Jpunch 02-16-2012

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Assessing Project Alternatives through Trade-off Analysis In

A Strategic Project Management Environment

Johnnetta Punch, PMP

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Introduction

The current federal-deficit crisis is requiring agencies to achieve their mission under constrained flat-line budgets, thereby making cost reduction a priority for the customer. This economic condition presents a particular problem for project managers within the space flight program. Assessing project alternatives through trade-off analysis is a risk control methodology that provides the project manager a tool from which to balance project constraints while shortening the length of the project.

For high risk (high liability) projects, this task examines from a strategic project management perspective, a systems approach for assessing project alternatives through trade-off analysis. The focus of this task is trade-offs during the project implementation phase. However, it should be emphasized that this analytical technique is done often and continuously throughout the lifecycle of NASA projects.

The current project environment is difficult and requires that we adapt a systematic approach for strategic planning and tradeoff analysis. The opportunity exists for improved up-front planning that facilitates decision making inherent in the trade-off analysis methodology as opposed to relying on a process based on history.

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Assessing Project Alternatives through Trade-off Analysis In

A Strategic Project Management Environment

The focus of this session is to examine a systematic approach to strategic planning and project trade-off analysis. A systematic approach is a proactive decision making methodology that:

– Promotes setting project goals

– Ensures a methodical, organized effort in which to carry out decisions

– Requires detailed up-front planning that usually necessitates increased effort by the project management team.

Strategic Project Project Management Model

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8. Tactical Project

Execution

Strategic Project

Planning

2. Establishing Guidelines

7. Decision and Alternative

Analysis

5. Situational Review and Assessment

3. Delivering the Project Scope and

Metrics

6. Problem and Opportunity

Analysis

1. Defining Customer

Expectations and Deliverables

4. Organizing the Project

Team

*Strategic Project Management Model

1. Defining customer expectations and priorities early in the project lifecycle

Obtain a comprehensive, exact understanding of the customer’s requirements

Understand the nuances of assignments

3. Delivering the Project Scope and Metrics Establish an integrated project baseline

5. Conducting a Situational Review and Assessment Answer questions: What’s happening now? What

happened in the past? What is likely to happen in the future?

Utilize strategic/concurrent systems engineering as a Total Quality Management Tool• Improve communication while breaking down

functional silos, parochial thinking and hidden agendas

• Reduce total project cycle time

7. Decision Making and Alternative Analysis Identify those alternatives necessary to achieve project

objectives * Strategic Project ManagementMichael J. Termini

Risks

Cost

Time

Technical Performance

Strategic project management combines comprehensive up-frontplanning with detailed downstream planning to ensure thatstrategic and tactical issues are addressed early in the project.

Strategic Project Management

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Fails to indentify and prioritize customer requirements

Makes unfounded assumptions instead of obtaining the facts

Fails to quantify and prioritize deliverables or project expectations

Relies generally on blind faith in the expertise and directions of those above them

*Strategic Project ManagementMichael Termini

A method for clarifying customer expectations

RequirementsExpectationsSpecifications

SchedulesCosts/budgetContingencies

Metrics

Listen

Repeat

Listen

Repeat

Document

Confirm

Customer

Suppliers

Proj

ect T

eam

Project Manager

Ask

Confirm

Risks

Cost

Time


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Delivering the Project Scope and Metrics

Tie the project budget and schedule to project expectations and scope

Generally, the project scope is difficult to define and requires: • Fundamental project control systems for technical, cost and schedule to

mitigate unplanned changes

Once the project deliverables and scope have been clearly defined, everything must be in writing, preferably in a single document.

• Project scope and deliverables

• All performance specifications

• Estimated project schedules and budget

• Projected project costs and returns

• Expected resource requirements and the timing of their use or consumption

• Project metrics and their associated data support systems

• Decision and corrective action procedures

• The assigned level of empowerment and all project approval requirements

Risks

Cost

Time


Tactical Project Management Model

Work Breakdown• Breaks the project down into major sub level activities

Activity listing detail • Must be sequenced with associated dependencies

Dependency Analysis • Dependencies can be serial or resource sensitive • Personnel, funding, information, data, or materials

Cycle Time Calculation• Total consumed time from the beginning of the activity

to completion Calendar Time Conversion

• Projects are planned on calendar time PERT Critical Path and Slack Time Analysis

• Utilizes computer models to calculate critical path and slack time within the project schedule

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*Tactical Project Management Model

Trade-off Analysis

Tactical Project Execution

Activity Listing Detail

Gant Chart Development

Calendar Time Conversion

Dependency Analysis

PERT Critical Path and Slack Time Analysis

Development of the Work

Breakdown Structure

Cycle Time Calculation

Gant Chart Development• Illustrates timeline for all project activities,

and value is predicated upon the accuracy of the data and the planning

Trade-Off Analysis• Decision making based on a systems

approach for assessing project alternatives

Scheduling techniques used to control and monitor the project, assess performance against established project objectives, and initiate corrective actions

