CHAPTER 6: PROJECT SCHEDULING
AND RISK MANAGEMENTSLIDES BY: MS. SHREE JASWAL
TOPICS
Developing the Project Schedule,
Network Diagrams (AON, AOA),
CPM and PERT,
Gantt Chart,
Risk Identification,
Risk Projection
RMMM
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 2
WHICH CHAPTER? WHICH BOOK?
Textbook:
* Chp 7: The Project's Schedule and budget
Reference Books:
#1 Chp 7: Network Scheduling and PDM
#1 Chp 8:PERT, CPM, Resource Allocation and GERT
#1 Chp 9: Cost estimating and budgeting
#1 Chp 10:Managing risks in projects
Note:
* Textbook: "Information Technology Project Management" Jack T. Marchewka
#1 Reference book: "Project Management for business and Technology" John M. NicholasCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 3
THE PROJECT PLANNING FRAMEWORK
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 4
PROJECT TIME MANAGEMENT AS DEFINED IN
PMBOK
Activity definition
Activity sequencing
Activity duration estimation
Schedule development
Schedule control
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 5
DEVELOPING THE PROJECT SCHEDULE
Project Management Tools
Gantt Charts
Project Network Diagrams
Activity on the Node (AON), Activity on arrow (AOA)
Critical Path Analysis
Pert
Precedence Diagramming Method (PDM)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 6
GANTT CHART FOR PLANNING
Simplest and most commonly used scheduling technique
The chart consists of horizontal scale divided into time units-
days, weeks or months and vertical scale showing project work
elements.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 7
GANTT CHART
Advantages:
Gives a clear pictorial model of the project.
Simplicity for the planner and the user.
Easy to construct & understand.
Is a means for assessing the status of individual work elements and the project as a whole.
It can be used as Expense Charts
1.for labor planning
2.resource allocation
3.budgetingCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 8
GANTT CHART FOR PLANNING
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 9
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 10
EXAMPLE OF GANTT CHART
GANTT CHART REPORTING
PROJECT’S PROGRESS
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 11
EXAMPLE TO MONITOR THE PROGRESS USING GANTT
CHART
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 12
GANTT CHART
Drawbacks:
It does not explicitly show interrelationships among work elements.
Gantt charts are often maintained manually. This is easy task in small
projects, but is burdensome and a disadvantage in large projects; it
causes apathy and results in charts becoming outdated.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 13
GANTT CHARTS EXAMPLE
Activity Start time Duration
A 0 5
B 6 3
C 7 4
D 8 5
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 14
GANTT CHART EXAMPLE: PROJECT DURATION IS SET TO 13 WEEKS
0 6 12 18 24 30
Gantt charts
Time
Activitie
s
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 15
GANTT CHARTS EXAMPLE
Suppose C & D must start only after activity B is completed.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 16
GANTT CHARTS EXAMPLE: PROJECT DURATION GETS INCREASED TO 14
WEEKS
0 6 12 18 24 30
Gantt charts
Time
Activitie
s
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 17
WHY NETWORKS?
