“WHY ARE PROJECTS ALWAYS LATE?”(“and what can the Project Manager DO about that?)

Craig Henderson, MBA, PMPARVEST Bank Operations

Introduction

PM Basics• FIO

• GID

• KISS

Predictable Project Delivery- Quality product- On time- On budget

(Figure it out)

(Get it done)

(Keep it simple, )sweetie

Planning• “FIO”

• Detailed, precise SCOPE• Create WBS structure• Estimate activity durations• Sequence activities

• Network diagram

• Develop schedule

With all this wonderful work,WHAT COULD POSSIBLY GO WRONG??

Planning• Estimate Errors?• Scope Creep?• Execution?• Risks?

Planning• Factors influencing estimate quality

• Planning horizon• Immediate events more accurate than distant events

• Project duration• Shorter durations more accurate than long

• People• Resource skill levels• Team experience• Turnover• Productive time (5-6 hours/day?)

• Project structure & organization• Estimate padding (or Understating?!)• Organization culture

Planning• Estimate Errors?• Tradeoffs

• “Nothing” is free (but everything else Costs!)• Estimates are not free• “Better” estimates are more expensive

• Must balance accuracy/cost tradeoff

Don’ t underestimate the estimate

Scope Creep?

(What is your Change Management Plan!)

task pred 1 pred 2 EstimateA 3B A 2C A 5D A 4E B 3F C 2G D 8H E F 4I H 4J G 4K I J 7

Task Data

What is your project duration estimate?

(network diagram reminder)

ES ID EF

SLACK

LS Dur LF

“AON” (Arrow on Node)ES ID EF

SLACK

LS Dur LF

ES ID EF

SLACK

LS Dur LF

ES ID EF

SLACK

LS Dur LF

3 C 8

1

4 5 9

3 B 5

3

6 2 8

5 E 8

3

8 3 11

3 D 7

0

3 4 7

14 I 18

115 4 19

8 F 10

1

9 2 1119 K 26

0

19 7 26

10 H 14

111 4 15

15 J 19

0

15 4 19

7 G 15

0

7 8 15

0 A 3

0

0 3 3

Network Diagram

What is the Critical Path?

3 C 8

1

4 5 9

3 B 5

3

6 2 8

5 E 8

3

8 3 11

3 D 7

0

3 4 7

14 I 18

1

15 4 19

8 F 10

1

9 2 1119 K 26

0

19 7 26

10 H 14

1

11 4 15

15 J 19

0

15 4 19

7 G 15

0

7 8 15

0 A 3

0

0 3 3

Critical Path

task pred 1 pred 2 EstimateA 3B A 2C A 5D A 4E B 3F C 2G D 8H E F 4I H 4J G 4K I J 7

Tot CP Est 26CP= A-D-G-J-K

Task Data

What are our odds of finishing on time, P(26)?

50/50?

Not So Fast!

• Task Duration• One point?• Three point?• Distribution?

“95% Payback, BEST IN TOWN!”

(Fitzgerald’s Casino, Reno, NV)

“Feeling lucky, Sucker?!”

PERT

• “Program Evaluation Review Technique”

• Assumes activity duration is a range statistically following a beta distribution.

• 3 time estimates for each activity:• Expected

• Optimistic

• Pessimistic

• Weighted average represents activity duration distribution.

• Weighted average and variance for each activity allows

computed probability for various project durations.

Activity and Project Frequency Distributions

7–17

Activity Time CalculationsThe weighted average activity time is computed by the following formula:

Activity Time Calculations (cont’d)

Activity time estimate variability approximated by:

Standard deviation for activity:

Standard deviation for project:

Note standard deviation of activity is squared in this equation; also called variance. This sum includes only activities on the critical path(s) or path being reviewed.

task pred 1 pred 2 a m bA 2 3 4B A 1 2 3C A 4 5 12D A 3 4 11E B 1 3 5F C 1 2 3G D 1 8 9H E F 2 4 6I H 2 4 12J G 3 4 5K I J 5 7 8

CP= A-D-G-J-K

Task Data

task a Est (m) b T(e) sigma sigma^2A 2 3 4 3 0.333333 0.111111B 1 2 3 2 0.333333 0.111111C 4 5 12 6 1.333333 1.777778D 3 4 11 5 1.333333 1.777778E 1 3 5 3 0.666667 0.444444F 1 2 3 2 0.333333 0.111111G 1 8 9 7 1.333333 1.777778H 2 4 6 4 0.666667 0.444444I 2 4 12 5 1.666667 2.777778J 3 4 5 4 0.333333 0.111111K 5 7 8 6.833333 0.5 0.25

Totals: 26 25.83333 4.027778CP= A-D-G-J-K CP sigma = 2.006932

Task Times

Probability of Completing the Project @ XCompute the “Z” value (Z = number of standard deviations from the mean)Then find probability of Z

Z Values and Probabilities

Possible Project DurationProbability project is completed before

scheduled time (TS) of 67 daysProbability project is completed

by the 60th day (TS)

Probability of finish by Est?

