SDPM Approach to Project Planning and Performance Analysis

7/29/2019 SDPM Approach to Project Planning and Performance Analysis

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Success Driven ProjectManagement (SDPM)

Approach to project planningand performance analysis

Vladimir Liberzon, PMPPeter S. Mello, PMP, PMI-SP

Spider Project Team


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History

Success Driven Project Management (SDPM)methodology was developed in Russia in 90-s andsince then was successfully used in many projects,programs, and organizations

SDPM is supported by Russian PM software SpiderProject but its basic approaches can be used with

other PM software tools


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History

Success Driven Project Management methodologyhas some common features with Critical ChainProject Management approaches but manydifferences too

Application of SDPM approaches showed very good

results and the number of companies that implementSDPM is growing very fast


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SDPM Ideas

Triple constraint and multiple project success criteriamake project management too complicated.

There is a need in the single and integrated project successcriterion.

The same project schedule and budget targets set for allproject stakeholders leads to project failure.

There is a need for setting different targets for project workforce,for project management team, and for project sponsor.


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SDPM Ideas

Target for Project Team Member: Project scheduleand budget shall be optimistic (no reserves included);

Target for Project Management Team: Includes

contingency reserves (scope, time, cost);

Target for Project Sponsor: Project schedule andbudget shall include management reserves forunknown unknowns.


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SDPM Ideas

Targets

Project Team Members

Project Management Team

Project Sponsor

Time

Cost


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SDPM Ideas

Targets

Project Team Members

Project Management Team

Project Sponsor

Time

Cost


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SDPM Ideas

Project management team shall have time and costbuffers for managing project risks and uncertainties.These buffers are not linked with any activity sequence.

Project buffer is a difference between target value and the value

for the same parameter in the optimistic schedule.

Time

Cost

Time bufferManagement

Team

Cost bufferManagement

Team


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SDPM Ideas

Targets shall be set using risk simulation.

These targets shall have reasonable probabilities to bemet.

Risk simulation shall calculate necessary project costand time buffers.

Time

Cost

Time bufferManagement

Team

Cost bufferManagement

Team


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SDPM Ideas

Project status information is useful but not sufficient fordecision making.

Decision making shall be based on the analysis of project trends.

Project buffers will be consumed during projectexecution.

Project management is about managing these buffers.

If they will remain positive to the moment of project finish thenproject management was successful and the targets werereached.


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SDPM Ideas

There is a need to have tools for measuring projectbuffer penetrations and project performance analysis.

The best indicator of buffer penetration and projectperformance status is current probability to meet projecttarget.

If the probability to meet project target is rising thenproject buffer was consumed slower than we expected,in other case project buffer was consumed too fast andproject success is endangered.

Success probability trends are the best integrated

performance indicators they take into considerationproject risks, they depend not only on performanceresults but also on the ro ect environment.


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SDPM

SDPM methodology also includes approaches to creatingproject schedule models and organizing project data.

In this presentation we will discuss:o Resource Constrained Scheduling and Resource

Critical Path,

o Risk Simulation methods and objectives,o Setting right project goals,

o How to set and to manage Project Buffers,

o Success Probabilities,o Management by Trends


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Project ResourceConstrained Scheduling and

Resource Critical Path

1


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Project scheduling without resource limitations takeninto the consideration;

Project/Portfolio resource constrained scheduling(resource leveling);

Calculation of feasible activity floats and those activitiesthat are critical;

C lcul tion of the Pro ect/Portfolio cost m teri l nd

Scheduling Tasks


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The problem of project schedule development withoutallowing for resource constraints has a correct

mathematical solution (Critical Path Method), which wouldbe the same for all PM packages, provided that initial dataare identical.

Other tasks are solved using different approaches and

yielding different results.

Critical Path Method


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Resource constrained schedules produced by differentPM software are different. The software that calculatesshortest resource constrained schedules may save afortune to its users.

That is why we pay most attention to resource-constrained schedule optimization.