Gantt charts don’t explicitly show task relationships
don’t show impact of delays or shifting resources well
network models clearly show interdependencies
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 18
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 19
LOGIC DIAGRAMS
network of relationships
elements & relationships (sequence)
this is ACTIVITY-ON-NODE
can have ACTIVITY-ON-ARC
research
what’s
been done
research
what needs
doing pick
final
topicinternet
research
write print
LOGIC DIAGRAMS & NETWORKS
Activity on node diagrams
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 20
A,6 B,9
LOGIC DIAGRAMS & NETWORKS
Activity on arc or arrow
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 21
21 3
EXAMPLE OF AON N/W
Activity Duration Immediate Predecessor
A 6 _
B 9 A
C 8 A
D 4 B,C
E 6 B,C
Duration is given in weeksCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 22
EXAMPLE OF AON N/W
AON diagram corresponding to data in prev table
Critical path A-B-E:21 weeks
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 23
Start A,6
B,9 D,4
C,8 E,6
Finish
AOA EXAMPLE
Activity on arc or arrow
Same example on AON network
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 24
1 2
A,12
AOA EXAMPLE
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 25
Activity Immediate Predecessors Duration
A _ 6
B A 9
C A 8
D B,C 4
E B 6
F D,E 6
Duration is in days
AOA DIAGRAM
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 26
1 2
AOA EXAMPLE
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 27
Activity Immediate Predecessors Duration
A _ 6
B A 9
C A 8
D B,C 4
E B 6
F D,E 6
Duration is in days
AOA DIAGRAM
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 28
1 2
4
3
AOA EXAMPLE
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 29
Activity Immediate Predecessors Duration
A _ 6
B A 9
C A 8
D B,C 4
E B 6
F D,E 6
Duration is in days
AOA DIAGRAM
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 30
1 2
4
3
55 6
DUMMY ACTIVITIES
As per the rule followed by AOA, an arrow connecting two
events can represent at most one activity i.e if 2 or more
activities are performed in parallel they must be represented
by separate arrows
Thus a common successor for 2 parallel activities have to be
connected by a dummy activity.
A dummy activity serves as a “connector” and represents
neither work nor timeCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 31
AOA EXAMPLE
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 32
Activity Immediate Predecessors Duration
A _ 6
B A 9
C A 8
D B,C 4
E B 6
F D,E 6
Duration is in days
AOA DIAGRAM
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 33
1 2
4
3
5 6
7
AOA EXAMPLE
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 34
Activity Immediate Predecessors Duration
A _ 6
B A 9
C A 8
D B,C 4
E B 6
F D,E 6
Duration is in days
AOA DIAGRAM
3-5, 4-5, 7-8,6-8 are dummy activities
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 35
1 2
4
3
5 6
7
8 9
DUMMY ACTIVITIES
Dummy activities are used in AOA diagrams in case a node has more than one immediate predecessor.
In previous example:
Activity Immediate Predecessors Duration
D B,C 4
F D,E 6
To represent activities D & F we use dummy activitiesCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 36
REDUNDANT ACTIVITIES
It is only essential to know the immediate predecessor of a
node while constructing a network.
All the predecessors except the immediate predecessors of a
node are redundant predecessors( activities).
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 37
ACTIVITY PREDECESSOR IMMEDIATE PRED: REDUNDANT PRED:
A --
B A A
C A A
D A,B,C B,C A
E A,B,C,D D A,B,C
F A,B,C B,C A
REDUNDANT ACTIVITY
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 38
AON VERSUS AOA
AON n/ws
There are no dummy activities
They are simpler
They are easier to construct.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 39
AON V/S AOA N/W’S
AOA n/w’s
AOA method used just as often, probably because it was developed first and is better suited for PERT procedures
The PERT model places emphasis on events and in the AOA method events are specifically designated by nodes.
AOA diagrams use line segments to represent flow of work and time, it is easy to construct schedules that are similar in appearance to Gantt charts but incorporate advantage of networks
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 40
AON V/S AOA N/W’S
Most software packages create AOA n/w’s that look similar
to Gantt charts.
In particular it is best to select one form of technique., AON
or AOA, and stick to it.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 41
CRITICAL PATH
The longest path from the origin node to the terminal node
Gives the expected project duration (Te)
One project can have more than one CP
Shortening activities on CP (critical activities) will help reduce the project duration
Shortening activities NOT on CP has no effect on project duration
Delay in any activities on CP will result in delay of project completion
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 42
Start A,6
B,9 D,4
C,8 E,6
Finish
Critical path A-B-E:21 weeks
Activity,
duration
predecessor
A,6 -
B,9 A
C,8 A
D,4 B,C
E,6 B,C
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 43
EARLY TIMES – EARLY START & EARLY FINISH
Specifies when at the earliest the activities can be performed.
