By V Satya Viswanadha Raju, PMP
Why this Course?
I’ve been in the information technology sector for over twelve years and my overall industry experience is nearly fifteen years. In these years, I’ve seen many Project Managers completely schedule their work with Microsoft Excel for each and every work package or activities. This should ideally be done with Microsoft Project software, a specially designed tool for project managers. I guess project managers use manual scheduling or tools like Excel, because they may not be knowing the power and utility of MS Project software. Another aspect can be lack of skills and application of knowledge using MS Project software.
Post my Project Management Professional (PMP) certification, I was looking for a hands-on tool which can help in understanding on various areas in a project – schedule management, resource management, resource levelling, crashing, fast tracking etc. I also wanted to implement my learning from the Project Management Body of Knowledge (PMBOK) and its applicability in real-world projects. This motivated me to take up the course of MS Project Live 2016 Lessons.
Features in this Course
First and foremost, the most vital aspect of MS Project 2016 Live Lessons is this: It covers the most important functions that every project manager performs in his or her daily work-life. The job of a project manager involves a number of activities and this course covers them all.
- There are many features in this course which I really liked. They are:
- Schedule planning, management and control.
- Resource pooling, multi resource plan management.
- Generating reports from MS Project to presentable formats such as MS PowerPoint (e.g., the Timeline View can be directly exported) or formats such as excel because not every stakeholder wants to have the reports in MS Project.
- Another key feature of this course is this: it covers many theoretical aspects of the PMBOK guide in a practical way. Here are some instances where I found my understanding of the PMBOK guide perfectly applied with a practical tool.
- You will know how to create an end-to-end schedule with tasks or activities, milestones, dependencies and loading of resources.
- You will know how to calculate costs for the project and end-to-end budget of the project.
- Resources drive both the schedule and cost and the theory part of the PMP learnings can be applied in resource management areas of this course.
- You will know how to track and monitor the project with variances.
- Every lesson of this course ends with a practical and a set of quiz questions. This will help you not only assess your understanding, but also try out the various exercises. In my earlier course for PMP 35 Contact Hours Online the approach was to have exercises after theory. Here in MS Project 2016 Live Lessons course as well, you have the exact same approach.
- This course also covers a number of advanced concepts. The ones I liked are:
- Earned Value Management (EVM).
- Calculation of Estimate to Complete (ETC), a metric available in EVM, but not in MS Project. This you can easily create.
- Critical Path Analysis (CPA) and its impacts etc.
Conclusion
I strongly recommend this course as a must go course after PMP.
I would strongly say and believe that my PMP course was 100% complete after completing this course.
Mr. Satya Narayan Dash and his site Management Yogi, again live up-to my expectations. Indeed, it lives up-to the name. The support has been throughout and I also received constant help. Thank you.
Brief Profile:
V Satya Viswanadha Raju, PMP: I work as an information technology professional with DXC Technology, Bangalore, India.
Let’s say you are going to a friend’s house, and you expect it to take about an hour to get there. In your city; however, traffic is known to cause delays. If a traffic jam occurs, it will impact your arrival time. You’ve informed your friend about the possibility of delay—say by 20 to 30 minutes, but the “reverse” scenario could also occur. With typical traffic, you will reach your friend’s home on time, and you will not need to use the 20 to 30 minutes.
In this example, you have identified the risk (i.e. traffic conditions). It is a known risk, but the impact on your travel time is unknown. You could call this a known-unknown risk. You have not only identified the risk, but accepted it, and proactively added a reserve time to your estimated travel. If you get into bad traffic, this reserve will be consumed.
Project management is similar. We have reserves for our estimates (time estimates or cost estimates). Estimates are many times expressed in ranges, such as rough order of magnitude (ROM) estimate, budgetary estimate, definitive estimate, etc. By definition, estimates are always uncertain. Ranges indicate the degrees of risk. To address these risks, we use buffers or reserves. Typically, these are contingency reserve and management reserve.
If you are preparing for the Project Management Institute® Risk Management Professional (PMI-RMP)® or Project Management Professional (PMP)® examinations, you must be familiar with these two reserves.
Contingency Reserve
Contingency reserve is allocated for an activity, work package, or a project. It is applicable to both time and cost estimates, which can lead to individual project risks. Contingency Reserve is also applicable to the overall project when overall project risk is concerned (i.e. chances of meeting a project end date or meeting the cost target). It is sometimes referred to as contingency allowance when you consider cost estimates, or schedule reserve when you consider time estimates.
