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implistically, a project fails when it over-runs, over-spends or under-performs. In other
words, it fails when the plan is not met. There are only two reasons why the plan is not
met:
• The plan is too optimistic - an over-optimistic plan is very common, and can arise out of
shoe-horning and cramming in order to meet pre-determined targets. Under-bidding, scale-
to-fit, and political spin are also common causes.
• Things happen, that means the plan is exceeded - scope creep, insufficient resources,
unanticipated work and events are some
causes of this.
Parallelism in projects further
exaggerates optimism in estimates,
because parallel tasks compound
risk. This phenomenon is called “merge
bias” or “nodal bias”. It is especially
present when the project is deliberately
scheduled with minimal float (a common
planning technique).
3
The projected outcomes also become ranges when parameters in a project have ranges (two
or three-point estimates, with some specific risk events),. For example the project finish date
is no longer a single date, but is now a range, with a confidence level too!!
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2
Chapter
Project contingency can make or break a project. Having too much contingency is
uncompetitive; having too little contingency increases the chance of failure.
Risk assessment (allowing uncertainty on estimates) gives confidences on outcome targets,
allowing contingency to be set with a preferred level of risk. Ultimately risk assessment helps
you bid, negotiate and win the contract at the price.
Contingency is often set at task level – it is common to add some contingency to every
estimate. It may even be a fixed amount – 10% for example. However, it is much better to set
contingency at project level instead – in other words, use the ranges on the task estimates to
understand what contingency should be set for the project as a whole.
Setting contingency at project level reflects the reality that some tasks may be delayed while
others may not, or may even be early: “it could rain anywhere, but it’s unlikely to rain
everywhere – and we don’t know where it will rain”.
Considering project cost and schedule together is also rare – often cost and schedules are
separate disciplines within the team. A risk assessment workshop can bring the disciplines
together.
These are all compelling reasons to use risk assessment on a project. It allows contracts to
be negotiated, bids to be submitted at the right price, and sensitivity to be understood (as
discussed in the previous section).
Risk response (mitigation) strategies can be expressed too !!
5
Understanding the effects of risk
assessment on finish dates of a
Project:
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3
Chapter
While both of PERTMASTER’s tools can be used too identify, assess, & build mitigation
plans, the RISK EXPERT MODULE provides greater scope for an in depth risk analysis &
resource and cost modeling. The following table should make your vision clear...
Pertmaster
Risk
Expert
Pertmaster
Project Risk
Risk Register √
7 Customizable risk log √
8 PI matrices √
9 Waterfall diagrams √
10 Mitigation planning √
Qualitative Generation of Risk Event Plans from risk
11
register √
Risk Analysis
12 Alternate scenario modeling √
13 XLS integration √
7
Primavera √ √
14 P3 Project Planner √ √
15 SureTrak √ √
Enterprise (including P3e/c, TeamPlay, IT
16
Project Manager) √ √
17 Primavera Contractor √ √
Pertmaster data pushed back into the
18
Primavera schedule √ √
Support for Primavera Java API v3.51, v4,
19
v4.1 and v5 √ √
20 Load Multiple projects into the same file √ √
Integration 21 Save projects as P3 files √ √
22 Project Management integrated menu √ √
Microsoft √ √
23 MS Project 200x (MPD, MPP) √ √
24 MS Project Server (EPM) √ √
Conquest √ √
Welcom √
25 Open Plan √ √
26 WelcomRisk √ √
Safran (Safran Project & Safran
√ √
Planner)
Generic Risk Import/Export √
√
27 Net present value √ √
Cost 28 Internal rate of return √ √
Modeling
29 Probabilistic cash flow √
√
Resource 30 Hierarchical resources √ √
Modeling
31 Resource uncertainty √ √
√
8
32 Estimate uncertainty √ √
33 Task existence √ √
Risk Types 34 Probabilistic branching √ √
35 Conditional branching √
36 Fixed cost uncertainty √ √
37 Variable cost uncertainty √ √
38 Resource uncertainty √ √
39 Weather modeling √
√
40 Duration quick risk √ √
41 Resource quick risk √ √
Risk Utilities 42 Task lag quick risk √ √
43 Risk Correlation √ √
44 Schedule sanity check √ √
45 Templated Quick Risk √
√
46 Risk Histogram √ √
47 Tornado Graph √ √
48 Duration sensitivity √ √
49 Schedule sensitivity √ √
Risk
50 Criticality √ √
Reporting
51 Cruciality √ √
52 Cost sensitivity √ √
53 Compare plans √ √
54 Critical path report √ √
55 Compare pre and post-mitigated plans √ √
56 Risk trend report √ √
57 Probabilistic date reporting √ √
√
58 Edit/creation of VBA macros √
VBA 59 √ √
Interface Execution of pre-created macros
60 Customizable macro menu √
9
4
Chapter
Note: If you already have a project plan ready (using other planning tools) we can import that too! And
get started; however let us learn how to build project plans using PERTMASTER’s tools. Lessons on
importing a pre-build plan from other planning tools are covered in the latter part of this manual.
