Integrating Risk Management and Performance Management- By Bassam Samman - iCompetences PPM2013

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AboutthePresenter

BassamSamman,PMP,PSP,EVP,GPMholdsaBachelor’sDegreeinCivilEngineeringfrom

KuwaitUniversityandaMastersDegreeinEngineeringandAdministraonfromGeorge

WashingtonUniversity.Heiscurrently

pursuingaPhDattheUniversityofSalford,

UK.HeisacerfiedProjectManagement

Professional(PMP),acerfiedPlanningand

SchedulingProfessional(PSP),EarnedValue

Professional(EVP)andGreenProject

Management(GPM).HeisthoroughlyexperiencedincompleteProjectManagement

includingprojectmanagementcontrol

systems,computerizedPCSSoOware,riskanalysis,sitemanagement,claimsanalysisand

prevenonandalternavedisputeresoluon.

Bassamhas30yearsexperienceinProject

ManagementConsultancy.

© 2009 CMCS FZCO

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IntegrangRiskManagementandEarnedValuePerformance

Management

§  HowTheEarnedValue’sEsmateToCompletecalculaonsprovideanexcellentprojectperformancetool

§  HowtheMonteCarlosimulaoncanprovidethepredictedesmatetocompleteatdifferent

confidencelevels.

© 2009 CMCS FZCO

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HowTheEarnedValue’sEsmateToCompletecalculaonsprovideanexcellentprojectperformancetool

© 2009 CMCS FZCO

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ManagingPerformanceWithEarnedValue

Performancemanagement involvesapplying controls that ensure the project stayswithin theagreeduponbudget.

Theearnedvaluetechniqueisusedtoimplementperformancemeasurement.

The earned value technique compares the cumulave value of the budgeted cost of workperformed (EV) at the original allocated budget amount to both the budgeted cost of workscheduled(PV)andtotheactualcostofworkperformed(AC).

© 2009 CMCS FZCO

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BudgetatCompleon(BAC)

Thesumtotaloftheme-phasedbudget.AlsoknownasProjectPlannedBudget

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PlannedValue(PV)

Isthebudgetcostfortheworkscheduledtobecompletedforanacvityuptoagivenpointinme.

Used to be known as Budget Cost of Work Scheduled (BCWS) or Budget Quanty of Work

Scheduled(BQWS)

  PlannedValueCostisthecostoftheworkthatshouldhavebeenaccomplishedasofthe

datadate,iftheprojecthadproceededaccordingtothebaselineplan.

  PlannedValueCost=BudgetatComple?onxSchedule%Complete.

  Answerstheques?on:Howmuchworkshouldbedone

© 2009 CMCS FZCO

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PerformanceManagementBaseline(PMB)

© 2009 CMCS FZCO

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A       E       D

Planned

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ManagementReserve(MR)

Timeorcostaddedtotheprojecttodealwithunknownunknownrisks.Thatisrisksthathavenotbeenidenfied.

© 2009 CMCS FZCO

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TotalAllocatedBudget(TAB)

TotalAllocatedBudget

ManagementReserve

BudgetAtComple?on

DistributedBudget

ControlAccounts

DiscreteWorkPackages

Appor?onedWorkPackages

LevelofEffortWorkPackages

SummaryPP

PlanningPackages

PlanningPackages

PlanningPackages

UndistributedBudget

© 2009 CMCS FZCO

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ControlAccount

Amanagementcontrolpointwheretheintegraonofscope,budget,actualcost,andscheduletakesplace,andwherethemeasurementofperformancewilloccur.

Controlaccountsareplacedatselectedmanagementpointsoftheworkbreakdownstructure.Eachcontrolaccountmayincludeoneormoreworkpackages,buteachworkpackagemaybeassociatedwithonlyonecontrolaccount.

Each control account is associated with a specific single organizaonal component in theorganizaonalbreakdownstructure(BS).

AControlAccountisamajormanagementcontrolpointfor:

§ CostSummarizaon§ VarianceAnalysisandReporng§ ResponsibilityAssignment§ ScopeDescripon§ CorrecveAconPlanning

© 2009 CMCS FZCO

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ControlAccountMatrix

© 2009 CMCS FZCO

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ControlAccountDetails–BeforeUpdate

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ProjectAuthorizedBudget/TotalAllocatedBudget

© 2009 CMCS FZCO

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 N ov -07 Dec- 07

Time

       A       E       D

Planned

Management Reserve

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EarnedValue(EV)

Isthebudgetedamountoftheworkactuallycompletedonthescheduleacvityduringagivenmeperiod.

UsedtobeknownasBudgetCostofWorkPerformed(BCWP)orBudgetQuantyofWork

Performed(BQWP)

  EarnedValueCostisthemonetaryvalueoftheworkperformedbyaresourceasofthe

datadate.