The name “contingency reserve” itself tells us that, contingent on certain things, a reserve will be used. PMI documents it as follows:
“Time or money allocated in the schedule or cost baseline for known risks with active response strategies.”
Breaking it down, you could say, contingency reserve:
- Is allocated for both time and cost
- Can be a percentage of the estimated duration/cost, a fixed number, or developed by using quantitative analysis techniques
- Is a part of the schedule baseline or cost baseline
- Addresses known risks, but with an unknown amount of rework (the known-unknowns)
- Is used with active response strategies, or more specifically when you use “Accept” risk response strategy
- Can be used for both positive and negative risks
Now, you might be wondering when you would use such a reserve.
A project is always executed in an uncertain environment, leading to many risks. It is unlikely that you can address all possible risks and have risk responses for all of them. In fact, for some risks, you just cannot do anything. You have to accept them.
Let’s consider an example. You know some deliverables in your project may require rework because of defects, issues, or bugs, but do you know the amount of rework needed? This is a known-unknown. Another example is this: resource churns will happen in any project. New resources will join the project, and/or old resources may leave. Do you know when a team member might decide to leave, or what impact it will have on the project? Here again, we have a known-unknown.
For such risks, there is nothing to do but actively accept the possibility of the occurrence. What you CAN do is assign a buffer or reserve—a contingency reserve.
Management Reserve
Unlike contingency reserve, which is for known-unknown risks (or simply known risks), the management reserve is for unknown-unknown risks (or simply unknown risks). PMI documents management reserve as follows:
“An amount of the project budget or project schedule held outside of the performance measurement baseline (PMB) for management control purposes, that is reserved for unforeseen work that is within scope of the project.”
Breaking it down, you could say, management reserve:
- Is allocated for either overall project schedule or budget
- Can be a percentage of the estimated duration/cost or a fixed number
- Is outside the schedule baseline or cost baseline
- Addresses the unknown risks with unknown or unforeseen work (the unknown-unknowns)
- Is kept for management control purposes
- Can be used for both positive and negative risks
Let’s consider another scenario to understand this type of reserve. In your project, there will be some risks which will be unknown (or unidentified) when you begin. For example, a sudden increase in material prices due to economic turbulence. Do you know about that risks in advance of the project? Of course not. You also do not know what the impact will be. These types of risks are hard to predict, so impact is also unknown. For such unknown-unknown risks, we have management reserve.
A significant point to note is that contingency reserve is within the baseline, whereas management reserve is not. Contingency reserve is known to the project manager and visible to all (It can be cut down, as well!), but management reserve is outside of the approved baseline. To use management reserve, as the manager of your project, you will likely be needing approval. Approval follows the change control process. If you use the reserve, then, of course, the baseline also has to be updated.
You may be wondering about the protocols of using these reserves? Such procedure should be documented as part of your “Risk Management Plan.” It can be created by you or dedicated by risk managers, who will be a part of larger, more complex, and/or strategically important projects.
Block Representation
Both contingency and management reserves are shown in the block diagram below.
The contingency reserve can be applied at the activity level, the work package level, or overall project level for overall project risk. If you have activity contingency reserves, they will get rolled-up in the work packages. Work packages with contingency reserves get rolled to control accounts. The control accounts, having the work packages and planning packages, then roll-up to form the cost baseline of the project. Within the cost baseline, you also have the overall project contingency reserve.
The cost baseline is part of the integrated baseline (i.e. the performance measurement baseline or PMB), against which the project performance is measured. The PMB is an integrated baseline for scope, schedule, and cost. On top of the baseline, we add the management reserve to determine the budget or total allocated budget (TAB) of the project.
Because the cost baseline is an approved version of the time-phased project budget, it can and is depicted many times with an S-curve. S-curve analysis is frequently used while conducting earned value management/analysis (EVM/EVA).
S-Curve Representation
In the below figure, we have 3 curves – planned value (PV) curve, earned value (EV) curve, and the actual cost (AC) curve. The end of the PV curve is the budget at completion (BAC), which is the cost baseline. The end of the AC curve is the estimate at completion (EAC). PV, EV, AC, BAC, and EAC are earned value management related metrics.
