Module 7 - Schedule Risk Analysis - Rev 0

PROJECT CONTROLS DEVELOPMENT PROGRAM MODULE 7– SCHEDULE RISK ANALYSIS PCDP Module - Schedule Risk Analysis Rev SPECIAL ACKNOWLEDGEMENTS: Mark Spanos, “A pessimist because of intelligence, an optimist because of will” This document has been prepared for the exclusive use of WorleyParsons Copying this document without the permission of WorleyParsons is not permitted MODULE - SCHEDULE RISK ANALYSIS Rev Description Originator Review Approved Date Released for Global Implementation Ed Cimic Project Controls R5 Management Team Project Controls R5 Management Team Nov 2011 Page PCDP Module - Schedule Risk Analysis Rev PROJECT CONTROLS DEVELOPMENT PROGRAM This Training Module is part of an modular training program designed to provide the participants with an overall introduction to the skills & knowledge required by Project Controls when executing an EPCM / PMC project The complete training program consists of the following modules: Module - Introduction To Project Controls Module - EPC Schedule Development (including P6 user skills) Module - Services Management (including InControl V8.0 user skills) Module - Commercial Performance Management Module - Introduction to TIC Cost Estimation Module - TIC Management (including Prediction Plus / InControl V10 user skills) Module - Schedule Risk Analysis (including Primavera Risk Analysis user skills) Module - Cost Risk Analysis (including @Risk user skills) The aim of this document is to provide a hands-on guideline to assist the project controller in obtaining a basic understanding of the Schedule Risk Analysis process NOTE: Review of Module 1– Introduction to Project Controls is required prior to studying this module Upon completion of Module 7, participants will be able to:  Understand the concept of Schedule Risk Analysis  Convert an EPC Schedule into a Schedule Risk Analysis Model  Understand the Risk Ranging Process  Generate Schedule Risk Analysis Reports / Graphs  Understand and Interpret Schedule Risk Analysis Reports  Utilise the basic functions of Primavera Risk Analysis Page PCDP Module - Schedule Risk Analysis Rev S C H E D U L E R I S K A N A LY S I S Module Content: 1.0 Schedule Risk Analysis? 1.1 Uncertainty and Risk in Cost Estimation 2.0 Project Risk Management 2.1 Risk Planning 8 2.2 Risk Identification 2.3 Qualitative Risk Analysis 10 2.4 Quantitative Risk Analysis 13 2.5 Risk Response Planning 15 2.6 Risk Monitoring & Control 18 3.0 Quantitative Schedule Risk 19 3.1 Schedule Risk Analysis: Key Steps 19 3.2 Basic Principles 4.0 Cost Risk Analysis Process 21 28 4.1 Background 29 4.2 Can we meet the deadline? 30 4.3 Main Execution Contracts 32 4.4 Contract 1- EPCM 32 4.5 Contract - Module Fabrication 32 Page PCDP Module - Schedule Risk Analysis Rev 6.6 Contract - Transport & Installation 33 6.7 Contract - Brownfield Modifications / Tie-ins / HUC 33 6.8 Contract - Accommodation Vessel 33 Training Exercises Exercise - Develop Cost Risk Analysis Model 34 Exercise - Risk Analysis Process 44 Exercise - Risk Analysis Results & Reports 51 5.0 Glossary of Terms 53 Attachment - Risk Model (042_TRN007_xx.xls) Page PCDP Module - Schedule Risk Analysis Rev S C H E D U L E R I S K A N A LY S I S Path Method):  Activity durations (and costs) are defined by single estimated values, often viewed as most likely values  As such, activity durations are defined as deterministic, so the uncertainty is not taken into account  CPM technique itself leads to the optimistic result due to “as soon as possible” approach  Project completion date gets predicted, and regarded as a certain, solid commitment against which a number of project performance targets are established 1.1 CPM (CRITICAL PATH METHOD) & CERTAINTY versus UNCERTAINTY PCDP Module - EPC Schedule Development described the processes, techniques and tools used by WorleyParsons to build project schedules Not much different than with any other organization engaging in project delivery: project plans and schedules are one of the essential tools of project management PMI (Project Management Institute) suggest in their best practices documents that all projects must be managed to their schedules And yet, despite all knowledge, sophisticated software and engagement of experienced Project Delivery teams, project sched- Page ules more often than not overrun their targets Schedule slippages can result in schedule Critical Path changes; Changes in the Critical Path often impact originally planned project execution strategies And so on… So why does all this happen? Most of the schedule slippages are usually explained by one of the following factors:  imposed unrealistic targets  completeness/correctness of activities logical sequencing  improper use of constraints  inadequate resources loading However, the fundamental reason for schedule slippages lies in the very nature of CPM (Critical The fact that activity durations (and associated costs) are only estimates, and therefore uncertain, means that they may not go as planned, but may take more or less time to complete This is true even for activities repeated many times over a number of projects Figure on page illustrates that fact by showing the original (likely) activities’ durations as bars, along with triangular shapes at the bars right end points representing possible ranges of optimistic and pessimistic activity durations Supported by experience and measured evidence from projects, this likely variability of activities durations, enhanced by complexities of their logical relationships, often impacts major milestone(s) or overall schedule “When you reach the top, keep climbing” ~/~ Zen proverb PCDP Module - Schedule Risk Analysis Rev Sometimes this impact may take place as a surprise, between two reporting periods and have dramatic consequence, and some other times, a number of small, incremental changes over longer periods may add to a significant impact on project schedule With the repeated reference to the PCDP Module 2, where aspects of schedule uncertainty are brought up in its sections 5.8 Risks and Opportunities and 5.13 Schedule Reserve, this PCDP module is dedicated to the review of probabilistic approaches and related processes, techniques and tools The processes of project risk management will be described in more detail in the subsequent sections Schedule risk analysis comes with answers not possible or not available in CPM planning/ scheduling approach:  Probabilistic View offering  Uncertain durations (and costs) are defined by threepoint estimates - optimistic (low or minimum), likely and pessimistic (high or maximum)  Durations (and costs) are expressed as PDFs (Probability Distribution Functions)  The range of expected values (dates, costs) are obtained by simulation Some of the benefits of schedule risk analysis are:  Provides the extent of possible overruns and required contingency reserve  Identifies the areas of greatest risks, inclusive of analysis of near-critical paths  Provides inputs to risks response plans  And more… But before continuing with the more focused and detailed training in quantitative schedule risk analysis, the entire next chapter is dedicated to the broader subject of project risk management, and as such it is shared / repeated in the PCDP Module - Cost Risk Analysis  It provides a range of possible completion dates (range of expected costs) along with corresponding probabilities Figure – Activity Duration Uncertainty Page PCDP Module - Schedule Risk Analysis Rev 2.0 PROJECT RISK MANAGEMENT “My education was interrupted only by my schooling.” Risk management is an essential and integral part of the WorleyParsons project delivery process undertaken by the project including the purpose, scope, process, responsibilities and extent of technical risk studies Understanding project risks is key for successful implementation of cost risk analysis Another important part of risk management plan is a description of how risks will be categorized As per PMI PMBOK Guide – 4th Edition (ANSI/PMI 99-0012008):”The objectives of Project Risk Management are to increase the probability and impact of positive events and decrease the probability and impact of negative events in the project.” Project Risk Management includes the processes of conducting risk management planning, identification, analysis, response planning, and monitoring and control on a project 2.1 RISK PLANNING Planning for risk management is the process that defines how to approach, plan, and execute the risk management activities for a project It creates a roadmap for the remaining risk management processes This process is general and high level in nature and therefore takes place early on the project A tool for creating consistent risk categories is the Risk Breakdown Structure (RBS) In the RBS, the categories of risks are decomposed into further details An example of RBS showing risk categories is shown in Figure The risk management plan is plotted out by meeting with all appropriate stakeholders This is followed up with a further analysis to determine the appropriate level of risk and the approach warranted on the project The RMP is either referred to or included in the Project Execution Plan (PEP) as required For more information, please refer to the EMS Task Sheet PAP-9002 2.2 RISK IDENTIFICATION The output of the risk management planning is the Risk Management Plan (RMP) Risk identification is a formalized process that identifies which risks could impact the project and to understand the nature of these risks The RMP details the risk management activities that will be Risk identification builds the “risk Page ~/~ Winston Churchill register”, which is a list of all risks, their causes, and any possible responses to those risks that can be identified at this point in the project (Please refer to WorleyParsons Risk Management Software Ver 4.05, its risk register template and guideline) Typically, identifying the risks is the first step in the Cost Risk Analysis process There are various tools available for the risk identification process: Documentation Reviews A documentation review is structured review of project documentation, including cost estimate and schedule basis, assumptions, prior project files, and other information The documentation is reviewed for completeness, correctness, and consistency Information Gathering Techniques There are numerous techniques for gathering information