ProjectEngineer https://www.projectengineer.net Sun, 03 Mar 2024 14:42:57 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.8 PMI Project Knowledge Areas, Intro https://www.projectengineer.net/pmi-project-knowledge-areas-intro/ https://www.projectengineer.net/pmi-project-knowledge-areas-intro/#respond Sun, 03 Mar 2024 14:42:57 +0000 https://www.projectengineer.net/?p=11503

ProjectEngineer.NET is aims to build better project managers each day. That’s why we’re launching this video series to teach current and future PMP students about the ten knowledge areas of the Project Management Body of Knowledge (PMBOK).

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PMI Project Knowledge Areas, Video 1: Project Integration https://www.projectengineer.net/pmi-project-knowledge-areas-video-1-project-integration/ https://www.projectengineer.net/pmi-project-knowledge-areas-video-1-project-integration/#respond Sat, 02 Mar 2024 02:36:06 +0000 https://www.projectengineer.net/?p=11496 [Read More]]]>

Project Integration is the “mother” to all other project knowledge areas and brings the knowledge and processes together where there is overlap, synergies and flow between other knowledge areas. It has the most processes of any knowledge area at 7 and spans the entire set of process groups.

Looking at the Integration knowledge area in more depth, it can be broken down into the 7 processes that define it. Each process is examined in this video and a summarized outline is provided below. Understanding Project Integration and how it fits within the 7 knowledge areas and 5 process groups is a key set of knowledge that will help you pass your PMP exam and practice good project management.

Project Integration across the process groups:

Initiating

Develop Project Charter: every project must have a Project Charter, which defines the vision, mission, objectives, spending thresholds and other components of a project (including considering risks, schedule, staffing and so forth). The project charter is generally created by the project manager in consultation with other stakeholders: an executive sponsor, one or more subject matter experts, industry/company experts, business analysts and support team managers. The project charter defines the project in principle, and generally from a high level. The project management plan is where the details will go.

Planning

Develop Project Management Plan: the project management plan is a top-down/bottom-up detailed document that covers all aspects of the project on which you are about to embark. The project manager (along with schedulers, coordinators, controllers and other professionals on larger projects) will need to estimate time, effort and cost of work. Once this is done coordination of tasks, sequencing work packages and defining stakeholders are amongst the next priority items to consider. As we go through the 10 knowledge areas in this series, you’ll see how each one of them contributes to the overall plan (for example, how to consider and document risks and risk mitigation in your project plan).

Executing

Direct & Manage Project Work: This sounds straight forward, but really requires significant focus, tenacity and experience. Part of what this means is holding project participants accountable to tasks, deadlines and risk mitigation efforts; however, this also means understanding the road ahead and
adjusting well in advance of critical issues (under/over estimating schedules, missed risks, insufficient mitigation of risks, under staffed project work, etc.)

Manage Project knowledge: Tacit / explicit knowledge

Monitoring & Controlling

Perform integrated change control: oversee all change requests and requirements. Escalation to the CCB (change control board, sometimes a steering committee, operating committee, or working group)

Monitor & control project work: Assess/evaluate project work that’s underway, and this really ties into other knowledge areas. Questions to ask: what’s the critical path? Are we missing any scheduled dates? Are there any risks coming to light now that the project is underway?

Closing

Close project or phase: the process of closing a project can often be underestimated from a cost and schedule perspective. Depending on the project you’re running, whether it’s a full project closeout or a phase in a larger project, project closeout can be extensive: site cleanup; drawing, document and records management; or, process transition to operations. These are a just a few examples, but each industry and project type has its own set of protocol, administration and nuances.

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Project Risk Checklist https://www.projectengineer.net/project-risk-checklist/ https://www.projectengineer.net/project-risk-checklist/#respond Mon, 16 Jan 2023 18:10:26 +0000 http://www.projectengineer.net/?p=6049 [Read More]]]> Identifying risks is a central component of project risk management. Risks are identified using various methods and placed into a risk register. The risks are then analyzed and prioritized, and appropriate risk response plans are drawn up.

I would like to update this list and keep it current, so if you have anything to add please leave a note in the comments section.

Project Scope

  • Scope is incomplete
  • Scope is unclear
  • Tasks get added during project without approval (scope creep)
  • Stakeholders demand additional scope
  • Project sponsor has different expectation of scope
  • Subconsultant/subcontractor scope definition is not clear
  • Project sponsor/executive demand additional scope without supplying additional funds

Project Quality

  • Quality of product/service does not meet expectations
  • Technical expertise of checking/reviewing not adequate
  • Technical errors
  • Technical omissions
  • Required technical training or learning curve is longer than anticipated
  • Design is not feasible
  • Design is not practical
  • Design is difficult or impossible to build
  • Design lacks features or flexibility
  • Design standards are not met
  • Standards change during project
  • Contractor does poor quality work
  • Contractor uses poor quality suppliers
  • technological change impacts deliverables