The contingency reserve is within the baseline (below the BAC). In other words, you can say it is part of the performance measurement baseline (PMB). For easier understanding, I’ve shown the contingency reserve as a lumpsum amount at the overall project level for both individual project risk and overall project risk. On the other end, the management reserve is beyond the baseline (below the BAC or above the PMB line).
Calculating Contingency Reserve
Earlier, I noted that contingency reserve can be calculated with quantitative analysis. You would make this calculation to have a desired level of confidence in meeting the project objectives (i.e. schedule objective or cost objective).
The contingency reserve is determined many times with Monte Carlo analysis on the quantitative risk model of the project. The output of this analysis can be a cumulative probability distribution curve—an S-curve with the probability of achieving our target objective(s).
The S-curve in the following example is a variant of the S-curve shown earlier, and is many times called as risk-adjusted S-curve. In the earlier figure, the shape is shown as an S-curve, because of cumulative cost values. A risk adjusted S-curve forms a similar shape, but with scale for probability in the Y-axis, instead of cost. Cost (or duration) can be shown in the X-axis.
An Example
Let’s say you are building a prototype for next-gen solar powered vehicles. The total cost of the project, after considering the activities/work packages/planning packages, came as $12.72M (million). A detailed probability analysis of the project resulted in the probability S-curve shown below, which is drawn with Primavera Risk Analysis. We want to find out the needed contingency reserve considering 80% chance of meeting the target cost. (Click on the image to have an enlarged view.)
Let’s analyze the figure. In the Y-axis, we have the probability, whereas cumulative cost is shown in the X-axis. The deterministic value for our initial planned cost is $12.72M, which has a probability of 23%. Look at the portion highlighted in yellow with notation next to the end of arrow mark. Now, that’s a very low chance!
For a 100% chance, we need a budget in excess of $15M, but what about the contingency reserve for 80% probability? To have THIS level of confidence, we need a budget of 13.84M. We see that highlighted in orange with notation next to the end of arrow mark.
In summary below:
Initial budget = $12.72M and 23% chance
Expected budget = $13.84M and 80% chance
Contingency needed = ($13.84M – $12.72M)/$12.72M
= 8.8%
In monetary terms, the contingency reserve will be ($13.84M – $12.72M) = $1.12M
We can conclude that for this project a contingency reserve of $1.12M, will result in 80% confidence of meeting the target cost.
If you want to reduce the contingency reserve, you have to go with a lower chance. If you want to have a higher chance, the contingency reserve, of course, will go up. In other words, the amount for contingency reserve will be based on the confidence level needed.
Contingency Reserve for Emergent Risks
A new aspect of risk management that has been introduced in PMBOK 6th edition is the concept of emergent risks. Unlike known-unknown risks or unknown-unknown risks, emergent risks are for unknowable-unknowns. These are risks which can only be known after they have occurred.
Unknowable-unknowns exist many times within projects using disruptive technologies or creating products or a market which has never existed before. For disruptive technologies, the market application does not exist, hence can’t be analyzed (it is unknowable). The amount of work needed also can’t be determined (it is unknown). Projects employing disrupting technologies can have emergent risks. These are addressed by project resilience.
To have project resilience, one important part is to allocate proper contingency reserve for both schedule and budget. This contingency reserve is separate from the contingency reserve added for known-unknowns.
To help you quickly remember contingency and management reserves, I’ve outlined the differences in the table below.
Contingency Reserve vs. Management Reserve
References:
[1] I Want To Be A PMP: The Plain and Simple Way To Be A PMP, 2nd Edition, by Satya Narayan Dash
[2] I Want To Be A RMP: The Plain and Simple Way To Be A RMP, by Satya Narayan Dash
[3] Project Management Body of Knowledge (PMBOK) Guide, 6th Edition, by Project Management Institute (PMI)
[4] Practice Standard for Project Risk Management, by Project Management Institute (PMI)
[5] Schedule Management Handbook, by National Aeronautics and Space Administration (NASA)
This article was first published by MPUG on 17th July, 2018.
Imagine the following scenario. You are in charge of managing a big match in a stadium. The venue can hold over 100,000 people. The audience is as passionate about watching, as their favorite players are about playing. Any untoward incident can create problems. You want to have the security, monitoring, and all other aspects of management under control. You want to have a quick response time for any incident, and you want to quickly spot and manage any disruption right away. But, your resources and budget are limited!
Will you go for multiple exit routes in the stadium or just a few?