Resource constrained

scheduling


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Traditional notion of Critical Path works only in case ofunlimited resources availability.

Let us consider a simple project consisting of fiveactivities, presented at the next slide.

Activities 2 and 5 are performed by the same resource.

Sample Project before leveling


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Please pay attention to activities that became critical.Now delaying each of the activities 1, 2 and 5 will delay

the project finish date.

We call these activities Resource Critical and their

sequence comprises Resource Critical Path.

Sample Project after leveling


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For many projects it is necessary to simulate financing andproduction, and to calculate project schedules taking into

account all limitations (including availability of renewableresources, material supply and financing schedules);

True critical path should account for all scheduleconstraints including resource and financial limitations;

We call it Resource Critical Path (RCP) to distinguish it

from the traditional interpretation of the critical pathdefinition.



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The calculation of RCP is similar to the calculation of thetraditional critical path with the exception that both early

and late dates (and corresponding activity floats) arecalculated during forward and backward resource (andmaterial, and cost) leveling;

This technique permits to determine feasible resourceconstrained floats;

Activity resource constrained float shows the period for

which activity execution may be delayed within thecurrent schedule and with the set of resources availablein this project without delaying project finish.



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As you may notice in our example, Resource CriticalPath may include activities that are not linked with logical

dependencies.

Resource Critical Path is actually not the path but thelongest sequence of activities in the current schedule.

One activity may depend on another because theseactivities are performed by the same resources. We callthese dependencies as Resource dependencies.

Resource dependencies may be shown in the projectschedule with the dotted arrows but they are the result ofthe project leveling and not initial information like logicaldependencies.



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Success Criteria

2


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If project success criteria are set as finishing project ontime and under budget then proper decision making will

be complicated;

For example, project managers will not be able toestimate if their decisions to spend more money andfinish the project earlier are reasonable;

We suggest to set one integrated criterion of theproject/program success or failure.

Project Success Criteria


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Many projects can be considered as business oriented:

Construction of roads, power plants, bridges, ports,

telecommunication networks, new product development andproduction etc. brings economic results and generate futureprofits;

Implementation of the corporate information system will improveorganization processes, etc;

In any case the delay of project finish date usuallyincreases project indirect cost, and acceleration meanssaving some money.


S C


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So each day of project delay means some money lossesand finishing project earlier means additional profit;

We can define cost of a project day (maybe separate

and different for acceleration and delay) estimating theseprofits and losses;

This way we define the rules of the game that is calledProject Management


P j S C i i


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Another option to set the profit that should beachieved at some point in time basing on the forecast of

the revenues that will be obtained after the project willdeliver its results;

Such success criteria will permit to weight time and moneymaking managerial decisions.

At the next slide you may see the project schedule thatis calculated without allowing for project financing andsupply restrictions. There is a period when project has

no money to proceed.


P j S C i i


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If project manager

finds enoughmoney then projecttotal profit to thetarget date will beclose to $245,695.


P j t S C it i


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If we calculate

project resource,supply and costconstrained

schedule then itbecome clear thatthe project willloose more than

$17,000 due tonecessary delays.


P j t S C it i


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Maybe it is reasonable to borrow money or to find someother solution?

To be able to weight options and to select the best it isnecessary to consider not only expenses but also futureprofits.

Proper project (program, portfolio) schedule model is thepowerful tool that helps to select the best decisions.


3


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Risk Analysis &

Success Driven

Project Management

3

Wh i k l i


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Our experience in project planning shows that theprobability of successful implementation of

deterministic project schedules and budgets is verylow. Therefore project and portfolio planningtechnology should always include risk simulation to

produce reliable results.

Why risk analysis

Ri k Sim l ti


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Risk simulation may be based on

Monte Carlo simulation or use threescenarios approach.

We prefer 3 scenario approach forthe reasons explained further.

Risk Simulation

Monte Carlo and 3 Scenarios


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Lets look at the difference between accuracy and precision.

Accuracy:Precision:




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Monte Carlo means Accuracy but lack of Precision.

