Quantitative Cost & Schedule Risk AssessmentQuantitative Cost & Schedule Risk Assessment

NASA - Marshall Space Flight CenterNASA - Marshall Space Flight Center

Office of Strategic Analysis & CommunicationOffice of Strategic Analysis & Communication

Capabilities & Performance Management OfficeCapabilities & Performance Management Office

Capabilities & Development Support TeamCapabilities & Development Support Team

Greg Smith (Smith & Associates, LLC)Greg Smith (Smith & Associates, LLC)

National Aeronautics and Space AdministrationNational Aeronautics and Space Administration

www.nasa.gov www.nasa.gov

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BackgroundBackground•MSFC is one of 10 NASA field centers (leader in SE&I)MSFC is one of 10 NASA field centers (leader in SE&I)

•OSAC responsibility includes PP&C and Risk IntegrationOSAC responsibility includes PP&C and Risk Integration

•PACMO is the PP&C / Schedule Risk process ownerPACMO is the PP&C / Schedule Risk process owner

•C&DS owns schedule, EVM, related risk assessment, integration processesC&DS owns schedule, EVM, related risk assessment, integration processes

Systems EngineeringSystems Engineering ( (SESE) is an ) is an interdisciplinaryinterdisciplinary field of field of engineeringengineering, that focuses on , that focuses on

the development and organization of complex artificial the development and organization of complex artificial systemssystems. Systems Engineering . Systems Engineering

integratesintegrates other disciplines and specialty groups into a team effort, forming a structured other disciplines and specialty groups into a team effort, forming a structured

development process that proceeds from concept to production to operation and development process that proceeds from concept to production to operation and

disposal. Systems Engineering considers both the business and the technical needs of disposal. Systems Engineering considers both the business and the technical needs of

all customers, with the goal of providing a quality product that meets the user needs.all customers, with the goal of providing a quality product that meets the user needs.

•From Wikipedia, the free encyclopediaFrom Wikipedia, the free encyclopedia

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Why do it?Why do it? To determine the probability of finishing on or before a given point in time for a given cost

Tasks in a schedule should reflect the “most likely” duration for each task – typically they do not

Each task is different and has a varying degree of probability of finishing within the duration specified

Schedule risk assessment attempts to quantify these probabilities by assigning values to each task

Bridges the gap between CPM scheduling and the project’s need to know the likelihood of “when”

A large portion of an effort’s cost is driven by its duration

Other factors (resource availability, skill, rate, utilization, political/environmental/organizational factors) can be considered as variables or independently

Quantitative Cost/Schedule Risk Assessment (C/SRA)

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Risk Assessment – Basic Process Flow Diagram

Event Triggers Need for Risk Assessment

Does ScheduleMeet Integrity Prerequisites?

Establish DataCollection

Technique(s)

CorrectProblems

CollectData

Set Minimum, Maximum,Most Likely Durations

Assign Probability Distribution Curves

Evaluate for Special Conditions and Assign Values

Perform Risk Analysis

Calculations

Analyze ResultsReview Analysis

withStakeholders

No

Yes

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Prior to Initial Baseline

Reviews

Risk change

Newly identified

Retired existing

Existing evolves

Scope change

Single significant change

Successive insignificant changes

Key milestones or events

Trades or Alternatives being considered

Event Triggers

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Schedule Risk Assessment Prerequisites

Impediments to performing an accurate SRA:

Constraints (artificially imposed datesartificially imposed dates) affect risk calculations – takes probability out of the equation

Incomplete or inaccurate logic networks (missing missing relationships between tasks in a schedulerelationships between tasks in a schedule) lead to inaccurate representations

Missing tasksMissing tasks create incomplete and incorrect results

DescriptionsDescriptions should be complete and clear to better enable the assignment of risk parameters

Tasks that are too longTasks that are too long (i.e. have long durations) lead to results with large ranges

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Schedule Risk AssessmentDuration Assignment

The original duration specified in the schedule is assumed to be the “most likely” unless specified otherwise

The minimum, or optimistic, duration is the least amount of time required or allowed to complete the task, if everything goes perfectly

The maximum, or pessimistic, duration is the greatest amount of time required or allowed to complete the task, if everything goes wrong

There are various methods for making these determinations

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Schedule Risk AssessmentDuration Assignment

Methods for making duration assignments, in order of preference:

Data Interview - Evaluate each task independently by collecting data and interviewing personnel and enter each duration manually (preferred method)

Historical Data – Collect and evaluate data for the subject project or similar projects (does not address direct & indirect performance issues)

Grouping – Assign risk parameters to tasks that share common characteristics (not as accurate, but acceptable)

Blanketing – Assign risk parameters with a parametric across the entire project or sections (not very accurate, difficult to validate)

Heuristic – Make your best “guess” (no basis or validity)

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• Uniform (flat)Uniform (flat)

• Triangular (pyramid shaped)Triangular (pyramid shaped)

Can be symmetrical or asymmetricalCan be symmetrical or asymmetrical

• Normal (bell shaped)Normal (bell shaped)

Always symmetricalAlways symmetrical

• Beta (skinny bell shaped)Beta (skinny bell shaped)

Can be symmetrical or asymmetricalCan be symmetrical or asymmetrical

Schedule Risk AssessmentProbability Distribution Curves (PDC)

0

50

Time 1 Time 2 Time 3

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Schedule Risk AssessmentSpecial Conditions

Probabilistic branching considers the situation where the outcome of a task can result in two or more possible courses of action

Conditional branching addresses the impact of external influences, such as weather

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Risk Assessment Calculations

A random sampling method is used by the software tool to select possible duration values in the range between the optimistic and pessimistic duration values

Monte Carlo – Speedier method, but has a larger possibility of sampling error

Latin Hypercube Sampling (LHS) – Slower method, reduces sampling error

An iteration is one cycle of calculated outcomes (one sample point from each task)

These calculations are performed by software – the user specifies the number of iterations

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Schedule Risk AssessmentResults Analysis

Date: 07/25/2002 9:58:36 AMSamples: 500Unique ID: 0Name: DART Project

Completion Std Deviation: 22.09 d95% Confidence Interval: 1.94 dEach bar represents 10 d

Completion Date

Fre

quen

cy

Cum

ulat

ive

Pro

babi

lity

Thu 09/02/04Wed 06/30/04 Mon 12/13/04

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18 Completion Probability Table

Prob ProbDate Date0.05 Mon 07/19/040.10 Mon 07/26/040.15 Fri 07/30/040.20 Thu 08/05/040.25 Wed 08/11/040.30 Tue 08/17/040.35 Thu 08/19/040.40 Tue 08/24/040.45 Fri 08/27/040.50 Tue 08/31/04

0.55 Fri 09/03/040.60 Wed 09/08/040.65 Tue 09/14/040.70 Fri 09/17/040.75 Fri 09/24/040.80 Wed 09/29/040.85 Wed 10/06/040.90 Thu 10/14/040.95 Wed 10/27/041.00 Mon 12/13/04

Initial Analysis (Duration -5% to +40%)**Scheduled for 8/22/04**

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Cost Risk AssessmentResults Analysis

**Planned for $4.9 M**

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Have an understanding of the probability of completing by a certain date

Use to establish contingency or reserve

Monitor the contingency as it gets used

Understand where the risk areas are so they can be monitored and proactively managed

Sensitivity Analysis

Risk Critical Analysis

How To Use The Results