ES & EF are computed by taking a FORWARD pass through the network
When an activity has several predecessors, its ES is the MAXIMUM of
all EF of predecessors
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 44
LATE TIMES – LATE START & LATE FINISH
Latest allowable times that the activity can be started and finished without delaying the completion of the project.
LS & LF are computed by taking a REVERSE pass through the network. LS for the last activity (Ts) is taken same as the EF for that activity (Te); larger value can be selected if project does not have to be completed by EF.
When an activity with multiple paths leading back, backward path with MINIMUM of all LS is selected.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 45
CRITICAL PATH
Eg:
activity duration__ predecessor
A requirements analysis 3 weeks -
B programming 7 weeks A
C get hardware 1 week A
D train users 3 weeks B, C
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 46
CPM EXAMPLE USING AOA METHOD
Critical path is: A-B-D 13 weeks
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 47
1 2
3
4
5 6
CPM TERMS
Total slack= LS-ES or LF-EF
Total slack of all activities along critical path is zero.
Hence delaying any of these activities will delay the project.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 48
CPM TERMS
Free Slack= ES( earliest successor)- EF
In the eg, activity C has a free slack of 6 weeks( 10-4=6)
Free slack indicated the amount by which activity can be
delayed without affecting the start of its successor activity.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 49
CPM
can have more than one critical path
activity duration predecessor
A requirements analysis 3 weeks -
B programming 7 weeks A
C get hardware 7 weeks A
D train users 3 weeks B, C
critical paths A-B-D
A-C-D
both with duration of 13 weeksCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 50
PRECEDENCE DIAGRAMMING METHOD (PDM) Need for PDM:
“Predecessor - Sucessor” type of networks assume a “strict” sequential relationship between activities
They do not provide for tasks that can be started when their predecessors are only “partially” complete
PDM allows multiple relationships between activities
Finish-to-Start (FS)
Start-to-Start (SS)
Start-to-Finish (SF)
Finish-to-Finish (FF)CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 51
PDM
Finish-to-Start (FS)
The start of the Activity B can occur n days, at the earliestafter the finish of Activity A
Start-to-Start (SS)
The start of Activity B can occur n days, at the earliest after the start of Activity A
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 52
PDM
Start-to-Finish (SF)
The finish of Activity B must occur n days, at the latest after the start of Activity A
Finish-to-Finish (FF)
The finish of Activity B will occur in n days, at the latest after Activity A finishes
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 53
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 54
PDM: RELATIONSHIPSA 15
PlasterWall
B 10Tear-down scaffolding
FS=5
A
FS=5
B
A 15Furniture move in
B 10Peoplemove in
SS=5
A
SS=5
B
A 15Test
new system
B 10Phase outold system
SF=20
A
SF=20
B
A 15Lay
asphalt
B 10Paint
parking linesFF=5
A
FF=5
B
PERT
The two most commonly used methods for project planning and scheduling are:
Program Evaluation and Review Technique (PERT)
Critical Path method (CPM)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 55
PERT
Program Evaluation & Review Technique (PERT)
The Framework for PERT and CPM
There are six steps which are common to both
1. Define the Project and all of it’s significant activities or tasks.
2. Develop the relationships among the activities. Decide which activities must precede and which must follow others.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 56
PERT
3. Draw the "Network" connecting all the activities. Each Activity should have unique event numbers. Dummy arrows are used where required to avoid giving the same numbering to two activities
