Enterprise Project Management...simulation to produce reliable results. Risk simulation in Spider Project may be based on Monte Carlo simulation or use three scenarios approach. 3

Spider P

roject

Spider P

roject

Enterprise ProjectEnterprise ProjectManagementManagement

Vladimir LiberzonVladimir LiberzonOlga Makar-LimanovOlga Makar-LimanovVictoria ShavyrinaVictoria Shavyrina

Spider Project Introduction

Spider Project is powerful professional project managementsoftware, developed in Russia. The first SP version waslaunched in 1993 and since then it has been constantlyimproved. The current Version 11 is used in 30 countries.Spider Project is an integrated software that containseverything that is useful for good project and portfoliomanagement. It supports all traditional methods and tools,and includes unique approaches and functions that have noanalogues in other software packages.It is the only PM software that optimizes resource, cost, andmaterial constrained schedules and budgets for projects andportfolios.


The unique features of Spider Project include: Quantity Based Scheduling Conditional Scheduling Skill Scheduling Cost and Material Leveling Resource Critical Path Calculation Cash and Material Flow Calculation and Management Trend Analysis


The unique features of Spider Project include: Multidimensional Risk Analysis Analysis of Success Probability Trends Management of Project Time and Cost Buffers Application and management of Corporate Norms Management of many Parallel Budgets Line of Balance Reporting and many others.

EPM Requirementsto Schedule Models

The same Project, Phase, Activity, Resource, Material, andDepartment coding structures are used in all projects,Resources that are used in all projects belong to theportfolio (corporate) resource pool,Resources of the same type share the same characteristics(like costs, production rates, material consumption perwork hour),WBS structures that are used in different projects of theprogram are compatible,

Project costs have the same structure in all projects (samecost components are used),

Data requirements

Cost accounts are the same in all projects,

Activities of the same type have the same characteristics in allprojects (like unit cost, material requirements per workvolume unit, etc.),

Typical resource assignments have the same characteristics inall projects (like productivity, cost and material requirements),

Typical (repeating) processes are modeled in the same way inall projects,

Project archives are kept and stored as required.

Data requirements

These requirements are usually set on the corporate leveland are mandatory for all projects in the organization.Templates, reference-books, coding systems etc. aredeveloped in the Corporate Project Management Office.Corporate Project Management Office creates andmaintains Databases or Reference-books that contain thoseparameters that shall be used for planning of all projects inthe organization.

Data requirements

Enterprise project managementhas to be based on thecorporate standards. Thesestandards include not onlyestimates of the typicalprocess, activity, resource, andassignment parameters butalso project templates.This slide shows WBS templatefor Arena construction projectsrequired by ProgramManagement Office for Sochi2014 Olympic Programplanning.

ProjectTemplates

Enterprise or Corporate Reference-books usually include:• Activity cost and material requirements per volume unit for

all activity types,• Resource assignment cost and material requirements per

volume unit for all assignment types,• Resource assignment productivity for all assignment types,• Resource assignment work loads for all assignment types.Activities, resources and resource assignments belong to thesame type if they share the same characteristics.Reference-book samples are shown in the next slide.

Corporate Databases(Reference-Books)

Corporate Databases(Reference-Books)

Typical Fragment Library

Project fragments usually describe typical processes andtechnologies that are used more than once as small projects.Creating project computer models using the library of typicalfragments helps to avoid inconsistencies and assures that theproject model follows corporate standards.A library of typical fragments is very important tool for thedevelopment of common corporate project managementculture and management standards.

Typical Fragment is small and defined in details as shown inthe next slides.

Cost Data

Usually it is not enough just to define activity and resourcecosts. It is necessary to know project expenses andrevenues, what will be spent on wages, on machinery andequipment, on taxes, etc. Sometimes it is necessary to allowfor multiple currencies. So there is a need to define andassign cost components.Cost Structure shall be the same in all enterprise projects.Spider Project allows to create any number of costcomponents and group them into cost centers.

