 Schedule Cost Risk Integration  for Major Infrastructure Projects | 19
  20. 20. PTM – Schedule Dev. Methods• Logic-based Scheduling Methods (LSM) • Deterministic Techniques • E.g. Critical Path Method (CPM), Resource Optimisation,  Critical Chain Method (CCM), etc. • Stochastic T h i St h ti Techniques • E.g. Probabilistic Evaluation and Review Technique (PERT),  PNET, Monte Carlo Simulation (MCS), etc. , ( ),• Repetitive Scheduling Methods (RSM) • Line of Balance (LOB) • Flowline Method Schedule Cost Risk Integration  for Major Infrastructure Projects | 20
  21. 21. PTM – Schedule Dev. Inputs• Planners develop the project schedule by using: • Available templates • Available quantities, resources and productivity rates • Available work/scope statements p • Available construction logic, and • Other assumptions e.g. calendars, PMP, etc. p g , , With all those uncertainties in the inputs and the  With all those uncertainties in the inputs and the possible risks and opportunities in the schedule, the  question is, how confident we are in this schedule?  Schedule Cost Risk Integration  for Major Infrastructure Projects | 21
  22. 22. PTM – Schedule Dev. Outputs• The outputs of Schedule Development process are: • (Deterministic) Project Schedule • (Deterministic) Schedule Model Data • ( (Deterministic) Schedule Baseline ) • (Deterministic) Resource Requirements How confident we are in this schedule?  Schedule Cost Risk Integration  for Major Infrastructure Projects | 22
  23. 23. PTM – Major Challenges• Uncertainties due to assumptions• Logic, constraints, resources, calendars and activity durations are not always clear and agreed• What-If Scenarios, and• Risks and Opportunities To have a realistic schedule, the Schedule Development  process should be improved by using Schedule Risk  h ld b i db i S h d l ik Analysis.  In other words Project Time Management and  Project Risk Management need to be integrated!  Schedule Cost Risk Integration  for Major Infrastructure Projects | 23
  24. 24. Project Cost Management (PCM) COST Schedule Cost Risk Integration  for Major Infrastructure Projects | 24
  25. 25. PCM – Process• Cost Estimating – developing an approximation of the costs of the resources needed to complete project activities. i ii• Cost Budgeting – aggregating the estimated costs of individual ti iti i di id l activities or work packages t establish a k k to t bli h cost baseline.• Cost Control – influencing the factors that create cost variances and controlling changes to the project g budget. PMBOK, PMBOK 2004 Schedule Cost Risk Integration  for Major Infrastructure Projects | 25
  26. 26. PCM – Tools & Techniques• Analogous Estimating• Determine Resource Cost Rates• Bottom-up Estimating• Parametric Estimating g• Project Management Software• Vendor Bid Analysis y• Reserve Analysis• Cost of Quality Q y Schedule Cost Risk Integration  for Major Infrastructure Projects | 26
  27. 27. PCM – Inputs• Estimators develop the project estimate by using: • Available organisational process assets • Available quantities, resources and productivity rates • Available work/scope statements p • Work Breakdown Structure (WBS), and • Other assumptions/documents e.g. PMP, etc. p g , All these add uncertainties to the estimate and reduce  All these add uncertainties to the estimate and reduce the confidence level. What about risks and opportunities in the total project cost? Schedule Cost Risk Integration  for Major Infrastructure Projects | 27
  28. 28. PCM – Outputs• The outputs of the Cost Estimating process are: • (Deterministic) Activity Cost Estimate • (Deterministic) Total Project Cost • ( (Deterministic) Cost Model Data ) • (Deterministic) Cost Baseline • ( (Deterministic) Resource Requirements ) q With all these uncertainties in the inputs and the possible  With all these uncertainties in the inputs and the possible risks and opportunities in the estimate, the question is,  how confident we are in this estimate?  Schedule Cost Risk Integration  for Major Infrastructure Projects | 28
  29. 29. PCM – Software• Software, like cost estimating software applications, computerised spreadsheets, and simulations and statistical tools are widely used to assist with cost i i l l id l d i ih estimating. To have a realistic estimate, the Cost Estimating process  should be improved by using Cost Risk Analysis (CRA).  h ld b i db i C ik l i (C ) In other words Project Cost Management (PCM) and  Project Risk Management (PRM) need to be integrated!  Schedule Cost Risk Integration  for Major Infrastructure Projects | 29