4.Assign time and/or cost estimates to each activity
5. Compute the longest time path through the network. This is called the critical path.
6.Use the Network to help plan, schedule, monitor and control the project.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 57
PERT
PERT was developed for application in projects where there is uncertainty associated with the duration and nature of activities.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 58
PERT
reflects PROBABILISTIC nature of durations
assumes BETA distribution
same as CPM except THREE duration estimates
optimistic
most likely
pessimistic
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 59
PERT
Three time estimates :
The Optimistic (a)
The minimum time in which the activity can be completed
The Most Likely (m)
Completion time having the highest probability (normal time to complete the job)
The Pessimistic (b)
The longest time an activity could take to completeCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 60
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 61
PERT
a = optimistic duration estimate
m = most likely duration estimate
b = pessimistic duration estimate
Mean or expected time for completion of an activity , te is given by
te = (a + 4m + b)/6
Variance, V is given by
V = sqr((b-a)/6)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 62
PERT
The expected time Te , represents the point on distribution where there is a 50-50 chance that the activity will be completed earlier or later than it.
a=3,b=5,c=13
Te= (3+4(5)+13)/6= 6 days
Variance is the measure of variability in the activity completion time:
V=sqr((13-3)/6)=sqr(1.67)= 2.78CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 63
PERT
The larger V, the less reliable Te, and the higher the likelihood that the activity will be completed much earlier or much later than Te.
More dispersed the distribution and greater the chance that the actual time will be significantly different from the expected time Te
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 64
PERT
Probability of finishing by a target completion date
The expected duration of a project - Te, is the sum of
expected activity times along the critical path.
Te = ∑ te
The variation in the project duration distribution is computed
as the sum of the variances of the activity durations along the
critical path
Vp = ∑ VCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 65
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 66
PERT EXAMPLE
NEAR CRITICAL PATHS
Putting too much emphasis on the critical path can lead
managers to ignore other paths that are near-critical or have
large variances, and which themselves could easily become
critical
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 67
DRAWBACKS OF PERT
Need to have considerable amount of historical data to
make time estimates
PERT gives overly optimistic results.
Beta distribution gives large errors in estimating Te.
Most of the errors in Te come from faulty time estimates not
Beta distribution.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 68
CPM
Although PERT and CPM employ networks and use the concept of critical path, the methods have two points of divergence.
CPM is a deterministic approach.
CPM includes a mathematical procedure for estimating the trade-off between project duration and cost.
CPM features analysis of reallocation of resources from one job to another to achieve the greatest reduction in project duration for the least cost.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 69
TIME-COST RELATIONSHIP FOR AN ACTIVITY
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 70
TIME-COST RELATIONSHIP FOR AN ACTIVITY
Tn- how long the activity will take under normal work conditions.
Also associated with normal pace is the normal cost, Cn, the price of doing the activity in normal time.
Usually normal pace is assumed to be the most efficient and thus least costly pace.
When maximum effort is applied, the duration so that activity can be completed in the shortest possible time, the activity is said to be crashed.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 71
TIME-COST RELATIONSHIP FOR AN ACTIVITY
In our example, cost slope for the activity is $3K per week.
Thus, for each week the activity duration is reduced( sped
up) from the normal time of 8 weeks, the additional cost will
be $3K.
Completing the project 1 week earlier i.e. 7 weeks, would
increase the project cost by ($9K +$3K=$12K)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 72
TIME-COST RELATIONSHIP FOR AN ACTIVITY
Basic rules:
Reducing the duration of an activity, increases the cost by
the cost-slope.
Increasing the cost of activity, reduces the duration of the
activity
Reduce the duration of activity with min value of cost slope.