3 Scenarios means Precision but lack of Accuracy. The choice depends on management approach.

Our approach may be called Management by Trends. Applying Trend Analysis we rely on data precision.

We think that trends supply management with mostvaluable information on project performance.

We think that trend analysis helps to discover

performance problems ASAP and to apply correctiveactions if necessary.




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It is the main reason why in our software 3 scenariosapproach was selected.

We think that the quality of initial data for project risksimulation is never good enough but Monte Carlo risksimulation creates an impression of accuracy that is

actually dangerous for project managers.

In any case we need Optimistic schedule and budget forproject performance management.

And we need to understand what happens with successprobability during project execution and so we need dataprecision.


Risk Simulation


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A project planner obtains three estimates (optimistic,

most probable and pessimistic) for all initial project data(duration, volumes, productivity, calendars, costs, etc.)and creates optimistic, most probable and pessimistic

scenarios of project performance Risk events are selected and ranked using the usual

approach to risk qualitative analysis

Usually we recommend to include risk events with theprobability exceeding 90% in the optimistic scenario,exceeding 50% in the most probable scenario, and all

selected risks in the pessimistic scenario

Risk Simulation

three scenarios approach

Risk Simulation


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Most probable and pessimistic project scenarios may

contain additional activities and costs due tocorresponding risk events and may employ additionalresources and different calendars.

As the result project planner obtains three expectedfinish dates, costs and material consumptions for allproject phases and the project as a whole.

They are used to rebuild probability curves for thedates, costs and material requirements.

Risk Simulation


Risk Simulation


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If probability curve is known the required probability to

meet project target defines the target that shall be set. The area under the probability curve to the left of the

target value determines the probability to meet the

target.

P=S(blue)/S(whole)

Risk Simulation


Project/Program Targets


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Target dates of most projects usually are predefined.

They may be set not only for the whole program/projectbut also for its major phases.

Project planning includes determining how to organize

project/program execution to be able to meet requiredtarget dates with the reasonable probability.

Project/Program Targets

Success Probabilities


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Success Probabilities

Probabilities to meet approved project targets we callSuccess Probabilities. These targets may be set for all

project parameters that will be controlled (profit,expenses, duration, material consumption).

Target dates do not belong to any schedule. Usuallythey are between most probable and pessimistic dates.

A set of target dates and costs for project phases

(analogue of milestone schedule) is the real projectbaseline.

But baseline schedule does not exist!

Performance Measurement


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problems It means that application of usual project performance

measurement approaches (like Earned Value Analysis)is complicated.

Without certain schedule and cost baselines it isimpossible to calculate Planned and Earned Value.

If we select some schedule (Optimistic or Most

Probable) as the project management baseline thevalues of Performance Indices that are lower than 1 donot mean that project performance is worse than

expected.

Buffers


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We recommend to use optimistic schedule for setting tasksfor project work force and manage project reserves.

The schedule that is calculated backward from the targetdates with most probable estimates of activity durations wecall Critical schedule.

The difference between start and finish dates in current andcritical schedules we call start and finish time buffers(contingency reserves).

The difference between activity (phase) cost that hasdefined probability to be met and optimistic cost of the sameactivity (phase) we call cost buffer.

Buffers

Sample Critical Schedule


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There are time,cost and material

buffers that showcontingencyreserves not onlyfor a project as a

whole (analogue ofCritical Chainproject buffer) butalso for any activityin the optimisticproject schedule.

Sample Critical Schedule

4


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Project/Program/Portfolio

Performance Management

4



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Performance measurement routine shall be set for allprojects belonging to the portfolio/program.

Portfolio/Program schedule is revised regularly. For mostlarge programs it is done weekly. To be able toreschedule the portfolio/program it is necessary that allprojects belonging to the portfolio/program have the samedata date.

So the portfolio/program management team requires fromall project management teams to enter actual data of theirprojects at specified dates and time (for an example: each

week on Tuesday before 12:00 the actual status onTuesday 08:00 shall be entered).




