Aggregate Risk Critical Path Planning:

1. Aggregate Risk Critical Path Planning: A Discussion of Leveraging Critical Chain Concepts for Critical Path Robert Richards, Ph.D. Stottler Henke Associates, Inc. www.StottlerHenke.com Hilbert Robinson President, Afinitus Group, LLC

2. Orientation • Introduction • Uncertainty & Risk • Needs for Aggregated Risk • Aggregated Risk: The Critical Chain Solution • Aggregate Risk Critical Path Planning • Conclusions • Q/A & Authors PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

3. Critical Chain & Resources • Critical Chain Project Management (CCPM): Resources explicitly defined and tracked • Imply that resources must be modeled to use Critical Chain concepts? • Only a subset of concepts deal with resourcesI.e. many of CCPM’s benefits are independent of resources PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

4. Critical Chain & Resources (2) • Many of CCPM’s benefits are independent of resources • If resources available in large enough quantities, then Critical Chain = Critical Path PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

5. Critical Chain & Critical Path • Why Not Leverage Critical Chain Concepts for Critical Path PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

6. Aggregation of Risk • Major Principle of Critical Chain • Does not explicitly require resource modeling • Fights • Student Syndrome • Parkinson’s Law • Let’s Look at in More Detail PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

7. Uncertainty & Risk • All Projects deal with uncertainty and risk • Provisions are always made to accommodate a reasonable amount of uncertainty PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

8. Non-Aggregate Risk • Traditional Critical Path implementation uses what will be referred to as a non-aggregated risk • Basic building block of the project model is the task or activity. • Assumption: in order to have a high confidence that the project will finish on time … each activity (or at least most) need to finish on time PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

9. Activity Contingency • Amount required by each activity to make it reliable is not trivial • More uncertain the environment and the more significant the consequence of missing the commitment, the greater the amount of safety incorporated into the planning of each activity must be, in order to maintain a high degree of reliability. • This is the non-aggregated risk technique; each activity is lengthened to provide protection against all its associated risk. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

10. Task Estimation Variation 50% confidence Safety 10% confidence 90% confidence 2 5 PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc. 10

11. “I know the task will be late before it comes to me” safety “I know this is not the only task I will work on” safety “I know my manager will cut estimates anyway” safety Estimating Task Durations • The situation: You are asked to estimate how long it will take you to complete a critical task. You want to make sure that you can live up to the estimate you provide. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

12. Needs for Aggregated Risk • Paradox? Even with apparent safety – projects still have a tendancy to be late • Student Syndrome • Parkinson’s Law • Critical Chain – considers these in its mitigation strategy  Aggregated Risk • Independent of Resources • Thus may be applicable to Critical Path PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

13. Level of Effort Deadline Trigger Start Scheduled Completion Time Student Syndrome (Procrastination) • Initial Activity • Inactivity • Deadline Trigger • Burst of Activity PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

14. Parkinson’s Law • “Work expands so as to fill the time available for its completion” • I can make it better. • I don’t want to be wrong on my estimate. • Avoid the accusations of “Sandbagging”. • The reward for finishing early is more work. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

15. Aggregated Risk: The Critical Chain Solution • Project Networks rebuilt:1) Removing hidden contingency from activity durations2) Replace with explicit contingency provisions • Strategically located at key points in the network • Results in: Project with shorter overall duration & higher degree of schedule protection.Project Level vs. Task Level Protection PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

16. Aggregation Principle • Insurance is designed to work by spreading costs across a large number of people. Premiums are based on the average costs for the people in an insured group.  This risk-spreading function helps make insurance reasonably affordable for most people. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

17. Introduction to Critical Chain • Developed by Eliyahu M. Goldratt • Introduced in 1997 • Derived from the Theory of Constraints • Differs from CPM in focus on resource requirements • Focuses on protecting the project’s critical chain • Gathers contingency time into pooled buffers protecting the critical chain PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

18. Critical Chain Planning Process From Task to Project Protection 1. Traditional Plan 2. Safety Excluded 3. Resource Leveled 4. Critical Chain Marked PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

19. Buffer Placement • Project Buffer • Between the last task of the aggressive project schedule critical chain and the committed end date • Feeding Buffers • Protect the critical chain from being impacted by non-critical chain • Place at the end of non-critical chains before they connect to the critical chain PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

20. Buffered Project PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

21. Buffered Project (2) • Aggregation Principle [where did some of the safety go?]: • Pooled protection provides more coverage • Location is just as important as amount • Sizing Rule of Thumb  Buffer is half of preceding chain • Buffers does NOT = Management Reserve Compared to 60 days traditional PB = Project Buffer FB = Feeding Buffer PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

22. Critical Chain: 2nd Look • The shortest causal path through a schedule • Takes resource requirements, contention into account • Slippage in the critical chain causes slippage in the delivery date PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

23. Critical Chain: Example PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

24. Buffering the Critical Chain PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

25. T8 experienced a 5 day increase in scope or delay Results in a 2.5 day impact to the project buffer The rest was absorbed by the CC gap 35-32.5=2.5 7% Complete and 14% Buffer Consumed Execution Mode: Buffer Management Schedule Before Execution Starts “AS OF DATE PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

26. Project Buffer Consumption after Feeder Buffer Consumption PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

27. Fever Chart PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

28. CCPM Schedule Control • Frequently status with estimates of Remaining Duration for working tasks: • Simple. • Forward looking. • Calculate impact on project buffer tracing task chains forward: buffer penetration. • Compare to pre-set thresholds for action: • Greenno action • Yellow plan buffer recovery. • Red implement buffer recovery. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

29. Aggregate Risk Critical Path Planning • The process to determine the Critical and Feeding Chains is identical regardless of whether resources are in scarce supply or not. • Resource scarcity has the impact of altering which tasks comprise the Critical versus Feeding changes but has no other material impact. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

30. Aggregate Risk Critical Path Planning • Update each activity duration to remove the entire hidden contingency, i.e., the activity duration is that duration where the probability of finishing on time is 50/50. • Insert Feeder Buffers (FB) where non-critical-path activities merge into the critical path. • Insert a Project Buffer (PB) after the final critical path activity. • During execution prioritize activities using buffer penetration. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

31. ARCPP: Implementation • Model as currently done • Set all the activities to require one unit of an arbitrary resource • Define the available number of arbitrary resource units to the number of activities. • Export to a Critical Chain software package • Use the Critical Chain software as advertised • Result = Aggregate Risk Critical Path Planning. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

32. Conclusions • By removing major inhibitor to the application of the Critical Chain method (the effort required to explicitly model resources) – more projects may benefit from a key concept of CCPM – Aggregated Risk • Aggregate Risk Critical Path Planning minimize the negatives: • Procrastination, and • Parkinson’s Law. • By making Critical Chain benefits accessible a la carte, 1) more likely to be experimented with and 2) incorporated into practice • Practitioners may find that a subset of concepts serves them better PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

33. Q/A & Authors Robert Richards, Ph.D. Stottler Henke Associates, Inc. 951 Mariner’s Island Blvd, Suite 360 San Mateo, CA 94404 (650) 931-2700 PMICOS2008.R.RichardsPhD@Neverbox.com Hilbert Robinson Afinitus Group, LLC 425-231-4637 hrobinson@afinitus.com PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.