*Project ManagementA systems approach to planning, scheduling and controlling byHarold Kerzner

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Trade-off Analysis

Focusing on the customer’s priorities

Balancing project constraints with the delivery priorities

Making compromises without sacrificing project success in the eyes of the customer

Executing trade-off analyses in strict accordance to customer

Renegotiating, if necessary, with the customer to bring the remaining variables (either cost, time or performance) in as planned

When unforeseen problems throw the project off schedule or create an over budget condition, the Project Manager must bring the project back in control by :

Risks

Cost

Time


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Categories of Project Constraints

Most Research and Development projects portray situation A-3.• The performance of a R&D project is

usually well defined, and it is cost and time that may be allowed to vary.

Capital equipment projects fall into situation A-1 or B-2, where time is of the essence.• The sooner the piece of equipment

gets into production, the sooner the return of investment can realized

Non process-type equipment necessary to comply with regulatory requirements develops a scenario around situation B-3. • Performance is fixed • Commercially off-the-shelf (COTS)

The professional consulting firm operates primarily under situation B-1.

*Categories of Project Constraints

Example Scenarios

In reality, every project has latitude for some compromise to be made without sacrificing success in the eyes of the customer.


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Assessing Project Alternatives through Trade-off Analysis

Recognizes that the smallest change in the project or system could easily affect all the organization’s system, i.e., business systems

Incorporates a six step process for decision making relating to managing project time, cost, and performance trade-offs. Steps include:

1. Recognizing and understanding the basis for project conflicts

2. Reviewing project objectives

3. Analyzing the project environment and status

4. Listing and analyzing alternative course of actions

5. Revising the project plan

6. Obtaining management approval and re-planning the project

The alternative to systematic planning is decision-making based on history. – Generally results in reactive management leading to crisis management, conflict management, and fire

fighting

A systems approach for decision making when performing trade-off analysis is considered proactive management

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Step 1: Recognizing and Understanding the Basis for Project Conflicts

An outdated project management cost and control system• Compares actual versus planned cost

• Provides early warning cost data, not necessarily tested or validated through information intelligence

Human errors/failures• Impossible schedule commitments, due to lack

of resources and/or available skill• Poor control of design changes• Poor project cost accounting • Machine failures • Failure to receive a critical input• Failure to receive anticipated approvals

• Uncertain /Unexpected Problems • Too many concurrent projects• Labor contract expiration• Change in project leadership• Possibility of project cancellation• Overcommitted company resources• Conflicting project priorities• Cash flow problems• Labor contact disputes• Delay in material shipment• “Fast-track” people having been promoted off

the project• “Temporary” employees having to be returned

to their home base• Inaccurate original forecast• Change in market conditions• New standards having been developed

Project conflicts may include:

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Step 2: Review Project Objectives

Reviewing project documentation to understand the degree of inflexibility imposed by the customer requires the project team to:• Complete a review of project objectives

• Integrate project and sponsor’s objectives

• Review the statement of work to:• Ensure adequacy of content with project and functional specialists

• Review schedule, cost, and technical performance specifications

• Assess resources consumed and projected

Look for the inflexibilities within the project objectives

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Step 3: Analyzing the Project Environment and Status

Assessing the Project Metrics• Time-to-complete• Cost- to- complete• Work –to- complete

Assessing quickly the significance of a particular variance• Inadequate planning

• A lack of detailed plans or technical, cost and schedule changes• Scope changes

• Changes that are permitted without formal incorporation in the project plan or increase in the resources authorized for the project

• Poor performance• Poor performance by one team member may quickly undermine the performance of the entire team

• Excess performance• An overzealous team member will unintentionally distort the planned balance between cost,

schedule, and performance on the project• Environmental restraints

• Third party approval, or dependency on outside resources projects

Identify problems through a comprehensive review and status of each project work package with functional managers.

Step 4: List and Analyze Project Alternative Course of Actions

Time• Will the time delay change the completion date for other projects and

other customers?• What is the cause for the time delay?• Can resources be committed to meet the schedule?• What will be the cost for the new schedule?• Will the increase schedule give us added value?• Will an extension of this project cause a delay on other projects hours

Cost • What is causing the cost overrun?• What can be done to reduce the remaining cost?• Should we absorb the extra cost ?• Can we renegotiate time or performance standards to stay within cost?• Will there be any net value gained for the increase in funding ?• Is this the only way to satisfy Performance?

Technical Performance• Can the original specification be met • Are the specification negotiable• Are we increasing or decreasing performance • Will the customer accept a change• Will the change in specifications cause a redistribution of project

resources

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To use this graphical technique, the customer drives which of the three project constraints to hold fixed.