Project Schedule

  • Project is behind schedule
  • Resources cannot be secured as anticipated
  • Stakeholders demand excessive consultation/communication
  • Contractor starts late
  • Contractor finishes late, pays penalty, delays others
  • Delay due to worker injury or fatality

Risk Management

  • Important risks are not identified.
  • Response plans are inadequate.
  • Risks are not shared with stakeholders.
  • Unauthorized risks are added to project by sponsors/executives

Market

  • The product will not realize enough Return on Investment (ROI)
  • Sales are insufficient
  • The project’s costs are not recovered
  • Market size shrinks
  • Competitors introduce competing products
  • Funding is cut

Communication

  • Stakeholders do not receive sufficient communication
  • Project sponsor/executives are not aware of project progress
  • Regulatory authorities not contacted early enough
  • Inspectors and contractors don’t get along

Procurement

  • Insufficient vendors to get a good price
  • Low quality of vendors
  • Vendor’s contract introduces risk
  • Vendor requires additional funds after contract signed
  • Contractor goes bankrupt during project
  • Contractor walks away
  • Contractor does poor quality job
  • Contractor performs unit price work without authorization
  • Contractor does less work on lump sum bid item

Stakeholders

  • Stakeholders delay project due to unmet concerns
  • Stakeholders introduce additional cost or scope that was unknown at project planning stage.
  • Stakeholders fight with each other
  • Regulatory authorities slow to grant approval
  • Regulatory authorities add cost – require additional studies, etc.
  • Regulatory authorities do not approve project
  • Stakeholders ignore project communications
  • Stakeholder turnover
  • Project sponsor/organization doesn’t approve of design

Project Cost

  • Cost estimates are too low
  • Costs of suppliers or equipment was not locked in
  • Cost of supplies/equipment changes
  • Manpower costs change
  • Contractor payment/progress estimates incorrect
  • Adminstrative and overhead costs underestimated
  • Project ROI not as anticipated
  • interest rates affect amortization of assets
  • technological change improves cost structure of project
  • WCB premium increase due to worker injury or fatality

Human Resources

  • Unable to secure required project team.
  • Insufficient funds to pay project team’s demands
  • Project team turnover
  • Organizational priorities remove project members
  • Turnover of project sponsor or organization
  • Worker injury

Other

  • Corporate support for project disappears
  • Meddling or micromanaging from corporate executives or project sponsors
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Creating a Risk Register https://www.projectengineer.net/creating-a-risk-register/ https://www.projectengineer.net/creating-a-risk-register/#comments Thu, 12 Jan 2023 15:10:49 +0000 http://www.projectengineer.net/?p=6020 [Read More]]]> The largest projects in the world, from the summer olympics to big petrochemical projects, have one major thing in common at the project management level: A relentless focus on risk. What happens if there is a riot? Or a catastrophic explosion? What if protestors disrupt the project, or regulatory agencies reject it?

These large megaprojects must allocate a small but important part of their budget to studying risk events and ensuring the adequate response plans are in place in advance of their potential disruption.

If it makes sense on large projects, doesn’t a proportional amount of risk analysis make sense on any size project?

The backbone of a solid risk management plan is called a risk register.

What is a Risk Register?

A risk register is an itemized listing of the risks that could derail the project.  For example, a supplier delivering their product late.

The Project Management Body of Knowledge defines a risk register as a document in which the results of risk analysis and risk response planning are recorded.  It is created within the context of the overall project management plan and/or risk management plan (if applicable).

Risk Register Example

Here is an example risk register:

Risk Register
ID Risk Probability Impact Contingency Risk Response Plan
1 Rain delay 20% 5 days 1 day Read weather forecast daily. Inform supervisor of poor forecast the previous day
2 Poor quality welding 10% $3,000 $300 Inspect welding prior to end of day

How to Create a Risk Register

There are three steps to creating a strong risk register:

  1. Risk Identification
  2. Risk Analysis
  3. Risk Response Plans

Risk Identification

A strong risk identification process is central to good project risk management.

There are many techniques that can be used to develop a listing of risks, but here are the most important:

  • Brainstorming
    Whether alone or in a group, brainstorming involves focusing on quantity over quality.  Just write everything you can think of on paper, and then come back and narrow down the list later.
  • Subject matter experts
    There is no substitute to having experts in subject matter advising you of the risks involved with the work.  Often they are in other departments but their advice is second-to-none.
  • Checklists
    Although we have a generic checklist, it is best to eventually develop a specific one for your organization or type of project.
  • Lessons learned
    Few organizations maintain a lessons learned database, but it is an invaluable tool. It’s a collection of project summaries, a record of problems encountered, mistakes made, and what the project manager would do differently in future projects.  When you’re starting a new project and you spend a few minutes reading that, how can you go wrong?
  • Documentation review
    This involves learning about the project, its technical details, and its people.  The higher risks will be present in the non-standard tasks that haven’t been performed by the organization before.
  • SWOT Analysis
    A Strengths-Weaknesses-Opportunities-Threats analysis will assist in drawing out the risks inherent in the project.  Particularly the Weaknesses and Threats quadrants can yield some new risks.
  • Delphi technique
    This method involves querying a group of people or subject matter experts, then sharing all of the answers anonymously with the whole group and letting them revise their original answers.  After several rounds a consensus should emerge.
  • Assumptions analysis
    Every project contains certain underlying assumptions upon which its business case is built.  Identifying these assumptions, and analyzing their reliability, can result in the identification of new risks.
  • Influence Diagrams
    Drawing out a simple decision network for the major turning points within a project can yield the important risks.