Cost Data

It is useful to create and to manage parallel cost estimatesof the same activities, like internal (real) cost, estimatedcost, contract cost, etc., and to manage parallel budgets (asdifferent cost centers).It is especially useful for Contractors who will be able tomanage their expenses and contract costs in the singlemodel.

Multiple WBS

It is also very useful to have an opportunity to get projectreports that aggregate project data different ways. Usuallywe use at least three Work Breakdown Structures in ourprojects: based on project deliverables, project processes andresponsibilities.At least one WBS is mandatory and required by CorporateProject Management Office. Additional WBS may be createdby project management teams.Spider Project allows to create any number of parallel WBS.

Contract Breakdown Structure is the powerful tool formanagement of contract relationships. The sameorganizations are involved in multiple projects and in differentprograms.Contract Breakdown Structure is used to get reports on thecontract performance and contract cash flows.It is used on both Project and Portfolio levels and helps tomanage not only separate contracts but also overallrelationships with Owners or Contractors.Spider Project simulates not only expenses but also incomesand is used for management of portfolio, project, andcontract cash flows.

Contract Breakdown Structure

Project and Portfolio Archives

The planners store project versions and analyse the progressin project execution, comparing current project, program andportfolio schedules and budgets not only with the baselinesbut also with any previous versions.It enables to assess the progress in project execution for thelast week, last month, last year, compared to the baseline,etc.

Creating a project usingcorporate libraries

If the project is typical it is reasonable to use the corporatetemplate. In other case we shall start with creating WBS.Let’s do it for small construction project – a division ofconcrete works.WBS looks like this:


Next step is Update (Replace) workpackages with typical fragments.Inserting the fragment you shalldefine what to do with codes andenter the ratio of the real volume ofwork in the project to the volume ofwork in the fragment.Then activities of differentfragments shall be linked and that’sall.


Created model will be already filled with resources, costs,materials and everything else that was entered in the typicalfragments.

Project Scheduling(short review –

was discussed at the Advanced session)

Project Scheduling

We discussed project scheduling in the Advanced session.I will remind specific Spider Project scheduling options: Quantity Based Scheduling Conditional Scheduling Skill Scheduling Cost and Material Constrained Scheduling Resource Critical Path Calculation Resource Constrained Schedule Optimization Resource Constrained Schedule Stabilization

Project Scheduling

Spider Project optimizes resource constrained schedules.The schedules created by Spider Project are usually shorterthan the schedules created by other PM packages for thesame projects. It saves a fortune to Spider Project users.Besides it includes very useful option that makes theschedules stable. This option is called Previous versionsupport. If this option is selected the schedule will keep theorder of activity execution that exists in user selectedversion in project (portfolio) archive.

Resource Critical Path

In many projects (and certainly in the corporate projectportfolio) it is necessary to simulate financing and production,and to calculate project/portfolio schedules taking intoaccount all limitations (including availability of renewableresources, material supply and financing schedules).True critical path should account for all schedule constraintsincluding resource and financial limitations.We call it Resource Critical Path (RCP) to distinguish itfrom the traditional interpretation of the critical pathdefinition.

Resource Critical Path

The calculation of RCP is similar to the calculation of thetraditional critical path with the exception that both early andlate dates (and corresponding activity floats) are calculatedduring forward and backward resource (and material, andcost) leveling.This technique permits to obtain resource constrained floats.Activity resource constrained float shows the period for whichactivity execution may be delayed within the current schedulewith the set of resources available in current project/portfoliowithout delaying project/portfolio finish or any due dates.Spider Project calculates RCP and true resource constrainedfloats since its launch at the end of 1992.

Success Criteria

Project Success Criteria

If project success criteria are set as finishing project on timeand under budget then proper decision making will becomplicated.Project managers will not be able to estimate the effect oftheir decisions to spend more money but to finish the projectearlier.We suggest to set one integrated criterion of theproject/program/portfolio success or failure.