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If different projects have different data dates thenprogram scheduling became impossible and most

reports will not be reliable.

So setting the rules for entering actual data is mandatoryfor program/portfolio management.

Project/Program/Portfolio planners shall keepperformance archives to be able to get trends of

project/program/portfolio parameters.


Management by Trends


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We recommend to manage projects and portfolios basingon the analysis of performance trends.

If some project is 5 days ahead of the baseline but oneweek ago it was 8 days and one month ago 20 daysahead of the baseline then some corrective action shall beconsidered.

If the project is behind the schedule but the distance

become smaller then project team improved projectperformance process and corrective actions are notnecessary.




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So trend analysis shows short term performance resultsand helps to make timely management decisions.

Usually project management team analyses trends ofmain project parameters like duration, cost, profit.


Earned Value Analysis


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Earned Value Analysis is another method that is usedfor estimating program/project performance.

But this method shall be used very carefully and only incombination with other methods because:

the real situation may be distorted,

project managers are motivated to do expensive jobsASAP and cheap jobs ALAP,

it does not consider if activities that were performedwere critical or not,

it does not consider project risks.

Earned Value Analysis

Success Probability Trends


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We consider success probability trends as the reallyintegrated project performance measurement tool.

Success probabilities may change due to:

Performance results

Scope changes

Cost changes

Risk changes

Resource changes

Thus success probability trends reflect not only projecterform nce results but lso wh t is oin on round the

Success Probability Trends

Measurement of buffer


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Success probability is a measure of buffer penetration.

If in the middle of the project half of project buffer wasconsumed it does not mean that the project is performed asexpected.

If most risks were behind then success probability willbecome higher and it will tell us that project buffer

consumption was lower than expected, if successprobability went down then buffer consumption is too highand it is necessary to consider corrective actions.

Measurement of buffer

penetration

Success Driven Project


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Success probability trends may be used as the only

information about project performance at the topmanagement level because this information is sufficientfor performance estimation and decision making.

We call Management by Trends methodology SuccessDriven Project Management.

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Management

5


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Conclusions

5



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1. Multiple project/portfolio success criteria make

management decisions complicated and subjective.

1. We recommend to set one integrated project successcriterion for decision making and performance analysis.

1. We recommend to set reliable target dates and costsbasing on risk analysis and simulation, but to use

optimistic project schedule for setting tasks for projectwork force.

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Management Tips



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4. Time and Cost contingency buffer penetrations shall be

regularly re-estimated. If these buffers are consumedtoo fast there is a need for corrective actions;

5. We recommend to keep project archives and to analysetrends of project parameters;

5. If trends are negative corrective actions shall be

considered even if the status is good;

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Management Tips



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7. Earned Value Analysis supplies management with the

useful information on project status. But it shall be usedcarefully and only as the supplement to other methodsof project performance measurement. In any case it is

useful to analyze EV parameters trends;

8. Success Probability trends are the best integratedindicators of project health.

Positive trends show that recent project performance is better than

expected. Negative trends show that buffers are consumed fasterthan expected and corrective actions may be necessary.

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Management Tips



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9. Success probability trends depend not only on projectperformance but also on risks that may changeduring project life cycle.

Success Probability Trends may be considered asthe best integrated project performanceindicators necessary for proper decision making.

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Management Tips

APPENDIX 1


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Success Driven Project Management and Critical Chain Project Management

59

APPENDIX 1

RCP and CC


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Resource Critical Path is the same as Critical Chainexcept suggested approach to determining Critical

Chain does not include taking into account supply andfinancial constraints.

We never met the clear description of CC calculation

algorithms.

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Drum Resource


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CCPM suggests to find Drum resource and create theschedule and determine Critical Chain scheduling

activities of this Drum resource.

SDPM does not look for drum resource. At differentproject phases different resources may be critical,

Resource Critical Path is calculated applying traditionalresource leveling.

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Optimistic or Most


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SDPM suggests to use Optimistic estimates for project

work force management.

CCPM suggests to use most probable estimates.