Obviously it is not possible, nor is it a desirable goal, to list all risks to a project. The real world simply contains too many possibilities. But a risk register is there to provide the project manager with a swift and decisive response when things go wrong.

The following example illustrates the Risk Register after the Risk Identification step:

ID Risk
1 Rain delay
2 Poor quality welding

 

Risk Analysis

There are two types of risk analysis:

  1. Qualitative Analysis
  2. Quantitative Analysis

Qualitative Analysis

This involves assigning each risk in the register a probability and impact score.

Risk has two components:

Risk = Probability x Impact
  • Probability. The statistical chance that the risk event will occur.
  • Impact. The consequences of the risk event.

For small projects each risk event can be given a score of 1-10, A-E, or similar in both categories. For larger projects it might be prudent to put the Probability on a scale of 1-100 (i.e. a percentage) and the Impact the actual impact on the project. This can be a monetary value, schedule impact, or whatever the actual impact is.

For example, you could decide that there is a 20% chance that the project will be delayed 5 days due to rain. In this case the Probability is 20% and the Impact is 5 days. Another example would be that there is a 10% chance that the welder will have to return to fix deficiencies at a cost of $3,000.

Both of these examples are typical to real projects and easy to obtain from real data from previous projects (or first hand experience).

After qualitative analysis, our example risk register looks like this:

Small Projects
ID Risk Probability Impact
1 Rain delay 7 2
2 Poor quality welding 2 6
Intermediate Sized Projects
ID Risk Probability Impact
1 Rain delay 20% 5 days
2 Poor quality welding 10% $3,000

Quantitative Analysis

Once each risk event is given a Probability and Impact score, it is analyzed and compared to the other risks to determine a prioritization. Quantitative analysis involves the use of analytical tools to determine the effect of the risk on the project.

For small projects the two scores on a scale of 1-10 can be multiplied together to determine the overall priority of the risk. This will not yield a meaningful project impact value but it will provide you with a prioritized ranking of the project risks. Communicating this list to clients or stakeholders can be very effective in the absence of any other analysis, and can be appropriate for small projects.

Small Projects
ID Risk Probability Impact Priority
1 Rain delay 7 2 1
2 Poor quality welding 2 6 2

For intermediate size projects, the sophistication level can be increased.  The Probability can be put on a scale of 1-100 and the Impact as the actual impact (in dollars, days, etc.). The quantitative analysis step consists of multiplying the two together to get a meaningful value for the risk event’s consequences to the project. For example:

  • 20% chance of being delayed by 5 days = 0.20 x 5 days = 1 day.
  • 10% chance of welder returning to fix deficiencies at a cost of $3,000 = 0.10 x $3,000 = $300.

In order to ensure these risk events are covered the schedule would be increased by 1 day and the budget would be increased by $300.  These are effectively project contingencies.

The task which receives the changes is not always obvious. For example, if there is a task called “welding” it would obviously receive the budget increase, but what about the rain delay? It can be added to any one task or averaged throughout all of them.

The risk register now looks like this:

Intermediate Sized Projects
ID Risk Probability Impact Contingency
1 Rain delay 20% 5 days 1 day
2 Poor quality welding 10% $3,000 $300

These values represent the ideal contingency. In other words, if you performed the project many times this value will cover those potential risk events.

It could also be seen as a fair insurance premium if you were to attempt to remove the risk via purchasing insurance, performance bonds, or the like.

Finally, for large projects, it could be prudent to perform more detailed analyses:

  • Monte Carlo analysis involves assigning a probability distribution to risk events and running many random simulations to determine what the actual budget/schedule probability outcome for the overall project is.
  • Running simulations or lab tests to determine the potential real world occurrence of theoretical events.
  • Consult probability tables. Probability values of known events can often be looked up and then combined to produce tangible probabilities of other real world events. For example, the probability of rain events in most parts of the world are known. The number of days during the project in which rain would delay it is also well known. The statistical probability of rain delay on the project can then be calculated.

Risk Response Plans

The third and final step in the production of a risk register is the creation of response plans.

