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

PMI College of Scheduling 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.

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 resources I.e. many of CCPM’s benefits are independent of resources This presents a challenge to some who may otherwise be interested in taking advantage of these concepts. Notes after 2nd bullet: In many scheduling applications, it is common practice to ignore resource load and capacity as factors in determining the schedule. The goals therefore is to find a way to take advantage of Critical Chain concepts without the explicit modeling of resources, as is typically required in the traditional application of those concepts. This is possible once it is understood that: 3rd bullet PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

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.

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.

PMI College of Scheduling 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.

PMI College of Scheduling 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.

PMI College of Scheduling 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.

PMI College of Scheduling 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.

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

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

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.

Student Syndrome (Procrastination) Initial Activity Inactivity Deadline Trigger Burst of Activity Level of Effort Start Scheduled Completion Time Deadline Trigger When does the unexpected tend to occur – before or after activity start? What about the safety we embedded to account for the unexpected? PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

PMI College of Scheduling 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.

Aggregated Risk: The Critical Chain Solution Project Networks rebuilt: 1) Removing hidden contingency from activity durations 2) 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.

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.

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.

Critical Chain Planning Process From Task to Project Protection 1. Traditional Plan 2. Safety Excluded The process starts with the creation of a project network that reflects the logical dependencies between activities in a project. Resource requirements are then added (represented in the exhibit by different colors) and the tasks estimated according to the new rule of scheduling activities with no contingency embedded. The entire network is then scheduled to level the work load of each resource to fit within their stipulated capacity. The list of tasks comprising the “Resource Constrained Critical Path” otherwise referred to as the Critical Chain, is then identified and all remaining tasks assigned to one or more feeding paths. See the yellow outlined sequence of tasks. At this point the network is a very aggressive representation of the schedule as it has no provisions for uncertainty. The model at this point is therefore considered to be too high risk to be used as the basis for committing to a schedule or budget. 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.

PMI College of Scheduling 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.

PMI College of Scheduling Buffered Project The final step of creating the single project Critical Chain schedule is to calculate and insert appropriately sized and located contingency buffers designed to render the schedule practically immune to the normal levels of uncertainty one is likely to encounter during execution of the typical project plan. FB stands for Feeder Buffer. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

PMI College of Scheduling Buffered Project (2) Compared to 60 days traditional PB = Project Buffer FB = Feeding Buffer 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 Application of Aggregation Principle means that the amount of protection required in a schedule decreases as the number of tasks being protected increases. A series of tasks protected at one location requires less protection than if each task was to be individually protected. Locating all the protection in a project at the end of the project provides maximum protection for all the tasks in that project. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

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.

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

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

Execution Mode: Buffer Management Schedule Before Execution Starts “AS OF DATE Run Rule: No scheduled starts, work to global priorities only 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 PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

Project Buffer Consumption after Feeder Buffer Consumption Once the feeder buffer is consumed, any more overage immediately impacts the project buffer. PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

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

PMI College of Scheduling 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: Green no 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.

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. Only one (albeit important) part of the solution required the explicit modeling of resources, the determination of the critical chain and hence the feeder chains. Note that this determination of the critical chain and hence the feeder chains would proceed in the same way even if there were always enough resources so that a resource conflict never arose. That is, if the Critical Chain (i.e., the resource-constrained critical path) was the same as the Critical Path PMI College of Scheduling “PMI” is a registered trade and service mark of the Project Management Institute, Inc.

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.

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.

PMI College of Scheduling 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.

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.