Guest Post by John Ayers (first posted on CERM ® RISK INSIGHTS – reposted here with permission)
Studies show most projects fail due to poor management of known risks. The known risks on a project are:
How to minimize the schedule risk on a project is addressed in this paper. The approach to do this is based on my 30 years of project and project risk management experience and knowledge.
To minimize the schedule risk, several factors must be considered and included as part of the schedule process. A list of these factors is as follows:
- Work Breakdown Structure (WBS) most important document on your project
- Work package based schedule
- Work Packages (WPs)/Supporting Activities
- Earned Value Management (EVM)
- Subcontract management
- Provide sufficient time for document review, comments, and re-write
- Staffing plan aligned with schedule
The purpose of the WBS is to break down the contract scope into logical and manageable elements. It should be product based as opposed to activity based. The other purpose of the WBS is to collect costs the way that makes sense. For example, if the project involves two or more divisions of the company, each division would want their own WBS element to manage their part of the project. Typically, level 1 of the WBS is the system, level 2 the system major subassemblies, and level 3 the WP level. These levels can vary depending on the type, complexity, and size of the project. There should be a separate WBS element for each subcontractor to enable tracking, monitoring, and controlling the subcontractors cost and schedule.
- SCHEDULE IS BASED ON WPs
The schedule is based on WPs and supporting activities for each WP. The WP level is the most important level because: work is accomplished at this level; time time card charges are made at the level; and EVM is accrued at this level. Budget and task duration are allocated to each activity for each WP. Activities are schedule and linked to other activities thus forming the schedule.
- WORK PACKAGES/SUPPORTING ACTIVITIES
WPs specify: task description; budget; schedule; EVM technique; input to start task; and output to complete and close task. The budget is based on a Basis of Estimate (BOE). It includes the rational for the budget. Some examples are: similar to another project task; bottoms up engineering estimate; or based on metrics and productivity. For example, as a mechanical engineer, I used a metric of square feet of drawings. I would estimate the number of drawings and calculate the square footage to come up with the metric. My company maintained a productivity data base for historical projects. Productivity is the number of hours to complete each square foot of drawings. For example, 8 hours per square foot of drawings. I would enter this data base and find a similar project and use the productivity it realized. I would multiply the metric (say 200 square feet) times the productivity (say 8 hours per square feet) to arrive my metric-based budget for the task.
A WBS dictionary is required for each WP to clearly define what the task is. It is necessary for all team members to have access to the dictionary to enhance communications and productivity.
Separate WP’s are needed for different types of costs. For example, the four categories of cost shown below each have a different overhead coast factor. Each cost type needs its own WP. You cannot mix them because of the different loading.
- ODC (other direct costs) travel.
EVM is the most effective tool I have used to measure performance against the baseline. Finance issues an EV (Earned Value) monthly that shows the performance to date for every WP. It is color coded (red-poor; yellow caution; green good). It is easy to identify the poorly performing WPs allowing maximum time to take a deep dive to find root cause of the problem and put in place an action plan to mitigate impact on your schedule. If you manage your red WPs well, then the probability of a successful project will be high.
For EVM to be effective, it must be structured correctly and used properly. The centerpiece of a well-structured EVM system is the WBS. It has to be well designed and detailed and extended to the lowest element which is the WP level.
- SUBCONTRACT MANAGEMENT
Typically, a contractor has 60 days to respond to a customers Request for Proposal (RFP). This poses a dilemma to your candidate subcontractors.
The dilemma is insufficient time to obtain a complete and accurate proposal from your candidate subcontractors in a timely fashion even if you start working with them in advance of the RFP issuance. Keep in mind, the subcontractor’s proposals go into your company’s proposal and the officers of the company must sign off on it attesting to the fact the proposal is accurate and valid. This means providing the subcontractor has about 3 weeks to prepare and submit their proposal. Working with them prior to the RFP issuance is essential to ensure the best proposals.
As a result of this dilemma, the candidate subcontractors proposals are soft (not fully complete and understated). To mitigate the risk their cost and schedule will grow once you get a best and final proposal from after you win the contract award, typically, a 20-25% factor is added before including it into your proposal. This includes the schedule as well.
The above is a prudent approach to minimize inserting an understated subcontractor schedule in your proposal.
- DOCUMENT REVIEW
Every project includes contract documents generated by the contractor that require customer review and approval. This process can take 4-6 weeks. The reason is after submittal to your customer it will returned with a lot of red ink (changes they want). This is almost a certainty. By the time the contractor updates and submits the updated document 2-3 weeks have passed. The final update and release to configuration management can take another 2-3 weeks. Based on my experience, the majority of schedules I have seen allow maybe 3 weeks for this process resulting in a built-in schedule delay unknowingly
- STAFF PLAN AIGNED WITH SCHEDULE
I contend a staffing plan that is not aligned with the schedule is not a valid schedule. For example, a schedule cannot be met understaffed. It is difficult to meet budget if the project is overstaffed. The scheduling tools have built in feature that allow you to determine if the staffing plan is aligned with the schedule. If not, the tool will iteratively find a solution.
I hope the reader realizes at this point, there are numerous steps involved in generating a valid low risk schedule. It takes a major effort and maybe 2-3 months to generate a low risk schedule. Too many times I have seen projects take short cuts and pay for it later. Some of the key reasons I have seen for poor schedules are:
- Understated budgets
- Unrealistic task durations
- Inadequate linking
- Insufficient number or WPs and activities
- Poor WBS
- Poor subcontract management
- Insufficient document review time
- Staffing not aligned with the schedule.
This paper presents a proven methodology I used successfully on many projects for generating a low risk, valid schedule for your project.
Currently John is an author, writer and consultant. He authored a book entitled ‘Project Risk Management. It went on sale on Amazon in August 2019. He has presented several Webinars on project risk management to PMI. He writes a weekly column on project risk management for CERN. John also writes monthly blogs for APM. He has conducted a podcast on project risk management. John has published numerous papers about project risk management on LinkedIn.
John earned a BS in Mechanical Engineering and MS in Engineering Management from Northeastern University. He has extensive experience with commercial and DOD companies. He is a member of PMI (Project Management Institute). John has managed numerous large high technical development programs worth in excessive of $100M. He has extensive subcontract management experience domestically and foreign. John has held a number of positions over his career including: Director of Programs; Director of Operations; Program Manager; Project Engineer; Engineering Manager; and Design Engineer. He has experience with: design; manufacturing; test; integration; subcontract management; contracts; project management; risk management; and quality control. John is a certified six sigma specialist, and certified to level 2 EVM (earned value management).https://projectriskmanagement.info/
If you want to be a successful project manager, you may want to review the framework and cornerstones in my book. The book is innovative and includes unique knowledge, explanations and examples of the four cornerstones of project risk management. It explains how the four cornerstones are integrated together to effectively manage the known and unknown risks on your project.