There are four ways to respond to each risk event within the risk register:

  1. Avoid.  Eliminate the threat or protect the project from its impact. For example,
    1. Change the scope of the project.
    2. Extend the schedule to eliminate a risk to timely project completion.
    3. Change project objectives.
    4. Clarify requirements to eliminate ambiguities and misunderstandings.
    5. Gain expertise to remove technical risks.
  2. Transfer.  This involves moving the impact of the risk to a third party.  Direct methods might be through the use of insurance, warranties, or performance bonds.  Indirect methods such as unit price contracts instead of lump sum (or vice versa depending on which side of the contract you’re on), legal opinions, and so forth.
  3. Mitigation.  Reduce the probability or impact of the risk.  This is not always possible and often comes with a price that must be balanced against the value of performing the mitigating action.
  4. Accept.  All projects contain risk.  As a minimum, there is the risk that it does not accomplish its objective.  Thus stakeholders, by definition, must accept certain risks.  Accepting risk is a strategy like any other, and should be documented and communicated like any other strategy.  After all, project success is defined by the project stakeholders, and strong relationships and communication can result in success in spite of the occurrence of risk events.  Risk acceptance can be passive, whereby the consequences are dealt with after the risk occurs, or active, whereby contingencies (time, budget, etc.) are built in to allow for the consequences of the risk to the project.

The Risk Register will Change

Throughout the project the risk register will be in a constant state of change. As the real world presents new risks, the risk register must be updated to ensure it contains the most accurate risk profile of the project.  On top of that, the project manager is constantly checking off risks from the register as they expire (their probability of occurrence goes to zero).

Risk events should be re-assessed on a regular schedule.  One of the following three things could occur at any time during the project:

  1. The risk has been eliminated
  2. The priority has been changed (probability and/or impact)
  3. The risk event has been triggered.  It is now an issue.

Whether you’re a veteran risk manager on megaprojects or a technical project manager on small projects, everyone can benefit from the use of a risk register.

Good luck with your risk register and let us know in the comments if you have anything to add.

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50 SMART Goals https://www.projectengineer.net/50-smart-goals/ https://www.projectengineer.net/50-smart-goals/#respond Wed, 11 Jan 2023 15:49:50 +0000 http://www.projectengineer.net/?p=6027 [Read More]]]> When I was a middle manager, I saw many goals that ended up as roadkill on the business superhighway. Whatever the flavor of the year was, that’s what was reflected in the business goals. Things like: reducing dependence on one client, diversifying our service offerings, and others made the rounds through our business units.

One year our vice president even said something to the effect of “My being here is dependent on reducing our dependence on one particular client.” In hindsight, that goal was accomplished by slowly losing business from that client (because it was clearly not a priority) without replacing it with new ones. In other words, the overall business is now much smaller, and that vice president is still there.

Goal accomplished, then?

I have the impression that I am not alone in my experience with business goals.

Business goals should be SMART:

  • Specific. If your goal is simply “to improve” I’ve got news for you.  You probably won’t.
  • Measurable. Many wonderful goals are not easily measurable, and their success or failure gets drowned out by the debate of whether or not they were.
  • Achievable. There’s nothing more demoralizing than being given goals that are outside of someone’s abilities.
  • Relevant. Ensuring the coffee is always hot and ready is a fantastic goal (in my office) but not relevant. That’s an extreme example, but suffice it to say that it’s easy to set goals for secondary things. Keep them focused on the important performance metrics.
  • Time-bound. In my previous company it was standard procedure to set goals that had no end in sight. Unsurprisingly, years later there was a different goal and nobody really knew what the goals meant. You can do everything else right, but you still need to have a time frame to achieve the goal.

Here are some examples of SMART goals you might utilize in your business unit or project:

  1. Revenue
  2. Number of clients/customers
  3. Number of projects
  4. Revenue per client
  5. Revenue per project
  6. Value of repeat business
  7. Number of repeat customers
  8. Deadlines achieved (yes/no)
  9. Number of milestones achieved
  10. Cost variance
  11. Schedule variance
  12. Number of safety incidents
  13. Amount of lost time
  14. Safety audit score
  15. Percent complete at a certain date
  16. Delivery time
  17. After sales support response time
  18. Number of stores/locations
  19. Number of dealers
  20. Number of scope changes
  21. Value of scope changes
  22. Employee cost
  23. Employee turnover
  24. Employee satisfaction
  25. Utilization rate
  26. Employee charge out rate
  27. Number of employees
  28. Client satisfaction
  29. Input cost
  30. Input cost growth/decline rate
  31. Product selling price
  32. Number of units produced
  33. Number of units sold
  34. Total manufacturing cost
  35. Price of a supply unit
  36. Margin
  37. Manufacturing time
  38. Amount/value of waste
  39. Product quality (i.e. six sigma score or similar)
  40. Number of defects
  41. Number of warranty returns
  42. Number of leads generated
  43. Conversion rate
  44. Market share
  45. Market share among certain demographic, geographic area, etc.
  46. Earnings per share
  47. Earnings per share growth rate
  48. Profit
  49. P/E ratio
  50. Return on Investment (ROI)

This is simply a list to get your brainstorming started. Good luck making your goals SMART and let me know if you have anything to add!