Each day of project delay means some money losses andfinishing project earlier means additional profit. Estimatingthese profits and losses we can define the cost of the projectday (maybe separate and different for acceleration anddelay).Another option – to set the profit that should be achieved atsome point in time basing on the forecast of the revenuesthat will be obtained after the project will deliver its results.Such success criteria will permit to weight time and moneymaking managerial decisions.Second approach is usual in project portfolio management.


Project/Portfolio decisions shall be justified by their positiveimpact on selected success criterion.In the next example project schedules were calculated withand without financial constraints.It helps to understand if it is profitable to borrow money oncertain conditions or to pay more to the contractors if theywill agree for delayed payments.Proper project (program, portfolio) schedule model is thepowerful tool that helps to select the best decisions.But first decide what is the best.


Risk Analysis &Success Driven

Project Management

Why risk analysis

Our experience of project planning showsthat the probability of successfulimplementation of deterministic projectschedules and budgets is very low.Therefore project and portfolio planningtechnology should always include risksimulation to produce reliable results.Risk simulation in Spider Project may bebased on Monte Carlo simulation or usethree scenarios approach.3 scenario approach is unique and we willdescribe it further.

Risk Simulation –three scenarios method

A project planner obtains three estimates (optimistic, mostprobable and pessimistic) for all initial project data (duration,volumes, productivity, calendars, costs, etc.).Risk events are selected and ranked using the usual approachto risk qualitative analysis. Usually we recommend to includerisk events with the probability exceeding 90% in theoptimistic scenario, exceeding 50% in the most probablescenario, and all selected risks in the pessimistic scenario.

Most probable and pessimistic project scenarios may containadditional activities and costs due to corresponding riskevents and may employ additional resources and differentcalendars.As the result project planner obtains three expected finishdates, costs and material consumptions for all majormilestones. They are used to rebuild probability curves forthe dates, costs and material requirements.Target dates and costs may be set basing on requiredprobabilities to be on time and on budget

Risk Simulation –three scenarios method

Project/Program Targets

If targets are predefined risk simulation helps to estimate actualprobabilities to meet set targets. If they are low correctiveactions shall be developed and estimated.

Risk Simulation –Monte Carlo

Monte Carlo simulation in Spider Project creates reliabledistributions of project outcome when resources, materialsand financing are limited because it uses the same levelingalgorithms as used for project scheduling.This feature is unique because other Monte Carlo software iscreated as add-ins to existing scheduling packages and usesown leveling algorithms. As the result created MC distributionsare not valid when resources are limited because resourcesare assigned different ways when the project is managed.

Risk Simulation –Monte Carlo

Spider Project Monte Carlo includes multidimensional riskanalysis calculating probability to meet a set of targetssimultaneously (like target finish, target profit, target cost,etc.).

A set oftargets maybe set usingscatterdiagram.

Success Probabilities

Project planning usually includes determining how toorganize project execution to be able to meet target dateswith the reasonable reliability.Probabilities to meet approved project targets we callSuccess Probabilities. These targets may be set for allproject parameters that will be controlled (profit, expenses,duration, material consumption).Target dates do not belong to any schedule. Usually they arebetween most probable and pessimistic dates.A set of target dates and costs (analogue of milestoneschedule) is the real project baseline.But baseline schedule does not exist!

Buffers

We recommend to use optimistic schedule for setting tasks forproject implementers and manage project reserves.

Spider Project not only calculates probabilities to meet targetsbut also creates a critical schedule – a project schedulecalculated backward from target dates. The differencebetween current and critical dates shows current schedulecontingency reserves (buffers).

Success Probabilities

Project PortfolioPlanning

Selecting Projects

In Spider Project you can create and manage any number ofproject portfolios.Creating project portfolio is easy – just select what projects toinclude and you will immediately get reports on selected set ofprojects.But selecting projects for including in the portfolio is not easy.There are many papers and discussions on project selectioncriteria and Spider Project can support any methodology. InSpider project it is possible to create any number of userfields, link them with formulas, apply project priorities usingany criteria.