  EarnedValueCost=BudgetatComple?onxPerformance%Complete

  Answerstheques?on:Howmuchworkisdone

© 2009 CMCS FZCO

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© 2009 CMCS FZCO

EarnedValue

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A       E       D

Planned Ear ned

Management Reserve

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ActualCost(AC)

Is the total cost incurred in accomplishingwork on the schedule acvityduring a givenmeperiod.

Used to be known as Actual Cost of Work Performed (ACWP) or Actual Quanty of Work

Performed(AQWP)

  ActualCostistheactualtotalcostincurredfortheworkaccomplishedasofthedatadate.

  ActualCost=ActualLaborCost+ActualNonlaborCost+ActualExpenseCost+Actual

MaterialCost

  Answerstheques?on:Howmuchdidthecompletedworkcost

© 2009 CMCS FZCO

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© 2009 CMCS FZCO

ActualCost(AC)

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A       E

       D

Planned Earned Actual

Management Reserve

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ControlAccountDetails–AOerUpdate

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PerformanceHistogram

© 2009 CMCS FZCO

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PerformanceManagementBaseline(PMB)

© 2009 CMCS FZCO

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PerformanceBarchart

© 2009 CMCS FZCO

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ScheduleVariance(SV)

Thedifferencebetweenthebudgetedcostofworkperformedand thebudgetedcostofworkscheduledatanypointinme.

SV=EV-PV

© 2009 CMCS FZCO

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© 2009 CMCS FZCO

ScheduleVariance

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A       E

       D

Planned Earned Actual

Management Reserve

SV = EV-PV

SV = 22,500 – 31, 500 = -9,000

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© 2009 CMCS FZCO

ScheduleVariance(SV)

Variances

-10,000

-9,000

-8,000

-7,000

-6,000

-5,000

-4,000

-3,000

-2,000

-1,000

0

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A       E       D

SV

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SchedulePerformanceIndex(SPI)

Rao of work accomplished versus work planned, for a specified me period. The SPI is anefficiencyrangforworkaccomplishment,comparingworkaccomplishedtowhatshouldhave

beenaccomplished

SPI=EV/PV

© 2009 CMCS FZCO

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SchedulePerformanceIndex(SPI)

© 2009 CMCS FZCO

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A       E

       D

Planned Earned Actual

Management Reserve

SPI = EV/PV

SPI = 22,500 / 31, 500 = 0.71

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SchedulePerformanceIndex(SPI)

© 2009 CMCS FZCO

Indices

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Jan- 07 Feb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug-07 Sep-07 Oct- 07 Nov -07 Dec- 07

Time

         I       n         d

       e       x

SPI

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© 2009 CMCS FZCO

CostVariance(CV)

Thedifferencebetweentheearnedvalueandtheactualcost.

CV=EV-AC

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© 2009 CMCS FZCO

CostVariance(CV)

Variances

-10,000

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A       E       D

SV CV

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© 2009 CMCS FZCO

CostPerformanceIndex(CPI)

Raoofworkaccomplishedversusworkcostincurredforaspecifiedmeperiod.TheCPIisan

efficiencyrangforworkaccomplishedforresourcesexpended.

CPI=EV/AC

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© 2009 CMCS FZCO

CostPerformanceIndex(CPI)

Indices

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Jan- 07 Feb- 07 Mar -07 Apr -07 May -07 Jun-07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

         I       n

         d       e       x

SPI CPI

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PerformanceIndex

© 2009 CMCS FZCO

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© 2009 CMCS FZCO

EVMeasuresandIndices

SV > 0 & SPI > 1.0 SV = 0 & SPI = 1.0 SV < 0 & SPI < 1.0

CV > 0 &

CPI > 1.0

Ahead of Schedule

Under Budget

On Schedule Under 

Budget

Behind Schedule

Under Budget

CV = 0 &

CPI = 1.0

Ahead of Schedule

On Budget

On Schedule On

Budget

Behind Schedule On

Budget

CV < 0 &

CPI < 1.0

Ahead of Schedule

Over Budget

On Schedule Over 

Budget

Behind Schedule

Over Budget

SchedulePerformance

Measures

Cost

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EsmateToComplete(ETC)

Theesmatetocompletetheremainingworkforanacvity,workpackageorcontrolaccount.