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Reporting Earned Value https://www.projectengineer.net/reporting-earned-value/ https://www.projectengineer.net/reporting-earned-value/#respond Tue, 10 Jan 2023 16:25:26 +0000 http://www.projectengineer.net/?p=5729 [Read More]]]> Earned value results are very easy to report to senior management or other stakeholders.  Generally the recipient needs some basic training regarding the meaning of the numbers, but this is not a major undertaking.  We break down the typical reporting methods into three categories:

  • Small projects
  • Medium-size projects
  • Large projects

Small Projects

For small projects that last about 3 weeks or less, a simple earned value table that includes the cost and schedule variances could meet the reporting requirements.  For example:

Project Status Report
Date March 3
Project Budget $10,000
Schedule Variance -$1,000
Cost Variance -$2,500
Comments A one time purchase of materials
has created the negative variances

It takes about 10 minutes to gather the data, crunch the numbers, and write out a quick status report.  This could be done daily to weekly and provides management with an excellent indicator of the project’s status.

Another helpful chart for small projects involves the graphing of the cost and schedule variance over time (period by period).  At each status point the data table is given one more column, and the results are graphed to show the trends in the variances over time.  The data table looks like this:

Period Inputs Schedule Cost
PV EV AC SV SPI CV CPI
1 $1,000 $1,000 $1,000 $0 1.0 $0 1.0
2 $2,000 $1,500 $3,000 -$500 0.90 -$1,500 0.85
3 $3,000 $2,000 $4,500 -$1,000 0.67 -$2,500 0.44
4 $4,000

This is an excellent way to see the bigger picture and get a grasp of project performance issues that the one time snapshot doesn’t give you.  For example, if the SPI had gone down very quickly but was now trending upward, maybe this is less concerning than an SPI that isn’t as bad right now but is trending downward.

EVM example

On this chart a positive situation would be where the EV is above the PV and the AC is below.  Thus, in this example they are both trending negative.

Medium Sized Projects

For projects that last between about 3 weeks to 6 months, a status report that looks closer to “full size” might be more useful.  It indicates efficiency levels and projected completion dates and budgets.  People who are familiar with all of the earned value metrics can follow the ones they are most comfortable with.

ID Name Start End BAC PV EV AC SV SPI CV CPI ETC EAC VAC TCPI
100 Set up Database Mar. 1 Mar. 10 $10,000
110 Acquire Server Mar. 1 Mar. 2 $1,500
120 Set up Data Structure Mar. 3 Mar. 3 $1,000
130 Move Data Mar. 4 Mar. 10 $7,500
200 Build Application Mar. 7 Mar. 20 $15,000
TOTAL $35,000

In this example the 100-level tasks are summary tasks (phases) and the 110-level tasks are sub-tasks.  That’s how I’m used to doing it but any work breakdown structure is acceptable.  You could also report the metrics by phase, at the 100-level only.

The period by period view is slightly more involved.  A spreadsheet might be necessary because of the many periods that will be involved.  The data table might look similar to this:

Period 1 Period 2 Period 3 Period 4 Period 5
BAC
PV
EV
AC
SV
SPI
CV
CPI
ETC
VAC
TCPI
EAC

Senior management generally favor the forecast values (ETC, EAC, VAC, and TCPI) whereas stakeholders favor the current project status (SV, SPI, CV, and CPI).  But any one of the variables can be charted to see the trend over time, in fact the trend is more important than the current value for many of the variables.

EVM example - SV and CV

Large Projects

On large projects which last more than about 6 months you would normally have a “full size” earned value report as there are likely to be stakeholders who are comfortable with the method and understand the numbers.  Each metric is communicating a specific thing, and thus stakeholders should be informed as best as possible.  Projects of this size usually have a full time project manager (or at least mostly full time) therefore they usually have time to do this analysis.

In addition to the project status report which contains the above earned value metrics, a task status report could be filled out which contains the following information:

  • The earned value metrics for the task:  BAC, PV, EV, AC, SV, SPI, CV, CPI, ETC, VAC, TCPI, and EAC.
  • The current status of the task.
    • Work that has been completed to date
    • Schedule for work during the next status period
  • Cost Variance
    • Cause of variance
    • Impact on project budget
    • Corrective action plan, if applicable
  • Schedule Variance
    • Cause of variance
    • Impact on project budget
    • Corrective action plan, if applicable

As with the medium size projects, a “trend over time” chart can also be created for the earned value metrics the project manager deems valuable, as well as any other metrics the stakeholders request.