Of course, you will likely prefer few exit routes. With fewer exits, you can have better management, as well as control, over the event.
Project management, encompassing schedule and associated risks, is quite similar. Just as the event manager would like to have minimal exit routes, a project manager wants to minimize ways the project’s end date could be impacted. If there are tasks (or activities) within the project that could be problematic, the PM would like to have them spotted quickly, analyzed for risks, and monitored.
This leads us to the topic of Critical Path and Critical Path Method (CPM).
Critical Path and Critical Path Method
As documented by Project Management Institute (PMI), the critical path is defined as “the sequence of activities that represents the longest path through a project, which determines the shortest possible duration.”
We can breakdown the above statement into two shorter ones:
- A critical path is the longest path through a project.
- A critical path is the shortest possible duration within which a project will be completed.
Although the two short statements sound contradictory, they are actually informing complementary concepts. Let’s take a look at an example to better understand. Below, we have a schedule network diagram, shown with activities (or tasks) and their durations in days and milestones, as well as dependencies among the activities and milestones. Going forward, in this article, the words “tasks” and “activities” are interchangeably used.
Note the paths in the above network diagram.
- Path 1: Start – A – B – Finish = 14 days
- Path 2: Start – C – B – Finish = 10 days
- Path 3: Start – C – D – Finish = 8 days
- Path 4: Start – E – D – Finish = 10 days
- Path 5: Start – E – F – Finish = 8 days
Obviously, the longest path is “Start – A – B – Finish.” Hence, it is the critical path, as shown in below figure. This satisfies our first statement in the definition for critical path (the longest path in a project’s network diagram).
But, what about the second statement in our definition (the shortest possible duration within which the project can be completed)? Let’s see.
Path 3, “Start – C -D – Finish,” has a length of 8 days. It is definitely shorter than Path 1, our critical path, but it is not the critical path because the milestone “Finish” is dependent on Task-D, as well as Task-B. The project can only be finished when both Task-B and Task-D are completed. So, Path 3 can’t be the critical path because it is not the shortest possible duration within which the project can be completed.
Consider that Task-B is on two paths—both Path 1 and Path 2. That said, Path 2, with a length of ten days, cannot be the critical path either, because the start of Task-B is dependent on both Task-C, as well as Task-A.
The shortest possible duration within which our small project can be completed is again “Start – A – B – Finish.” Notice that the second part in the definition of critical path complements the first.
In this case, we have only one critical path, “Start – A – B – Finish.” The activities A and B are called critical path activities, because they are on the critical path. The rest of the activities (C, D, E and F) are non-critical path activities.
What we just walked through, is known as critical path analysis (CPA), and we employed critical path method (CPM) to look at the data. CPM is a scheduling method defined by PMI as “a method used to estimate the minimum project duration and determine the amount of schedule flexibility on the logical network paths within the schedule model.”
So, critical path not only estimates the minimum project duration, but also the schedule flexibility of the network paths within the schedule model. The schedule flexibility part is determined by available floats, which we will see shortly.
At this stage, you might be wondering if there can be multiple critical paths? The answer is yes. There can be many paths which are longest in the network diagram and are also of same length. That said, let’s analyze the implications of having multiple critical paths.
Critical Paths and Risks
As critical path is the longest path, if you delay any task on the critical path, it will push the end date of the project out.
Remember the illustration at the beginning of this article? The more exit routes in the stadium, the harder management, monitoring, and control becomes.
Similarly, if there are many critical paths for a project, there will be many ways the project schedule can be delayed. In such a case, you have more risks from a schedule perspective. Additionally, with many critical paths, it becomes harder to monitor the resulting large number of tasks.
It is fair to conclude that the more critical paths, the more risk the project will have.
But, there is also another way to look at the critical path. A number of project-portfolio management software users refer to this definition, which says, “Critical path is that network path in which the total float of activities can be less than or equal to zero.”
To understand this definition, we need to understand a concept called “total float” or “total slack.”
Total Float (Total Slack)
The definition of total float (TF), as documented by PMI is, “The amount of time that a schedule activity can be delayed without delaying the project finish date or violating a schedule constraint.”
Going back to our network diagram above, can you tell what the TF values will be for our critical path activities?
They will have a TF of zero because if you delay a critical task by one day, it will push the end date of the project or delay the project. Note that total float can also be negative, if it violates a schedule constraint.