ETC=BAC-EV

© 2009 CMCS FZCO

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© 2009 CMCS FZCO

EsmateToComplete(ETC)

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A

       E       D

Planned Earned Actual

Management Reserve

ETC = BAC – EVETC = 65,000 – 22,500

ETC = 42,500

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FuturePerformance

Future performance may be

different to current

performance

Proactive measures are

taken to recover variances

Nature of future work isdifferent to completed

work

Completed work includes

learning that will not applyto future work

Future activities are easier or 

more difficult than completed

activities

Completed work includes

non-recurring elements

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© 2009 CMCS FZCO

HowToReflectFuturePerformanceUsingETCCalculaon

ETCwillnotbeinfluencedbypastprojectperformance-pmisc

§  ETC=(BAC-EV)

ETCwillbeinfluencedbyfactorsofpastcostperformance–MostLikely

§  ETC=(BAC-EV)/CPI

ETCwillbeinfluencedbypastcostandscheduleperformance-Pessimisc

§ ETC=(BAC-EV)/(CPIXSPI)

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© 2009 CMCS FZCO

EsmateAtCompleon(EAC)

Thecostoftheamountofworktocompletescheduleacvies.Itisaforecastofthemostlikely

totalvaluebasedonprojectperformanceandriskquanficaon.

EAC=AC+ETC

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© 2009 CMCS FZCO

EsmateAtCompleon(EAC)

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A

       E       D

Planned Earned Actual

Management Reserve

EAC = AC + ETCEAC =18,000 – 42,500

EAC = 60,500

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© 2009 CMCS FZCO

VarianceAtCompleon(VAC)

Thevariancebetweenbudgetandesmateatcompleon.

VAC=BAC–EAC

AlsoknownasVariance(VAR)

( )

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© 2009 CMCS FZCO

VarianceAtCompleon(VAC)

Project Performance

0

5,000

10,00015,000

20,000

25,000

30,00035,000

40,000

45,000

50,000

55,00060,000

65,000

70,000

Jan- 07 F eb- 07 Mar -07 Apr -07 May -07 Jun- 07 Jul- 07 Aug- 07 Sep- 07 Oct- 07 Nov -07 Dec- 07

Time

       A

       E       D

Planned Earned Actual

Management Reserve

VAC = BAC - EACVAC =65,000 – 60,500

VAC = 4,500

E d V l P f Hi

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EarnedValuePerformanceHistogram

©2009CMCSFZCO

Planned

Actual

     I    n     $     1 ,     0

     0     0     ’    s

BudgetatCompleon(BAC)

1 2 3 4 5 6 7 8 9 10

Months

     T    a    r    g    e    t     C    o    m    p     l    e         o    n

     D    a    t    e

     C    u    r    r    e    n    t     C    o    m    p     l    e         o    n

     D    a    t    e

200

400

600

800

1000

1200

11

1300

Planned=$500K:DataDate

Actual=$400K

200

400

600

800

1000

12001300

ProbableScheduleDelay=4weeks

Probable

Cost

verrun

=$300K

EsmateatCompleon(EAC)

CostVariance-$100K

Schedule

Variance(Time)

-4wks

ScheduleVariance($)

-$200K

Earned

Earned=$300K

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HowtheMonteCarlosimulaoncanprovidethepredicted

esmatetocompleteatdifferentconfidencelevels

© 2009 CMCS FZCO

E port Control Acco nt Details To XLS Template

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ExportControlAccountDetailsToXLSTemplate

Project Risk Categories

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ProjectRiskCategories

© 2009 CMCS FZCO

Risk

Technical

Higherperformance

goalsTechnologyshis

PlaormchangesNewindustrystandards

Complextechnology

Unproventechnology

ProjectManagement

Schedule Budget

Quality Scope

Resources Projectteam

Communica?on

Organiza?onal

Weakinfrastructure

Unclearorganiza?onalobjec?ves

Intra-organiza?onal

resourceconflicts

Shiingfundingavailability

External

Legalchallenges

Shiingcustomergoals

Naturaldisasters

Legalshis

Impact f Risk n Project bjecves

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ImpactfRisknProjectbjecves

RISK ITEM

CONTRACTOR

PROVIDES

DEFECTIVE

SERVICE

IMPACT

ON

SAFETY

IMPACT

ON

TEAM

WORKING

IMPACT

ON

QUALITY

IMPACT

ON

COST

IMPACT

ONTIME

© 2009 CMCS FZCO

Risk Impact Scales n Four Major Project bjecves

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RiskImpactScalesnFourMajorProjectbjecves

How Does Monte Carlo Simulaon Works?

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© 2007 CMCS FZCO 48

HowDoesMonteCarloSimulaonWorks?

Import Control Account With ETC Value To Risk Simulaon SoOware

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ImportControlAccountWithETCValueToRiskSimulaonSoOware

The imported values in Acumen Risk with Uncertainty

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TheimportedvaluesinAcumenRiskwithUncertainty

MonteCarloSimulaon

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Monte Carlo Simulaon

80%confidencechartforEAC

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Thetornadoandotherriskcharts

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Thetornadoandotherriskchartsforeachcontrolaccount

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Thetornadoandotherriskcharts

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