When variances require explanation, a form like this Variance Analysis Report can be used to communicate why variances are beyond a certain threshold, for example CV or SV is greater than 20% of BAC.  This form has been taken from the PMI Practice Standard for Earned Value Management, 2nd Edition:

Variance Analysis Report - Practice Standard for Earned Value Management

There are a myriad of ways the project’s progress, status, and forecast can be reported.  That’s why for large projects we recommend the project management team be familiar with the reporting options outlined within the Practice Standard for Earned Value Management, by the Project Management Institute.  A strategy needs to be determined based on the needs of management and other project stakeholders.  Project specific forms can be developed, if necessary.  The project management plan, in the stakeholder communication section, should contain the details of how and when the reporting will take place.

Good luck on your projects!  For further reading check out the Earned Value Management System.  If you need a good top to bottom primer on Earned Value, be sure to check out our Earned Value Tutorial.

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Analogous Estimating https://www.projectengineer.net/analogous-estimating/ https://www.projectengineer.net/analogous-estimating/#respond Mon, 26 Sep 2022 16:54:52 +0000 http://www.projectengineer.net/?p=5936 [Read More]]]> Analogous estimating uses the actual data from a previous project as the basis for estimating the current project.

For example, the previous fence cost $75/foot therefore this one should cost about $100/foot.

Many different variables can be compared, such as:

  • scope
  • cost
  • budget
  • duration
  • Measures of scale: Size, weight, length, etc.
  • Work units: Number of piles driven, number of lines of code written.

It can be used for both duration and cost estimates.

The Three Types of Estimates

In project management, analogous estimates are one of three types of estimates.  The other two are:

Also, bottom up estimating is used in conjunction with each or any of these.  In bottom up estimating, the three estimate types are used on individual tasks, which are then “rolled up” into the overall project.

Adjustments

Often, minor adjustments to the actual cost of the comparable project should be made.  As long as they are within reason, this is an acceptable practice.  If the adjustments are major, the accuracy of the estimate is reduced accordingly.

Accuracy

The accuracy of an analogous estimate is generally considered to be the lowest of the three methods.  However, it is usually also the cheapest and fastest estimate to make.  Previous project data is usually just a few clicks away and the adjustments are often straightforward.

Many organizations are built on multiple similar projects, such as construction firms that specialize in buildings.  In these cases analogous estimates are standard practice and need no further explanation.  However, the strength of the method lies in the adjustments when good comparable project data is not available.

Phases

Many projects group related tasks into phases.  The phases represent groups of tasks, and the overall project is a group of phases.  This is called a Work Breakdown Structure (WBS).  In this case, any or all part of the hierarchy can be estimated using analogous estimating.

For example, at the bottom of the WBS hierarchy, a project task could be estimated using a comparable project.  The project phase could also be compared to the same project phase.  And the entire project could be compared to the comparable project.

Tracking

The bottom up estimate can be tracked on any level.  The most detail, as well as complexity, will exist at the lowest level.  On the other end of the spectrum, only the entire project cost could be tracked.  This is the the least work but sacrifices the ability to find and fix problems.

Example

man building a fenceLet’s say you are building a fence.  The project has two tasks:

  • Set posts
  • Build fence

You head to google before starting the project and discover that the local hardware store suggests a fencepost cost of roughly $75/post.  Since there are 10 posts, that equates to $750.  This is called a parametric estimate.

Next, your colleague, who built a fence last month tells you that their fence cost about $5,000 (excluding the fenceposts) for a fence that was 100 feet long.  Thus, since your fence is half as long, it would cost roughly $2,500.  This is an analogous estimate.

For the entire project, we add the two together.  This is called bottom up estimating and results in the overall project cost.

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Variance at Completion (Earned Value Analysis) https://www.projectengineer.net/variance-at-completion-earned-value-analysis/ https://www.projectengineer.net/variance-at-completion-earned-value-analysis/#respond Fri, 16 Sep 2022 14:09:20 +0000 http://www.projectengineer.net/?p=5724 [Read More]]]> The VAC is a forecast of what the variance, specifically the Cost Variance (CV), will be upon the completion of the project.  It is the size of the expected cost overrun or underrun.  In many situations the project manager must request additional funding as early as possible, or at least report the potential for an overrun.  The VAC represents the size of this request.

VAC Formula

The formula is:

VAC = BAC – EAC
= Old Budget – New Budget

Interpretation

The VAC represents the amount of expected budget overrun or underrun at the end of the project.

It should not be confused with the budget underrun or overrun today.  That’s the Cost Variance (CV).  Rather, it is a projection which assumes that whatever conditions caused a the variance position today will result in a variance position in the future.

The Variance at Completion is simply a future projected Cost Variance (CV).  It has the same units as CV.  It is the same type of element.

Sample PMP Exam Questions

  1. A project has a budget of $250,000.  The estimated final cost to complete the project is $275,000.  What is the Variance at Completion (VAC)?

    VAC = BAC – EAC
             = $250,000 – $275,000
             = -$25,000

  2. If the Cost Variance (CV) of a project is positive, would the Variance at Completion (VAC) be positive or negative?Positive, because the CV represents the current budget status, and the VAC indicates the final outcome under the current trend.