%53)26(

083.

01.2/)83.2526(

/)(

p

StndDevvalueMeanZ

Possible Project DurationProbability project is completed before

scheduled time (TS) of 26 units

%53)26(

083.

01.2/)83.2526(

/)(

p

StndDevvalueMeanZ

Total

25.8326

53%

Monte Carlo Simulation• Randomize task times

• Random normal number• Adjusted for µ & σ of each task’s distribution

• Add resulting task times per network diagram• Do this “many” times!• Calculate average (expected value) and σ

Monte Carlo Simulationin Excel

• Generate random results for each task• Analysis Tool Pack, Random Number Generator

• Following CP, add times• Remember “IF” statement to check CP length!

• Calculate average project time/stnd dev• Compare to previously computed result

Monte Carlo Results

• Te = 27.48• Stnd Deviation = 1.83

• (Remember, Computed• Te = 25.83• Stnd Dev = 2.0)

How can this be?????????

Monte Carlo• CP = A-D-G-J-K

BUTMonte Carlo runs showed• CP finish of A-C-F-H-I-K = 61.3%

ObservationCP shifted from original path about 2/3 of the time!

The CP shift prevented us from gaining full advantage when the original randomized CP was very early.

CP Results # %A-B-E-H-I-K= 15 1.5%A-C-F-H-I-K= 613 61.3%A-D-G-J-K= 372 37.2%

What is the term for a network like this?

3 C 8

1

4 5 9

3 B 5

3

6 2 8

5 E 8

3

8 3 11

3 D 7

0

3 4 7

14 I 18

1

15 4 19

8 F 10

1

9 2 1119 K 26

0

19 7 26

10 H 14

1

11 4 15

15 J 19

0

15 4 19

7 G 15

0

7 8 15

0 A 3

0

0 3 3

Critical Path, and others

Monte Carlo Result - Beta Distribution?Total

Count of beta

beta

CP Results # %A-B-E-H-I-K= 15 1.5%A-C-F-H-I-K= 613 61.3%A-D-G-J-K= 372 37.2%

Management’s Project TargetTotal

Count of Random Z

Random Z

Est CP = 26, Te(computed) = 25.83, Te (simulation) = 27.57

Confidence and Completion

• 95% confidence project will complete by time “X”

53.30

48.2783.1*64.1

)(*

MeanStndDevZ

“95% Payback, BEST IN TOWN!”

(Fitzgerald’s Casino, Reno, NV)

“Feeling lucky, Sucker?!”

Possible Project Duration95% confidence Project Duration

Total

27.57

30.53

95%

53.30

48.2783.1*64.1

)(*

MeanStndDevZ

Probability of finish by Est?

%21)26(

809.

83.1/)48.2726(

/)(

p

StndDevvalueMeanZ

“Feeling lucky, Sucker?!”

P(26)?

Probability of finish by Est?

%21)26(

809.

83.1/)48.2726(

/)(

p

StndDevvalueMeanZ

Total

27.57

26

21%

"Guess" "50/50" P(26) 50%

Classic CP T(e)= 25.83CP sigma = 2.00Project 95% con= 29.12P(26) = 53.32%

Monte Carlo T(e)= 27.48sigma = 1.83Project 95% con= 30.49P(26) = 21%

Project Result Summary

Remember• Activity definition and precedence• Network diagram• Task estimates, and ranges/distributions• Calculate Expected Durations on CP• Consider Monte Carlo simulation

Finally:• Calculate “Management Duration” based on desired

confidence/predictability• Add this to your Risk Plan and Risk Budget

“Why are projects always late?”

Project Managers frequently fail to understand and account for

Actual result distributions vary from (point) estimates

In their Risk Plans and Budgets

“Feeling lucky, Sucker?!”

Questions!

“Feeling lucky, Sucker?!”