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 73
TIME-COST RELATIONSHIP FOR AN
ACTIVITY(NUMERICAL PROBLEM)
Activity Normal Crash Cost Slope
Tn Cn Tc Cc_____________
A 9 10 6 16 2
B 8 9 5 18 3
C 5 7 4 8 1
D 8 9 6 19 5
E 7 7 3 15 2
F 5 5 5 5 _
G 5 8 2 23 5
$55K $104K
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 74
TIME-COST RELATIONSHIP FOR AN
ACTIVITY(NUMERICAL PROBLEM)
1
2
6
3
5
4
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 75
TIME-COST RELATIONSHIP FOR AN ACTIVITY
(NUMERICAL PROBLEM)Activity Normal Crush Cost Slope
Tn Cn Tc Cc_____________
A 9 10 6 16 2
B 8 9 5 18 3
C 5 7 4 8 1
D 8 9 6 19 5
E 7 7 3 15 2
F 5 5 5 5 _
G 5 8 2 23 5
$55K $104K CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 76
TIME-COST RELATIONSHIP FOR AN
ACTIVITY(NUMERICAL PROBLEM)
1
2
6
3
5
4
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 77
TIME-COST RELATIONSHIP FOR AN
ACTIVITY(NUMERICAL PROBLEM)
1
2
6
3
5
4
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 78
TIME-COST RELATIONSHIP FOR AN
ACTIVITY(NUMERICAL PROBLEM)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 79
TIME-COST RELATIONSHIP FOR AN ACTIVITY
(NUMERICAL PROBLEM)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 80
TIME-COST RELATIONSHIP FOR AN ACTIVITY(NUMERICAL
PROBLEM) USING CRASH TIMES
Observe that activities are plotted using values of TcCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 81
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 82
BASIS FOR COMPARISON PERT CPM
Meaning PERT is a project
management
technique, used to
manage uncertain
activities of a project.
CPM is a statistical
technique of project
management that
manages well defined
activities of a project.
What is it? A technique of planning
and control of time.
A method to control cost
and time.
Orientation Event-oriented Activity-oriented
Evolution Evolved as Research &
Development project
Evolved as Construction
project
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 83
BASIS FOR COMPARISON PERT CPM
Model Probabilistic Model Deterministic Model
Focuses on Time Time-cost trade-off
Estimates Three time estimates One time estimate
Appropriate for High precision time
estimate
Reasonable time
estimate
Critical and Non-critical
activities
No differentiation Differentiated
Suitable for Research and
Development Project
Non-research projects like
civil construction, ship
building etc.
Crashing concept Not Applicable Applicable
EARNED VALUE ANALYSIS
Earned value gives a quantitative indication of project progress
It enables you to assess the “percent of completeness” of a project using
quantitative analysis rather than rely on a gut feeling
To determine earned value following steps are performed
1. Budgeted cost of work scheduled(BCWS) for each work task is
determined
2. Budget at Completion (BAC) which is summation of BCWS of all work
tasks is calculated
3. Budgeted cost of work performed(BCWP) is computed CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 84
EARNED VALUE EXAMPLE
Suppose you just signed a contract with a consulting firm called
Dewey, Cheatem, and Howe for developing an IS.
Project Budget, Schedule, Tasks:
$40,000
4 months
20 Tasks (evenly divided over 4 months)
$2,000 per task
5 tasks per month
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 85
INVOICE
End of Month 1
Dewey, Cheatem, & Howe
Amount Due: $8,000
Payment due immediately!
page 1 of 2
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 86
PLANNED BUDGET-BUDGETED COST OF WORK SCHEDULED
(BCWS)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 87
BCWS ( PV) VERSUS ACWP(AC)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 88
INVOICE
Dewey, Cheatem, & Howe
Work Completed for Month 1
Task A - $2,000
Task B - $3,000
Task C - $3,000
page 2 of 2
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 89
DEFINITIONS
Budgeted Cost of Work Scheduled (BCWS)
Planned expenditure cash flows based on the completion of tasks in
accordance with the project’s budget and schedule
Actual Cost of Work Performed (ACWP)
Actual Project Expense based on completed tasks
Earned Value or Budgeted Cost of Work Performed (BCWP)
The amount of the budget that we should have spent for a given amount
of work completedCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 90
BCWS VERSUS ACWP
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 91
COMPARISON OF BCWS, ACWP, AND
BUDGETED COST OF WORK PERFORMED (BCWP)
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 92
COST METRICS
Cost Variance (CV)-The difference between a task’s estimated cost and its actual
cost:
CV = BCWP – ACWP = EV – AC
Negative Value = over budget and/or behind schedule
Positive Value = under budget and/or ahead of schedule
Cost Performance Index (CPI)-percentage of work completed per dollar spent
CPI = BCWP ÷ ACWP = EV ÷ AC
ratio > 1 = ahead of schedule and/or under budget
ratio < 1 = behind schedule and/or over budgetCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 93
SCHEDULE METRICS
Schedule Variance (SV) – the difference in terms of cost between the
current progress and our originally scheduled progress
SV = BCWP – BCWS= EV – PV
Schedule Performance Index (SPI) – a ratio of the work performed to the
work scheduled.