Plot graphically Scenarios 1-3 1. Trade-off cost with technical

performance held fixed

2. Trade-off technical performance with cost held fixed

3. Trade-off cost with time held fixed. Completing the project on schedule can

be extremely important in certain cases

Quantify and plot the result of the analysis in order to determine the crashing cost for shortening the length of a project.

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Step 4 List and Analyze Project Alternative Course of Actions Continues….


Fixed Performance - Identify available alternatives and plot the results to determine the crashing costs for shortening the length of the project

*Cost is expressed as a function of time

Scenario 1: Trade-off with fixed performance If the critical project constraint most important to the customer is technical performance, consider the following alternatives actions

• Adding additional resources or capital to the project , if required

• Applying other technological, processes or methodologies available to the team

• Redefining the scope or deleting

• Minimizing cost growth through the use overtime (salaried personnel)

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Step 4 Developing an Alternative Actions continue…….

If the critical project constraint most important to the customer is fixed cost, consider the following alternatives actions.• Allocate unused or excess funds from other

activities within the projects to offset current or projected overruns

• Allocate activities to lower level personnel where risks of failure is minimal

• Outsource where control and risk management dictate a low probability of failure

• Re-engineer process for a reduction in activity or process costs or overhead costs – some activities may be eliminated all together, thus saving cost.

• Eat the cost overrun rather than pass it along to the customer

* Cost is held Fixed

Tech

nic

al

*Project Management A systems approach to planning, scheduling and controlling byHarold Kerzner

Performance is expressed as a function of time

Fixed Cost - Identify available alternatives and plot the results to determine the crashing costs for shortening the length of the project

Scenario 2: Trade-off with Fixed Cost

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Step 4 Developing an Alternative Actions continues……..

If the critical project constraint most important to the customer is fixed time, consider the following alternatives actions:

• Reallocate resources not on the critical path (slack time activities) to activities on the critical path that have shown some slippage.

• Reprioritize or eliminate one or more noncritical path activities

• Apply additional resources

• Employ other compression techniques like concurrency

• Utilize overtime

• Assign some of the remaining noncritical project activities to either administrative or clerical personnel

• Re-engineering to assess the critical path activities in descending cycle times sequence to determine which activity can be re-engineered

*Scenario 3: Trade-off with fixed time

Cost varies with performance

*Project Management A systems approach to planning, scheduling and controlling byHarold Kerzner

Technical

Fixed Time - Identify available alternatives and plot the results to determine the crashing costs for shortening the length of the project

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Step 5: Analyzing and Selecting Feasible Alternatives

Analytical techniques involves:

• Comparing and ranking alternatives in the order of perceived importance

• Identifying relevant factor to evaluate

• Constructing a decision tree or matrix to aid managers in choosing a solution that minimizes the overall impact

• Selecting the appropriate completion strategy, and beginning implementation with management approval

• Preparing a formal project update report including alternative work scopes, schedules, and cost to achieve• Minimum cost and schedule overruns• Conformance to project objectives

• Presenting to internal and external project management the alternatives along with an estimate of success probability

• Providing corrective actions for time, cost & performance

Meet Specified Delverable

Meet Schedule

Meet Cost Requirements

Increase Business

Maximize Profits Total

Applied Weights 0.20 0.50 0.25 0.025 0.025 1Alternative:Request Extension 100% 0% 95% 50% 100% 48Absorb added cost 90% 85% 100% 75% 0% 87Miss delivery 95% 0% 80% 100% 90% 42Add Resoruces 95% 95% 50% 90% 0% 81Reduce Quality 0% 85% 85% 15% 0% 66

Decision Matrix

Objective

Decision Tree

Decision Analysis – Choosing the solution that minimizes the overall impact on project objectives in the eyes of the customer

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Step 5: Analyzing and Selecting Feasible Alternatives continues….

Renegotiating the project technical performance criteria

Completing the project on schedule, to a minimum quality level

Controlling costs and technical performance, but permitting the schedule to slide could result in a dissatisfied project sponsor

Maintaining schedule and cost performance by allowing quality to slip

Cancelling the project in an effort to limit exposure beyond that already encountered

Some other viable alternatives include:

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Step 6: Obtaining Management Approval and Re-Plan the Project

Top management usually make decisions based on:• Policies on quality, integrity, and image• Ability to develop a long-term client relationship• Type of project (R&D, modernization, new product)• Size and complexity of project• Other projects on the way or planned• Company’s cash flow• Bottom line (ROI)• Competitive risks• Technical risks• Impact on affiliated organizations

From the list of alternatives, management chooses a course of action that may require• Detailed re-planning• New schedules, PERT Charts• Work Breakdown Structures and other key benchmarks

The basis of decision-making for selecting alternatives

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Summary

Throughout the lifecycle of a project it is important to:

• Focus on customer expectations and priorities

• Comprehensive up-front planning with detailed downstream planning typically yields a significant return-on-investment in terms of benefits to the project down stream

• Recognize the value of a proactive systems approach to planning and trade-off analysis

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