Selecting Projects

But portfolio projects use the same limited resources, activitiesof different projects may be interdependent, financialrestrictions are usually applied to the portfolio as a whole.So selecting projects one by one, without taking into accountcommon restrictions is risky.Let’s consider simple example shown in the next slide

The portfolio consists of 2 subportfolios and 6 multiprojects.Each one looks attractive but resources are limited and theportfolio shall be recalculated to take into account portfoliorestrictions.

After Portfolio leveling NPV dropped from 33047364.94 to13990552.75. Expected expenses = 16960752.80 but someprojects will generate profits and maximal investments areonly 10656475.88.

But if we will delete multiproject 6 portfolio NPV will become16,001,802.41 (more than 2 millions larger) and necessaryinvestments will become 9,583,108.96 (more than 1 millionless). It is not easy to understand when to stop withoutportfolio resource constrained scheduling!

We calculated the portfolio without applying project priorities.Let’s look what will happen if to prioritize projects and avoidmultitasking.

Applying project priorities we increased portfolio NPV by morethan 4 millions! Though overall portfolio durations did notbecome less the profit starts earlier.

Portfolio ManagementConclusions

Portfolio shall be scheduled taking into account all existingconstraints. Selecting the projects without estimating theirimpact on overall portfolio performance may lead to wrongdecisions.Portfolio shall be scheduled and managed applying projectpriorities to achieve better results.

Project/PortfolioPerformanceManagement

Performance Measurement

Common performance measurement routine shall be set for allprojects belonging to the portfolio.Portfolio schedule is revised regularly. For most portfolios it isdone weekly. To be able to reschedule the portfolio it isnecessary that all portfolio projects have the same data date.So the portfolio management team requires from all projectmanagement teams to enter actual data of their projects atspecified dates and time (for an example: each week onTuesday before 12:00 the actual status on Tuesday 08:00 shallbe entered).


If different projects have different data dates then portfolioscheduling become impossible and most reports will not bereliable.Though Spider Project includes unique option – schedulingfrom the specific date and not moving activities that werescheduled earlier setting the rules for entering actual data ismandatory for portfolio management.This specifics makes client-server approach to organizinggroup work with the project/portfolio models less efficientthan in other application areas.

Group Work

In Spider Project the users create responsibility WBS that isused for the database replication.Each person responsible for some project or phase receivesthe separate model of his/her project/phase.Project managers can manage their projects using their ownupdating periods, play what if with their projects, etc. withoutany fear that it can interfere with the work of other managers.But project updating routine shall correspond with portfolioroutine. As usual, all project history is kept.

Group Work

This is an example ofResponsibility WBS

Group Work

For portfolios it isalso possible todistribute,consolidate andupdate all projectsbelonging to theportfolio.


With Spider Project project management teams collect reportsnot on the “percent complete”, but on physical quantities(volumes) that were done, time that was spent, materials andequipment that were consumed, money that were spent onproject activities.We don’t understand discussions on the best ways to measureactivity percent complete.

Management by Trends

Project/Portfolio planners keep archives to be able to gettrends of project/portfolio parameters and analyze pastperformance.We recommend to manage projects/portfolios basing on theanalysis of performance trends.If some project is 5 days ahead of the baseline but one weekago it was 8 days and one month ago 20 days then somecorrective action is needed.If the project is behind the schedule but the distance becomesmaller then project team improves project performance andinterference is not necessary.

Earned Value Analysis

Earned Value Analysis is another method that is used forestimating project/portfolio performance.But this method is used very carefully because:• the real situation may be distorted,• project managers are motivated to do expensive works

ASAP and cheap works ALAP.