SPI = BCWP ÷ BCWS= EV ÷ PV
ratio > 1 = ahead of schedule and/or under budget
ratio < 1 = behind schedule and/or over budget
Ratio = 1 = right on scheduleCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 94
EARNED VALUE METRICS
Budget At Completion (BAC)
Budget At Completion (BAC) is the sum of the budgets for each phase of
the project
i.e. total estimated expense for the project
Advantage of this approach is that the entire estimated amount (BAC)
need not be allocated at the time of project’s conception
This approach allows all concerned parties to look at the cost of each
phase of the project
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 95
EXAMPLE
Budget for the week: Purchase 4 Web servers at 50K each.
At the end of the Week: 3 servers purchased at 300K
Completed work = 3/4 = 75%
Calculations :
BCWS = PV = 4 * 50 = 200K
BCWP = EV = 3 * 50 = 200 * 0.75 = 150
ACWP = AC = 300
CV = EV - AC = 150 - 300 = -150
CPI = EV / AC = 150 / 300 = 0.50CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 96
EXAMPLE (CONTD….)
SV = EV – PV = 150 - 200 = -50
SPI = EV / PV = 150 / 200 = 0.75
BAC = BCWS = PV = 200
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 97
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 98
PERFORMANCE INDEX MONITORING
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 99
PROJECT RISKS
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 100
What can go wrong?
What is the likelihood?
What will the damage be?
What can we do about it?
RISK
What is risk? A potential problem – might or might not happen
• Two elements:
Chance or probability of occurrence
Consequent loss or impact
Can we avoid risks?
Some risks can be avoided
BUT, not all
We are concerned about
risks we run in the software development project
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 101
REACTIVE RISK MANAGEMENT
project team reacts to risks when they occur
mitigation—plan for additional resources in anticipation of fire fighting
fix on failure—resource are found and applied when the risk strikes
crisis management—failure does not respond to applied resources and
project is in jeopardy
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 102
PROACTIVE RISK MANAGEMENT
formal risk analysis is performed
organization corrects the root causes of risk
TQM concepts and statistical SQA
examining risk sources that lie beyond the bounds of the
software
developing the skill to manage change
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 103
KINDS OF RISK
Risk involves uncertainty and loss
Project risks threaten the project plan
impact is on delivery date, budget overrun
factors are project complexity, size, structural uncertainty
Technical risks threaten the quality, timeliness of the software to be produced
problems with the process of software development
problems with specification ambiguity & technical uncertainty
problems with leading edge developments
CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 104
KINDS OF RISK
Business risks threaten the viability of the software to be built
building a system no one wants (market risk)
building a product that does not fit the strategy of the company
building a product that sales force does not understand how to sell
losing the support of senior management (management risk)
losing budgetary or personnel commitment (budget risk)
Risks can be known, predictable, or unpredictable
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RISK MANAGEMENT PARADIGM
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control
identify
analyze
plan
track
RISK
RISK IDENTIFICATION
It is a systematic attempt to specify threats to the project
plan.
2 distinct types of risks are:
1. Generic risks
2. Product specific risks
Although generic risks are important, usually the product-
specific risks cause most of the problems.
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RISK IDENTIFICATION
Product size—risks associated with the overall size of the software to be built or modified.
