:AACE CERTIFICATION 2009-2010:

Learning – Schedule Risk Assessment
Project management using earned value by Humphreys and Associates provides an insight into practical project management which is useful in practice. I was reading chapter 19 to deal with the question that assigned to me, the chapter can help me to deal with unrealistic request for delivery schedule and also provide an answer to the request what would be the probable schedule risk with various method that provided in the chapter and so that contingencies can be planned for the risk event if it takes place. However not all the methods are perfect, PM need to recognize the advantages and disadvantages and also potential discrepancies arise with different method used.

Schedule risk is part of an overall risk assessment and exists in every project as well as daily activities. Failing to recognize and consider this risk will be causing cost and schedule overrun. Highly critical path does not mean that the risk is high. CPM will be able to help to recognize the path with longest duration and least total float, however risk analysis provide information that CPM unable to detect. Critical path may attract management attention however highest risk path has a good chance of overrunning. Results can be serious when the impacts of high schedule risk paths are ignored. In addition to incentive payments may be lost, additional costs may be incurred in the rush at the end of the project to accelerate efforts in an attempt to meet the completion date.

The fact is that even standard projects are risky and one-of-a-kind or first-of-a-kind projects (customized IT or software projects) are particularly risky because:
- Technology may be unproven
- Design readiness is more difficult to achieve - unanticipated problems may occur with no ready solutions.
- Little or no historical data are available
- Objectives or scope may be redefined middle of the project
- Contractors, supplier and labor are more unfamiliar with what is required to get the job done.

Schedule risk assessment involves a number of goals that including estimating the likelihood of overrunning the baseline schedule and identifying paths that are potential problems area so that they can receive increased management attention and provides early warning of threats to the schedule. Those responsible for a risk assessment should adhere to standards of honesty and provide unbiased estimates. However, due to strategic reasons, very often schedule risks are disregarded. Even with a well-disciplined risk analysis, management may make bad decisions with good information.

Risk of a schedule overrun is driven by, any factors, known and unknown factors, we need to quantify these factors, expert judgment is needed to quantify the risk when data are not available. Quantified risk assessment helps to allows decision made based on potential overrun that is clear and explicit, and provides as estimate of the contingency requirement to limit overrun risk to an acceptable level as well as early warning for special management attention so that extra resources can be allocated if necessary and also contingencies plan can be activated.

Very often as a contractor, due to competition and customer demand, directed dates project schedule and reducing duration to fit the schedule, happens in project bidding as well as implementation. Project manager and bidder have to be honest in dealing with such kind of situation and to provide the real picture and the extent of risk that could affect the project if we underestimated the damage caused by over ambitious bid that provide the “feel good” picture the project will be successful. This is a violation of scheduling process and a risk analysis can help to explore the situation and provide the workaround to the situation to negotiate internally and externally for the acceptable delivery schedule that can really help to ensure deliver the project successfully.

Methods shown as well as illustration in this chapter, such as CPM approach, cumulative likelihood curves (S-Curves) and its characteristics and considerations in relation to network design and characteristic as well as more advance method such as PERT approach, analytical approximation approach and Monte Carlo approach can be practically applied and provide an eye opener to project owner or project sponsor the impact if we failed to recognize or constantly ignoring the impact of the schedule risk.

CPM approach could help to provide a quick and rough idea on the risk probability and S-curves will be able to provide an illustration on how the schedule will be shifted or delay and its probability. Preferred method will be PERT or Monte-Carlo approach. However, PM needs to put the methods presented in Chapter 19 in practice to deal, instinctively and automatically, with issue arises from risk assessment and its potential impact.

[Reference: Chapter 19, Schedule Risk Assessment, Project Management Using Earned Value]

# posted by Lau @ 12/11/2009 12:20:00 PM