Using most probable estimates still means that there are

some reserves for usual problems and these reserveswill be lost in any case (Parkinson Law):

WORK EXPANDS SO AS TO FILL THE TIME

AVAILABLE FOR ITS COMPLETION

Probable?

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Project Buffers


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CCPM suggests to estimate excessive contingencyreserves that people added to most probable activity

duration estimates, take them away, summarize and putin a dummy activity that is called Project Buffer andfollows the last activity of Critical Chain.

SDPM uses risk simulation for setting reliable targets andproject time buffer is the difference between acceptedproject schedule finish and target finish. Project time

buffer does not belong to any chain.

Besides, SDPM also works with Project Cost Buffers andMaterial Buffers.

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Feeding Buffers


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CCPM suggests to create feeding buffers on activitiesthat precede Critical Chain activities to protect Critical

Chain.

CCPM proposes that Critical Chain shall never change.

SDPM does not protect any chain project schedule isregularly recalculated and risks analyzed.

Besides Resource Critical Paths in optimistic, mostprobable, and pessimistic schedules may be different.

Change of RCP during project execution is usual.

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Multitasking


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CCPM suggests to pipeline projects in the portfolio (toperform them one after another) to avoid multitasking.

SDPM suggests almost the same always applypriorities to the portfolio projects calculating portfolioschedule. But if resources are available they may be

used in the projects with lower priorities.

Besides there are special cases when multitasking is

useful. An example is in the next slide.

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Multitasking


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With multitasking:

Without multitasking:

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Buffer Penetration


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CCPM does not suggest reliable quantitative methods for

analyzing buffer penetration. Dividing buffer into threezones (green, yellow, red) is one of them. Entering yellowzone means an alert, red requires corrective actions.

SDPM estimates buffer penetration by successprobability trends. If the trend is negative then projectbuffer is consumed faster than expected.

If in the middle of the project performance project bufferis half consumed it may mean excellent performance if

most risks are behind and poor performance if most risksare ahead.67

Estimation

APPENDIX 2


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SDPMwith other PM

software

SDPM with PM software and


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SDPM is fully supported by Russian PM software Spider

Project but it does not mean that SDPM cannot beapplied with other PM software.

We will show that it is easy with any PM softwarethough more complicated than with Spider Project.

Excel



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We will start with discussing simplified calculation of the

probability to meet project target.

Lets suppose that we got optimistic, most probable andpessimistic values of some project parameter.

It does not matter much what shape of probability curvewill be selected. Remember that our initial data are not

perfect and we plan to manage trends. So lets supposethat the distribution is triangular.

Excel



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Lets restore the triangle distribution and calculate the

probability to meet some target T.

It is an area to the left of T divided by the whole area ofthe triangle. It is not hard to get the formula shownbelow where X is the probability to meet target T.

Excel



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Now lets look at the simple sample project where we

defined optimistic, most probable and pessimisticactivity durations using PERT option in MS Project2007.

Applying PERT weights 6, 0, 0 we will make expectedschedule the same as optimistic, with weights 0, 0, 6expected schedule will become pessimistic.

Excel



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Lets enter total project durations and formula forcalculating target probability into Excel.

You may see how Excel calculated probabilities to meetdifferent target dates.

Optimistic schedule shall be used for setting tasks for

project workforce.

Excel



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During project performance planned project duration inoptimistic, probable, and pessimistic scenarios will change.

Entering these data in Excel we will be able to calculatecurrent values of success probability.

Excel



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When probability value reach 1 we may be almost sure

that target date will be met.

Probability trend shows when we had problems and whenthey were solved.

0

2

4

6

8

10

12

Probability

Excel


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Thank YouFor Attending!

References for SDPM: www.sdpmworld.comwww.spiderproject.com

Contacting the authors:[email protected]@spiderproject.com.br
http://www.sdpmworld.com/http://www.sdpmworld.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.sdpmworld.com/http://www.sdpmworld.com/

SDPM Approach to Project Planning and Performance Analysis

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