Earned Value Metrics

Variance at Completion is one of 12 earned value metrics which are calculated in the following three categories:

Planning

  1. BAC (Budget at Completion):  The project budget.
  2. PV (Planned Value):  The expected current budget and schedule completion.
  3. EV (Earned Value):  The actual current budget and schedule completion.
  4. AC (Actual Cost):  The actual amount of funds spent on the project.

Current Status

  1. SV (Schedule Variance):  How far ahead or behind schedule the project is.
  2. SPI (Schedule Performance Index):  How far ahead or behind schedule the project is, expressed as a percentage of the overall project duration.
  3. CV (Cost Variance):  How far over or under budget the project is.
  4. CPI (Cost Performance Index):  How far over or under budget the project is, expressed as a percentage of the overall project budget.

Future Projection

  1. ETC (Estimate to Complete):  The amount of funds necessary to finish the project.  This does not include funds spent to date.
  2. EAC (Estimate at Completion):  The final project budget.  This includes funds spent to date.
  3. VAC (Variance at Completion):  The expected final Cost Variance (CV) assuming the efficiency level experienced throughout the project thus far.
  4. TCPI (To-Complete Performance Index):  The Cost Performance Index (CPI) which must be achieved to allow the project to complete on budget.

VAC Example

The VAC is one of the last earned value metrics to be computed:

ID Name Start End BAC PV EV AC SV SPI CV CPI ETC EAC VAC
100 Plant Trees July 1 July 10 $10,000 $3,000 $2,000 $4,500 -$1,000 0.67 -$2,500 0.44 $18,182 $12,500 -$2,500

After the VAC, the final variable will complete the table, TCPI.  Then, the project manager must report the earned value results to the appropriate authorities.

For more information, visit our Earned Value Tutorial.

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TCPI (Earned Value Analysis) https://www.projectengineer.net/tcpi-earned-value-analysis/ https://www.projectengineer.net/tcpi-earned-value-analysis/#respond Tue, 06 Sep 2022 16:39:23 +0000 http://www.projectengineer.net/?p=5726 [Read More]]]> The To-Complete Performance Index represents the efficiency level, specifically the CPI (Cost Performance Index) that will make the project finish on time.  It can be a powerful indicator because it is generally easy to ascertain if your people will be as productive as the indicator tells you.

There are two ways to calculate the TCPI:

  1. To achieve the original budget
    If the goal is to achieve the original project budget, that is, the overrun or underrun has not resulted in a change to the project schedule and/or budget, the following formula applies:

    TCPI = (BAC – EV) / (BAC – AC)
  2. To achieve the EAC
    If the goal is to achieve the project’s EAC (Estimate at Completion), use this formula.  This formula applies if the project’s budget has changed, and the original budget (BAC, Budget at Completion) no longer applies.  If additional funds covering the cost overrun have been requested and approved by the project sponsor, the EAC becomes the new ultimate target of the project, and this scenario applies.

    TCPI = (BAC – EV) / (EAC – AC)

Interpretation

A TCPI of 1.20 means the project team must be 20% more efficient than the initial project schedule assumption.

  • If the TCPI is below 1.0, the project is below its budget
  • If the TCPI is equal to 1.0, the project is on budget
  • If the TCPI is above 1.0, the project is above its budget

The closer the project is to completion the higher the CPI that will be necessary to complete on budget.  It can become extreme near the end.

Also, if the project has already spent more than its budget the TCPI will be negative.

This indicator tends to be a bigger red flag than other indicators.  For example, if your people need to be twice as efficient as their previous performance, it tends to make you take notice that corrective action needs to be taken.

Sample PMP Exam Questions

  1. A tire factory is looking to expand its production.  The initial project budget was $200,000.  The project is 75% complete and has spent a total of $165,000.  What is the TCPI?
    EV = 75% x $200,000 = $150,000.
    AC = $165,000.
    BAC = $200,000.
    TCPI = (BAC – EV) / (BAC – AC)
    = ($200,000 – $150,000) / ($200,000 – $165,000)
    = 1.43
    Therefore, the project must be 43% more efficient than the schedule assumption to finish on budget.
  2. The project manager obtains a budget increase to $220,000.  What efficiency level does the project team need to achieve the new project budget?
    EV = $150,000.
    AC = $165,000.
    BAC = $200,000.
    TCPI = (BAC – EV) / (EAC – AC)
    = ($200,000 – $150,000) / ($220,000 – $165,000)
    = 0.91
    Therefore, the project team needs only a 91% efficient rate to finish at the new budget.

TCPI Example

TCPI is the last column in the table of Earned Value metrics, and generally the last to be calculated.

We will assume the project budget has not been revised and the goal is still the original project budget (formula #1, above).

TCPI = (BAC – EV) / (BAC – AC)
TCPI = ($10,000 – $2,000) / ($10,000 – $4,500) = 1.45.