  30. 30. Project Risk Management (PRM) RISK Schedule Cost Risk Integration  for Major Infrastructure Projects | 30
  31. 31. PRM – Process Establish Context SULT ITOR AND REVIEW W NICATE AND CONS Identify Risks SMENT D RIS ASSESS Analyse Risks SK COMMUN MONI Evaluate Risks C Treat RisksAS/NZS ISO 31000 2009 Ri k M 31000:2009, Risk Management – P i i l and guidelines t Principles d id li Schedule Cost Risk Integration  for Major Infrastructure Projects | 31
  32. 32. PCM – Risk Assessment• Risk Assessment includes: • Risk Identification (both Uncertainties and Events) • Risk Analysis • Qualitative  • Semi‐Quantitative Risk Analysis • Quantitative • Risk Evaluation Ri k E l ti The goal is to have a better understanding of risks /  g g / opportunities and their overall impact on project schedule  and cost to see the plan in ONE integrated picture.  Schedule Cost Risk Integration  for Major Infrastructure Projects | 32
  33. 33. PTM, PCM and PRM• Every Schedule has uncertainties and assumptions• Every Cost Estimate has uncertainties and assumptions, and• Every Project has risks and opportunities To have a confident plan, Project Time Management (PTM),  p , j g ( ), Project Cost Management (PCM) and  Project Risk Management (PRM) need to be integrated!  Schedule Cost Risk Integration  for Major Infrastructure Projects | 33
  34. 34. PTM, PCM and PRM COST SCHEDULE RISK Schedule Cost Risk Integration Schedule Cost Risk Integration  for Major Infrastructure Projects | 34
  35. 35. S/C/R Integration – Overview• Available data gathering and validation• Schedule and Cost Estimate Development• Risks & Opportunities Workshop/s (team approach)• S/C/R Integration g • R&O Register incl. both Uncertainties and Events • Schedule Cost Risk Model • Simulation• Results and Discussions• Re-Modelling• Monitoring & Controls Schedule Cost Risk Integration  for Major Infrastructure Projects | 35
  36. 36. S/C/R Integration – Data• Required information for a SCR Integration: • Well-developed project scope • Quality estimate excl. contingency and escalation • Good Schedule reflecting the estimate g • Risk Mgmt policy/processes in your organisation • Risk checklist incl. typical risks and opportunities yp pp • Risk & Opportunities Template • Schedule/Cost Risk Templates/Models, and p , • Sample available reports Schedule Cost Risk Integration  for Major Infrastructure Projects | 36
  37. 37. S/C/R Integration – Review• How to review the deterministic Schedule & Cost? • Validation of • Quantities (most likely) • Productivity Rates (most likely) y ( y) • Durations (most likely) • Resource Cost Rates (most likely) ( y) • Constraints (Contractual or Management) • Logic network and Work Statements, and g , • Reasonable Critical Path Schedule Cost Risk Integration  for Major Infrastructure Projects | 37
  38. 38. S/C/R Integration – R&O Register• The elements of the R&O Register: • The identified risks & opportunities • Likelihood of the identified risks and opportunities • Impacted activities p • Schedule and/or Cost Impact/s • Schedule and/or Cost Variations • Correlation of risks and opportunities to one another • Notes, etc. , Schedule Cost Risk Integration  for Major Infrastructure Projects | 38
  39. 39. S/C/R Integration – Model• Major risks and opportunities been identified• Uncertainties and Events• The likelihood and impacts been assessed• Risk Matrix aligned with the company’s risk management g p y g policy• Impacts checked against the allocated calendars• Correlations between risks been identified• Stage the opportunities if required, and• Duplications are minimised and addressed Schedule Cost Risk Integration  for Major Infrastructure Projects | 39
  40. 40. S/C/R Integration – Special Conditions• Special conditions that require extra attention: • Probabilistic Branching – which considers the situation where the outcome of an event can cause two or multiple possible courses of activities • Correlation between risks • Positive Correlation: occurs when one risk goes higher, so must  the other. the other • Negative or Adverse Correlation: occurs when one risk increases,  the other must decrease.  • Inclement Weather or other external influences Schedule Cost Risk Integration  for Major Infrastructure Projects | 40