Business impact—risks associated with constraints imposed by management or the marketplace.
Customer characteristics—risks associated with the sophistication of the customer and the developer's ability to communicate with the customer in a timely manner.
Process definition—risks associated with the degree to which the software process has been defined and is followed by the development organization.
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RISK IDENTIFICATION
Development environment—risks associated with the availability and quality of the tools to be used to build the product.
Technology to be built—risks associated with the complexity of the system to be built and the "newness" of the technology that is packaged by the system.
Staff size and experience—risks associated with the overall technical and project experience of the software engineers who will do the work.
Risk identification can be done by asking a no. of questions relevant to each of the topics
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ASSESSING OVERALL PROJECT RISK
A set of questions that are ordered by their relative importance to the success of a project,
such as:
Have top software and customer managers formally committed to support the project?
Are end-users enthusiastically committed to the project and the system/product to be
built?
Are requirements fully understood by the software engineering team and their
customers?
Have customers been involved fully in the definition of requirements?
Do end-users have realistic expectations?
The project risk degree is directly proportional to the number of negative responses to these
questionsCHAPTER 6 SLIDES BY: MS. SHREE JASWAL 110
PRODUCT SIZE RISK FACTORS Factors are:
Estimated size of the product in LOC or FP
Confidence in the estimate
Estimated size in number of programs, files, transactions
Size of database
Deviation in size of product from average of previous products
Number of users
Number of changes before and after delivery
Amount of reused software
If these quantities are large or deviate significantly from previous projects, then the risk is high
Or if numbers are similar but previous experience less than satisfactory, the risk is high.CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 111
CUSTOMER RELATED RISK FACTORS
Customer related factors are:
Have you worked with customer before?
Does the customer have a good idea of what is wanted?
Will the customer spend time determining the project scope?
Is the customer willing to establish rapid communication with the developer?
Is the customer willing to take part in reviews?
Is the customer technically sophisticated in the product area?
Is the customer willing to let you do your job?
Does the customer understand the software development process?
If the answer is “no” to any questions, there is potential risk to be investigated.CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 112
RISKS DUE TO PROCESS MATURITY
Questions that must be answered:
Have you established a common process framework?
Is it followed by project teams?
Do you have management support for software engineering ?
Do you have a proactive approach to SQA?
Do you conduct formal technical reviews?
Are CASE tools used for analysis, design and testing?
Are the tools integrated with one another?
Have document formats been established?
Answers of “no” identify weaknesses in the process and should be investigated.
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TECHNOLOGY RISKS
Questions that must be answered:
Is the technology new to your organization?
Are new algorithms, I/O technology required?
Is new or unproven hardware involved?
Does the application interface with new software?
Is a specialized user interface required?
Is the application radically different?
Are you using new software engineering methods?
Are you using unconventional software developmentmethods, such as formal methods, AI-based approaches, artificial neural networks?
Are there significant performance constraints?
Is there doubt the functionality requested is "do-able?“
A “no” answer to these questions indicates weakness of technique and risk factors to be investigated.CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 114
RISK COMPONENTS
performance risk—the degree of uncertainty that the product will meet its requirements and be fit for its intended use.
cost risk—the degree of uncertainty that the project budget will be maintained.
support risk—the degree of uncertainty that the resultant software will be easy to correct, adapt, and enhance.
schedule risk—the degree of uncertainty that the project schedule will be maintained and that the product will be delivered on time.
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RISK PROJECTION
Risk projection, also called risk estimation, attempts to rate each risk in two ways
the likelihood or probability that the risk is real
the consequences of the problems associated with the risk, should it occur.
The are four risk projection steps:
1. establish a scale that reflects the perceived likelihood of a risk
2. delineate the consequences of the risk
3. estimate the impact of the risk on the project and the product,
4. note the overall accuracy of the risk projection so that there will be no misunderstandings.