Our assignment now is to initiate a project. This project will be identified as “Office Building
Addition”. Our first aim would be to make a detailed plan of this project so that we can
identify all small & big risks in the next step
Exercise 1:
10
2. Select Pertmaster
Plan.
Click Open
4. Click OK
11
4.2 Deliverables of Work (Work Breakdown Structure)
Now that we have initiated the ‘Office building Addition’ project, we need to split this into
possible deliverables i.e. we need to define the “Work Breakdown Structure”.
Exercise 2:
Create the Work Breakdown Structure as given in the Table below. You may follow
instructions from your tutor.
Structure
Foundation
Elevators
Exterior Finishes
Bricks
Roof
Interior Finishes
Level 1
Level 2
Level 3
12
4.3 Preparing the Activity List
Exercise 3:
Add the following Activities in the respective WBS already created earlier.
Remaining
Name Activity
Description Duration
(Activity ID) Type
(days)
start
OBA 0070 Begin Building Construction 0
milestone
13
finish
OBA 0160 Foundation Phase Complete 0
milestone
start
OBA 0190 Begin Structural Phase 0
milestone
finish
OBA 0250 Structure Complete 0
milestone
start
OBA 0270 Rough-In Phase Begins 0
milestone
finish
OBA 0280 Rough In Complete 0
milestone
14
OBA 0350 Install Wiring and Cable 15 normal
start
OBA 0380 Close-In Phase Begins 0
milestone
finish
OBA 0390 Building Enclosed 0
milestone
start
OBA 0410 Assemble Brick Samples 0
milestone
Review and Approve Brick
OBA 0420 10 normal
Samples
Prepare and Solicit Bids for Brick
OBA 0430 3 normal
Exterior
15
OBA 0540 Drywall in Offices 15 normal
finish
OBA 0560 Finishes Complete 0
milestone
Finish
OBA 0580 Building Addition Complete 0
milestone
Our list of Activities is ready however there seems to be no logic to this plan. Let us define
relationships between activities which will give the network its logic.
Name Lag
Description Predecessors Relationship
(Activity ID) (Days)
Begin Building
OBA 0070 OBA 0040 FS 0
Construction
16
OBA 0090 Excavation OBA 0080 FS 0
Install Underground
OBA 0100 OBA 0090 FS 0
Water Lines
Install Underground
OBA 0110 OBA 0090 FS 0
Electric Conduit
Form/Pour Concrete OBA 0110 FS 0
OBA 0120
Footings OBA 0100 FS 0
Concrete Foundation
OBA 0130 OBA 0120 FS 0
Walls
OBA 0240 FS 0
OBA 0250 Structure Complete OBA 0230 FS 0
OBA 0220 FS 0
Mechanical/Electrical
OBA 0260
Systems
17
OBA 0270 Rough-In Phase Begins OBA 0330 FS 0
OBA 0050 FS 0
OBA 0390 FS 0
OBA 0270 FS 0
OBA 0280 Rough In Complete
OBA 0330 FS 0
OBA 0300 FS 0
OBA 0360 FS 0
OBA 0490 FS 0
OBA 0390 Building Enclosed
OBA 0520 FS 0
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Prepare and Solicit Bids
OBA 0430 OBA 0420 FS 0
for Brick Exterior
OBA 0460 FS 0
OBA 0470 Brick Exterior Walls
OBA 0250 FS 0
OBA 0390 FS 0
OBA 0540 Drywall in Offices
OBA 0280 FS 0
OBA 0040 FS 0
OBA 0550 Touch-up and Clean-up OBA 0540 SS 7
OBA 0310 FS 0
19
4.5 Creating a calendar for work
1. Click on Plan.
2. Click on
Calendars.
3. Click on New.
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5. Customize the working days as
required.
You may follow instructions from your
tutor.
21
4.6 Resource Definition
1. Click on Plan.
2. Click on Resources.
22
4.7 Resource Assignments
Name
Description Resource Units
(Activity ID)
LABOURER 10
OBA 0080 Site Preparation
CRANE 1
LABOURER 10
OBA 0090 Excavation
CRANE 1
CEMENT 200
OBA 0120 Form/Pour Concrete Footings
LABOURER 5
CEMENT 100
OBA 0150 Backfill and Compact Walls
LABOURER 5
CRANE 1
OBA 0220 Concrete First Floor LABOURER 7
CEMENT 150
CEMENT 150
OBA 0230 Concrete Basement Slab
LABOURER 5
CEMENT 125
OBA 0240 Concrete Second Floor
LABOURER 5
LABOURER 5
OBA 0470 Brick Exterior Walls
BRICKS 1000
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5
Chapter
Now once our project plan is ready let us start identifying risks & continue further analysis.