ID Name Start End BAC PV EV AC SV SPI CV CPI ETC EAC VAC TCPI
100 Produce Report Apr. 1 Apr. 10 $10,000 $3,000 $2,000 $4,500 -$1,000 0.67 -$2,500 0.44 $18,182 $12,500 -$2,500 1.45

Conclusions

This project team must be 45% more efficient than they have been to finish on budget.  A seemingly difficult task.

The project manager must decide if the project team can accomplish the rest of the project with this level of efficiency, or whether a cost overrun is inevitable and should be pursued.

TCPI completes the earned value calculations.  The last step in the earned value management system is reporting the results to the various stakeholders.

For more information, please visit our Earned Value Tutorial.

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5 Project Management Certifications (And How to Attain Them) https://www.projectengineer.net/5-project-management-certifications-and-how-to-attain-them/ https://www.projectengineer.net/5-project-management-certifications-and-how-to-attain-them/#respond Wed, 31 Aug 2022 18:48:05 +0000 http://www.projectengineer.net/?p=8131 [Read More]]]>

So you want to be certified as a project manager?  Certification has many benefits, such as:

  • Promotion
  • Higher pay
  • Recognition
Whatever your reasons for pursuing certification, there are several different types of certification you could choose to achieve your goals.  These fall into the following two basic categories:

  1. Project Manager.  For the “full” project manager certification the common thread tends to be experience, that is, you must be able to demonstrate a certain number of hours managing projects in order to earn the designation.  Often there are also continuing professional development requirements.
  2. Associate Project Manager.  These lower certifications are intended for technical people, or people who are not project managers but wish to move into project management.

Project Manager

The following certifications are available for project management certification.  The requirements vary widely so be sure to read through each one to decide which is right for you.

  • PMP
    This designation is arguably the standard for project management certifications.  Issued by the Project Management Insitute (PMI) based in the United States, it has about 650,000 certified individuals and is growing by about 15% per year.  There are educational requirements (U.S. high school or global equivalent) and experience requirements (5 years).  You must pass an exam based on the Project Management Body of Knowledge (PMBOK), a textbook that is readily available in most bookstores.
  • IPMA-B
    This designation is issued by the International Project Management Association (IPMA).  Unlike the PMP, the IPMA full project manager designations are divided into levels B and C.  Level B is intended for larger, more complex projects where analytical project management techniques are a major part of the management of the project.  After writing the exam, the IPMA. through its network of country-specific organizations, confirms the knowledge and experience of the applicant via a worksite visit.
  • IPMA-C
    This designation is also issued by the International Project Management Association (IPMA).  Level C is intended for small and/or less complex projects where a successful project outcome is based more on relationships and hands on management than analytical project management methods.  Like level B, the IPMA confirms the knowledge and experience of the applicant via a worksite visit.
  • PRINCE2 Practitioner
    This is the main PRINCE2 certification, administered by Axelos in the UK.  It is based on the PRINCE2 manual “Managing Successful Projects with PRINCE2.”  Because there are no education or experience requirements (you can study on your own and register for the exam) this is considered a very basic certification but the corresponding recognition by industry is also lower.  Unlike the other certifications, there are no letters after your name when achieving PRINCE2 certification.
  • PRINCE2 Professional
    This certification has no written exam.  Rather, it involves an intensive two and a half day residential assessment which test the candidate’s ability to make real world decisions in a project environment.  Like the Practitioner certification, there are no letters after your name.

Associate Project Manager

These entry-level designations are aimed at people who wish to move up into project management, or are not full time project managers yet but wish to demonstrate project management expertise.  They do not require experience nor university degrees.  They generally involve studying a textbook and writing an exam (although there are slight variations).  There are also no continuing professional development credits to maintain the certification.

  • CAPM
    The Certified Associate in Project Management, Issued by the Project Management Institute (PMI), has about 27,000 people certified worldwide.  Although it has the smallest number of certifications in this category, the PMI also administers the Project Management Professional (PMP) designation which is arguably considered the standard within the industry.  Thus, the CAPM is simply the “baby PMP” and could be used as a stepping stone to becoming PMP certified.  It is based on the PMI’s Project Management Body of Knowledge.
  • IPMA-D
    The International Project Management Associate, Level D, certification is issued by the International Project Management Association (also IPMA) and has 175,000 certifications worldwide.  It is the lowest of four certification levels, and the only one which does not require a site visit by IPMA-certified assessors.  The exam is based on the IPMA Competence Baseline (ICB), which is the official textbook for all IPMA certification levels.
  • PRINCE2 Foundation
    This is the entry level PRINCE2 certification, administered by Axelos in the UK.  It is based on the PRINCE2 manual “Managing Successful Projects with PRINCE2.”  The number of certified individuals is not known.  Unlike the other two, there are no letters after your name when achieving PRINCE2 certification (on any of the three levels).

Whatever certification you choose, we wish you the best of luck in your project management career.

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