To learn more on Negative Total Float, you refer this article:
Practical PMP with MS Project - Negative Total Float
What about the non-critical tasks? Let’s take a look at Task-C and calculate total float. This task is on Path 2, “Start – C – B – Finish,” which has a length of ten days. It is also on Path 3, “Start – C – D – Finish,” which has a length of eight days. If you consider Path 2, you delay Task-C by four days, whereas, if you consider Path 3, you delay by six days. Which is the best option? Of course, four days delay is better than six. We conclude that total float for Task-C is four days. Note that you can calculate TF values for non-critical tasks, too.
Using Microsoft Project 2016, you can calculate the critical path, critical tasks, and total float (slack) in a matter of minutes. This is shown in the below figure.
The start and finish milestones are represented with filled black diamonds. Each task is represented with a horizontal bar. Critical and non-critical tasks are highlighted in red and blue colors, respectively. The duration of a task is inside the bar and the total float value is noted next to the bar.
Criticality Analysis
Earlier, I pointed out that the more critical paths, the more risk (schedule-wise) for the project, but what about the individual schedule activities, including near-critical and non-critical activities? Do they pose risks to the project?
Duration estimates for activities (or work packages) are uncertain in nature. When you give an estimate, of course, you can’t say it is 100% accurate. These uncertainties can lead to individual project schedule risks, and individual tasks can also pose schedule risks to a project.
During quantitative risk analysis, we use a simulation such as the Monte Carlo simulation, and with the help of software tools, check for the combined effect of individual project risks on the overall project objectives. The overall objectives can be looked at from schedule perspective, cost perspective, and/or any other point of view. As we are talking of critical and non-critical activities, let’s focus on schedule risks due to estimation uncertainties or variations in duration estimates. For schedule risks, we take the below inputs for a simulation.
- Schedule network diagram
- Activity (or work package) duration estimates
- Probability distribution of duration estimates (i.e. triangular, beta, uniform, etc.)
The output of the Monte Carlo simulation is a (quantitative) risk model. On this risk model, we can perform “Criticality Analysis.” Criticality analysis determines which elements of the risk model, i.e., critical or non-critical activities, have the greatest impact on a project’s critical path(s).
The criticality analysis is represented many times with a “Criticality Path Report.” In this report, you have the criticality index values for the activities.
Criticality Index
The criticality index is calculated after criticality analysis is performed. The criticality index informs how often a particular task or activity was on the critical path during criticality analysis.
This index is expressed as a percentage number. The higher the percentage value, the higher chance for the task to be on the critical path, and therefore a higher chance of delaying the project. That said, the reverse is also true. Tasks with zero percent or low critical index values, are less likely to delay the project.
We already know that critical tasks have zero or negative total float. While calculating the criticality index for a task, the total float of the task is taken into consideration. Tasks with high criticality index values are more likely to be on the critical path. The critical path tasks will usually have criticality index values as 99% or 100%.
When you monitor tasks with high criticality index values, your project is more likely meet the schedule objective and finish on time. With criticality analysis, you can focus on tasks with high criticality index values during risk response planning (done as part of a “Plan Risk Response” process). This often follows quantitative risk analysis (done as part of a “Perform Quantitative Risk Analysis” process).
A sample criticality analysis report with criticality index value is shown in the below figure. This diagrammatic representation is known as “Tornado Diagram,” as the shape is that of a tornado. This is drawn with Primavera Risk Analysis by taking the Microsoft Project Plan (.mpp) file created with the tasks from our schedule network diagram example.
As shown above, the tasks on the critical path have criticality index values of 99%. In other words, Task-A and Task-B have a high chance to impact the project’s finish date. For a complex project with many network paths and activities, you will have many such activities, which will need to be monitored carefully.
As an aspiring Project Management Professional (PMP) or Risk Management Professional (RMP), these are important concepts to know. You can expect situational and scenario questions, as well as questions with graphs for analysis, in your exams.
References:
[1] I Want To Be A RMP: The Plain and Simple Way To Be A RMP, by Satya Narayan Dash
[2] Project Management Body of Knowledge (PMBOK) Guide, 6th Edition, by Project Management Institute (PMI)
[3] Practice Standard for Project Risk Management, by Project Management Institute (PMI)
[4] I Want To Be A PMP: The Plain and Simple Way To Be A PMP, by Satya Narayan Dash
This article was first published by MPUG on 19th June, 2018.
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Why this Course?
Features in this Course