Performance Analysis

Success Probability Trends

We consider success probability trends as the reallyintegrated project performance measurement tool.Success probabilities may change due to:Performance results

Scope changes

Cost changes

Risk changes

Resource changes

Thus success probability trends reflect not only projectperformance results but also what is going on around theproject.

Success Driven ProjectManagement

Success probability trends may be used as the onlyinformation about project performance at the topmanagement level because this information is sufficientfor performance estimation and decision making.We call Management by Trends methodology SuccessDriven Project Management.

Project/PortfolioPerformance Reports

Plan and Performance Reports

Performance reports usually include project/portfolio Activity,Resource, and Material Gantt Charts, S-curves, ResourceHistograms, Earned Value Graphs, Contract Cash Flows,Time-Location (or Linear) Diagrams, Trends ofproject/portfolio parameters.These reports were discussed at Spider Project Advancedsession.Examples of Portfolio and Project reports are shown in thenext slides.

Portfolio Gantt Chart

Resource and Material GanttCharts

Material Gantt Chart shows periods of material consumption.Resource Gantt Chart shows periods of resource utilization.

Time-Location Diagram

Time-Location diagram is a clear and compact way of projectschedule presentation.The time is plotted on the Y-axis of this diagram and theproject metrics (in kilometers, floors, or any other units) isplotted on the X-axis.This report is especially useful in linear construction projects(roads, railways, pipelines, high rise buildings, etc.)Next slide shows time-location diagram of a railwayconstruction project.In Spider Project time-location diagrams may be created forany time periods and besides they are animated and mayshow the construction process step by step.

Time-Location Diagram

Trend Charts

Trend Charts

Banana Curves

Project Truncation

Projects can be sliced byuser defined periods

Table Reports

Table reports can becreated for anyparameters and forany time periodincluding userdefined.

Conclusions

Corporate Project ManagementRequirements

1. There is a need for common methodology, templates,reference-books of the corporate norms to be able tocreate corporate Project Management System andanalyze project portfolios.

2. There is a need for Project Management Office –organizational unit that develops corporate projectmanagement standards, collects actual information onproject performance and works with the Portfolio Model,creating and updating portfolio plan and analyzingportfolio performance.


3. Most norms and standards are applied to the activityphysical units (m, t, m3, piece, etc.). So it is necessaryto plan activity schedule and to monitor projectperformance basing on physical quantities (volumes ofwork) measurement.

4. Portfolio Model includes the models of individual projectsand shall be resource loaded.


5. We recommend to create a library of project fragmentsthat may be used for fast development of the detailedproject models.

6. We recommend to set reliable target dates basing onrisk analysis and simulation but to use optimistic projectschedule for setting tasks for project participants.

7. Time and Cost contingency buffer penetrations shall beregularly re-estimated. If these buffers are consumedtoo fast there is a need for corrective actions.


8. We recommend to keep project archives and to analyzetrends of project parameters.

9. If trends are negative corrective actions shall beconsidered even if the status is good.

10. Earned Value Analysis supplies management with theuseful information on project status. But it shall be usedcarefully and only as the supplement to other methodsof project performance measurement.


11. Success Probability trends are the best integratedindicators of project health.

12. Positive trends show that buffer penetrations are lowerthan expected. Negative trends show that buffers areconsumed faster than expected and corrective actionsmay be necessary.

13. Success probability trends depend not only on projectperformance but also on risks that may appear anddisappear during project life cycle. That is why theymay be considered as integrated indicators necessaryfor decision making.

Enterprise Project Management

In this session we discussed some Spider Projectapproaches to corporate project management.There are many differences between Spider Projectapproaches and approaches used in other softwarepackages. But the main is the following:We think that corporate PM system shall be based on thecorporate norms and templates.Through Reference-books and Fragment Libraries SpiderProject supports creating corporate project managementstandards and environment.

Thank you!www.spiderproject.com

[email protected]

Enterprise Project Management...simulation to produce reliable results. Risk simulation in Spider Project may be based on Monte Carlo simulation or use three scenarios approach. 3

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