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BUILDING A RISK TABLE
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Risk Probability Impact RMMM
Risk
Mitigation
Monitoring
&
Management
BUILDING THE RISK TABLE
Estimate the probability of occurrence
Estimate the impact on the project on a scale of 1 to 4, where
1 = catastrophic impact on project success
2 = critical impact on project success
3 = marginal impact on project success
4 = negligible/low impact on project success
sort the table by probability and impact
RMMM contains a pointer to Risk mitigation, monitoring & management plan
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Risk Category Probability Impact RMMM
Customer w ill change requirements PS 80% 2 3.1
Lack of training on tools DE 80% 3 3.2
less reuse than planned PS 70% 2
Size estimate may be signif icantly low PS 60% 2
Staff turnover w ill be high ST 60% 2
Delivery deadline w ill be tightened BU 50% 2
End users resist system BU 40% 3
Funding w ill be lost CU 40% 1
Technology w ill not meet expectations TE 30% 1
Staff inexperienced ST 30% 2
Large number of users than planned PS 30% 3
PS-Project size risk BU-business risk CU- customer etc
Impact 1-catastrophic 2-critical 3-marginal 4-negligible
RMMM- Risk Mitigation, Monitoring and Management Plan
RISK EXPOSURE (IMPACT)
The overall risk exposure, RE, is determined using the following relationship :
RE = P x C
where P is the probability of occurrence for a risk, and C is the cost to the project should the risk occur.
Compare RE for all risks to the cost estimate for the project.
If RE is greater than 50% of project cost than the project viability must be evaluated.
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RISK EXPOSURE EXAMPLE
Risk identification. Only 70 percent of the software components scheduled for
reuse will, in fact, be integrated into the application. The remaining functionality
will have to be custom developed.
Risk probability. 80% (likely).
Risk impact. 60 reusable software components were planned. If only 70
percent can be used, 18 components would have to be developed from
scratch (in addition to other custom software that has been scheduled for
development). Since the average component is 100 LOC and local data
indicate that the software engineering cost for each LOC is $14.00, the overall
cost (impact) to develop the components would be 18 x 100 x 14 = $25,200.
Risk exposure. RE = 0.80 x 25,200 ~ $20,200.CHAPTER 6 SLIDES BY: MS. SHREE JASWAL 121
RISK MITIGATION, MONITORING, AND MANAGEMENT
Mitigation—how can we avoid the risk?
Monitoring—what factors can we track that will enable us to determine if the risk is becoming more or less likely?
Its 3 primary objectives are:
To assess whether predicted risks do in fact occur
To ensure that risk aversion steps defined for the risk are properly applied
To collect information for future risk analysis
Management—what contingency plans do we have if the risk becomes a reality?
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RISK MITIGATION
Meet with current staff to determine causes of turnover
Mitigate those causes that are under our control before the project
starts
Once the project commences, assume turnover will occur & develop
techniques to ensure continuity when people leave
Organize project teams so that information about each development
activity is widely dispersed
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RISK MITIGATION
Define documentation standards & establish mechanisms to
be sure that documents are developed in a timely manner
Conduct peer reviews of all work
Assign a backup staff member for every critical technologist
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PARETO’S 80-20 RULE
For a large project 30 or 40 risks may be identified which will
require 3 to 7 risk management steps each which will make
risk management a project itself!
Hence the need of Pareto’s 80-20 rule to manage s/w risk
It states that 80% of overall project risk can be accounted for
by only 20% of the identified risks.
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RMMM PLAN
RMMM Plan: documents all work performed as part of risk
analysis, and is used by the project manager as part of the
overall project plan
Alternatively, each risk is documented individually using a risk
information sheet (RIS)
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RISK INFORMATION SHEET (RIS)
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Risk Information Sheet
Risk ID: Date: Probability: Impact:
Description:
Refinement/context:
Mitigation/monitoring:
Management/contingency plan/trigger:
Current status:
Originator: Assigned:
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