  41. 41. S/C/R Integration – Simulation• The S/C/R Model should be simulated with multiple scenarios of the project using random samplings of the relevant risks and opportunities considering their h l i k d ii id i h i probability and impact.• Two T popular methods: l th d • Monte Carlo Simulation (MCS) – faster method but has a  larger possibility of sampling error g p y p g • Latin Hypercube Sampling (LHS) – slower method but less  sampling errors Schedule Cost Risk Integration  for Major Infrastructure Projects | 41
  42. 42. S/C/R Integration – Treatment Plan• The accuracy of the S/C/R Integration outcomes should be improved through a number of iterations of this process.• Based on the initial results, the team should: • Review the R&O Register and make modifications where required h & d k df h d • Make changes to the Model accordingly • Run the simulation again and repeat the process to achieve the  Run the simulation again and repeat the process to achieve the most cost‐effective risk mitigation plan • Finalise the Risk Treatment Plan as well as the Contingency Plan • Management Approval, and • Communicate this plan with the team and then monitor it Schedule Cost Risk Integration  for Major Infrastructure Projects | 42
  43. 43. Case Study• Project: Electricity Transmission Cable Tunnel• Part of $1B Program• Tier 1 Contractor• Scope: p • Tunnel Construction • Net Connections • Cable Installation • Tunnel Entrance • Ventilation Intake Schedule Cost Risk Integration  for Major Infrastructure Projects | 43
  44. 44. Case Study – Schedule Review Confidential Schedule Cost Risk Integration  for Major Infrastructure Projects | 44
  45. 45. Case Study – R&O Register Schedule Cost Risk Integration  for Major Infrastructure Projects | 45
  46. 46. Case Study – S/C/R Model Schedule Cost Risk Integration  for Major Infrastructure Projects | 46
  47. 47. Case Study – S/C/R ModelLost Day Facto (LDF) t or Schedule Cost Risk Integration  for Major Infrastructure Projects | 47
  48. 48. Case Study – MCS SimulationConfidentialConfidential Schedule Cost Risk Integration  for Major Infrastructure Projects | 48
  49. 49. Case Study – Simulation ResultsConfidential Deterministic PC Date 99% ---17/Dec/14 50% --- 04/Nov/14 Contingency Plan Schedule Cost Risk Integration  for Major Infrastructure Projects | 49
  50. 50. Case Study – PC DatesConfidential Deterministic PC Date 99% ---17/Dec/14 50% --- 04/Nov/14 Schedule Cost Risk Integration  for Major Infrastructure Projects | 50
  51. 51. Case Study – Criticality IndexConfidentialConfidential AL Always CRITICA C Schedule Cost Risk Integration  for Major Infrastructure Projects | 51
  52. 52. Case Study – Criticality PathConfidential The Criticality Path Report  highlights the path through the  project containing the tasks with  project containing the tasks with the highest Criticality Index  values. Percent Criticality is the  probability that an activity will  be on the critical path; this  indicates the relative  importance of the activity to  p y other activities in the  programme. Schedule Cost Risk Integration  for Major Infrastructure Projects | 52
  53. 53. Case Study – Criticality DistributionConfidentialConfidential Criticality Distribution Profile  plots the spread of the  Criticality Index in a project to  Criticality Index in a project to give an indication of the  % of Tasks Critical number and threat of near to  25.9 % critical path. critical path A high percentage (more than  40%) indicates a relatively  40%) i di l i l tight programme. Schedule Cost Risk Integration  for Major Infrastructure Projects | 53
  54. 54. S/C/R Integration – Benefits to bottom line• Increase certainty in achieving p j y g project outcomes – P&C System: Scope, Time, Cost, & Risk – Learn from lessons – Consistency across multiple ventures and repeatability C i li l d bili – Demonstrate capability and excellence to clients• Reduce risks and maximise Opportunities• Drive proactively• Increase efficiency and optimise Time Cost & Risk Time, Cost,• End to end transparency• Control change Schedule Cost Risk Integration  for Major Infrastructure Projects | 54
  55. 55. Question, Comment? Schedule Cost Risk Integration  for Major Infrastructure Projects | 55

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