Design Building
OBA 0030 Triangle 18d 23d 25d
Addition
Form/Pour Concrete
OBA 0120 BetaPert 8d 10d 14d
Footings
Concrete Foundation
OBA 0130 Triangle 8d 10d 13d
Walls
24
You may now run the Risk Analysis!! Your Risk Histogram should look similar to the one
shown below.
Cumulative Frequency
88 Converged in 200 iterations
70% 22/Apr/08 17:30
(variation < 0.1% over 100 iterations)
65% 22/Apr/08 09:30 Mean Total Plan Cost:
60% 21/Apr/08 09:30 Converged in 277 iterations
66 55% 19/Apr/08 11:00 (variation < 0.1% over 100 iterations)
Hits
1. Click on Risk
25
2. Click on “Risk On for sub resource”
Sometimes the quantity of a material resource required may be uncertain. We need to model
such cases too!
26
5.3 Task Existence Risk
Imagine a situation wherein there are 75 % chances that during excavation ground water
may be found.
27
Rules for Task Existence:
1. If the Keep Links to other tasks option is selected and the task does not exist then its duration is
set to zero & any resource requirements are set to zero. The effect of its duration & resources on
the project is therefore removed.
2. If the Remove Links to other tasks option is selected and the task does not exist then it is ignored –
Ignoring a task removes the task & all preceding & succeeding links. (This may arouse a situation
wherein there may be open ends in project in a particular iteration).
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5.4 Probabilistic Branching
Probabilistic branching allows you to model the risk of outcomes occurring in a project. It is
used when the outcomes are exclusive, i.e. only one of the many outcomes occurs
Imagine a situation wherein there are chances that archaeological remains may be found
while excavating. In such case the following probable outcomes are probable:
a. Archaeological remains found that needs expert removal (50% chance; duration= 10d;
cost= Rs 5000)
b. Archaeological remains found which do not need expert removal (50% chance; duration=
0d; cost= Rs. 0)
29
Rules for Probabilistic branching:
1. Succeeding tasks can have a probability of 100%.
2. When there are two or more succeeding tasks with less than 100% probability, all of those
probabilities must add up to 100%.
3. If there is only one task with a probability less than 100%, then it can have any probability.
4. A task that has more than one predecessor has to have a probability of 100% (such tasks are
shown with an * mark on the ‘Risks-Probabilistic Branch’ tab.
30
5.5 Probabilistic Links
Probabilistic links allow you to model the probability of a link between two tasks existing or
not existing.
Select the task “Structure Complete”. Add the probabilistic link risk to its predecessors as
shown below.
3. If there is only one link with a probability less than 100%, then it can have any probability
31
6
Chapter
REPORTS
6.1 Risk Histograms
Click on Risk/
Histogram View.
32
You can view the histograms for various parameters of the project or even selected tasks, viz., Durations,
Start Dates, Finish Dates, Float, Cost, etc.
33
6.2 Tornado Graphs
Tornado graphs ar used to display & rank Sensitivity, Schedule Sensivity Index, Criticality &
Cruciality values.
34
6.3 Scatter Plot
The scatter plot shows the relationship between two outputs of a risk analysis. Each point on
the scatter plot represents two values for one iteration of the risk analysis. The total number
of points is equal to the number of iterations that were run in the risk analysis.
The example below shows the relationship between the time and cost of the plan. In this
example it shows that the time to finish the plan is correlated to the cost of the plan (i.e. as
the time to complete the project increases so does the cost).
The level of correlation between the inputs is indicated by the Pearson's and Spearman's
correlation indices shown to the right of the report.
Analysis
Rs875,299
Simulation: Latin Hypercube
Rs848,558 Iterations: 1000
Rs821,817 Correlation
Entire Plan C ost
Rs741,595
Rs714,854
Rs688,113
Rs661,373
Rs634,632
26/Mar/08 15:00 03/Apr/08 16:00 11/Apr/08 17:00 20/Apr/08 09:30 28/Apr/08 10:30
35
6.4 Schedule Check Report
36
6.5 Summary Risk Reports
Click on
Reports/
Summary Risk
Report
37
7
Chapter
UTILITIES
7.1 Importing Pre build Plans
Click on File/ Import Plan
38
Select the source
file format
39
7.2 Exporting Pertmaster plans
40
Select the destination & format for the output file.
41
8
Chapter
RISK REGISTER
• Open the Risk register & add the following risks to the register
42
• In the Mitigation Tab, add the
following mitigation plan & post
mitigation scoring for the risk “Board
Approvals Delayed”.
43
• Click on the waterfall
chart tab. This will
show the risk score
plotted against time.
Clicking on the quantified tab will allow you to edit the grayed parameters.
You may also build Pre- Mitigated & Post Mitigated plans. Follow instructions from your
tutor.
44
45