to create the risk register PCDP Module - Schedule Risk Analysis Rev Figure 3– Example Risk Breakdown Structure (RBS) The techniques most commonly applied in the context of risk are: “I have a number of alternatives, and each one gives me something different “ ~/~ Glenn Hoddle  Brainstorming  Delphi Technique Although it may not be exhaustive, this tool provides structure to the Risk Identification process Assumption Analysis  Root Cause Analysis Assumptions should not only be documented, they should also be analysed and challenged if necessary Checklist Analysis Diagramming Techniques Checklist analysis uses a Risk Breakdown Structure (RBS) to check off items and ensure that all significant risks or categories are being evaluated Ishikawa diagrams, also called cause-and-effect diagrams and fishbone diagrams, are another way to show how potential causes can lead to risks  Expert Interviews Another diagramming method used to identify risks is Influence Diagram This diagram shows how one set of factors may influence another For instance, late arrival of material may not be a significant risk by itself, but it may influence other factors, such as triggering overtime work or causing quality problems later on in the project due to inadequate time to properly perform the work Page PCDP Module - Schedule Risk Analysis Rev Finally, flow charts are useful in identifying risks Flow charts are graphical representation of complex process flows They are especially helpful when used to “sketch” something very complex into an understandable diagram SWOT Analysis Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis is another practical tool used to identify potential risks and group them into four chart quadrants representing strengths (S), weaknesses (W), opportunities (O), and threats (T) Strengths and weaknesses are usually of internal nature, while opportunities and threats present themselves as external risks to project SWOT analysis can give another perspective on risks that will often help identify the most significant project risk factors WorleyParsons provides a brainstorming prompt list to aid in the identification of Threats and Opportunities which may arise Please refer to the EMS CRP0013 Risk Brainstorming Prompt List for additional details 2.3 QUALITATIVE RISK ANALYSIS Qualitative risk analysis process helps to rank and prioritize the Page 10 risks so that the right emphasis is put on the right risks bility of occurring and impact to the project It helps to ensure that time and resources are spent in the appropriate risk areas Risk Event = Risk Probability x Impact (Value) Qualitative risk analysis is a risk probability and impact assessment process Probability = Frequency of Relevant Event / Total Number of Possible Events Impact = Value of Loss / Gain It takes each risk from the risk register and analyses its proba- Figure 4– SWOT Analysis Chart “Between two evils, I always choose the one I never tried before” ~/~ Mae West PCDP Module - Schedule Risk Analysis Rev Once the Project Services Engineer has completed the formatting of the Schedule Risk Model, the risk inputs layout may look like the one shown above The next step is to start populating activities’ risk(s) data Schedule Risk Model - Populating Activities For training purposes, the participant will determine a summary of Activities from the overall EPC Schedule that represent the key schedule drivers for the project A suggested activity listing is shown on page 40 With the exception of Activity IDs 1-17-GEN-13 (Start Milestone) and 6-05-PED-00 (Finish Milestone), all other Activities have a “Normal” Activity Type (as indicated in the General tab of the Task Details window – please see page 41) As indicated in Chapter 5, CROC has certain key Milestone Dates that are required to be met Of this list, the following milestones were included as “constraints” in the list of identified schedule drivers Note 1: Activity ID 1-17-GEN-13 “Start EPCM” is constrained as a Must Start On date of 02/Jan/11 Note 2: Activity ID 6-05-PED-00 “ETA Compressor & Turbine Package” is constrained as a Must Start On date of 16/Oct/10 Page 39 PCDP Module - Schedule Risk Analysis Rev List of identified Schedule Drivers Activity Activity Rem Early Early ID Description Dur Start Finish (Days) Predecessor Activity Type Lag ID 1-17-GEN-13 Start EPCM (Note 1) 1-03-EDA-00 Module Detailed Design 02/Jan/11* n/a 266 2-Jan-11 24-Sep-11 1-17-GEN-13 SS 266.00 2-Jan-11 24-Sep-11 1-17-GEN-13 SS 6-05-PED-00 ETA Compressor & Turbine Package (Note 1) 456 16-Oct-10 14-Jan-12 6-05-PBA-00 RFQ, TBE, PO, ETA Piping, E & I Bulks 281 9-Apr-11 14-Jan-12 1-17-GEN-13 6-05-PSA-00 RFQ, TBE, PO, ETA Primary Struct Steel 294 28-Nov-10 17-Sep-11 6-05-PEA-00 RFQ, TBE, PO, ETA Suction Scrubber 379 12-Feb-11 2-17-MFD-00 Contract Award / Mobilise – Module Fabrication 197 23-Jan-11 3-17-IND-00 345 5-Jun-11 1-03-EDB-00 Brown Field Mods Detailed Design Contract Award / Mobilise – Transport & Installation n/a SS 97 25-Feb-12 1-17-GEN-13 SS 41 7-Aug-11 1-17-GEN-13 SS 21 14-May-12 1-17-GEN-13 SS 154 n/a 4-17-BFM-00 Contract Award / Mobilise – BF/Tie-Ins/HUC 197 13-Mar-11 25-Sep-11 1-17-GEN-13 SS 70 5-17-ACV-00 Contract Award / Mobilise – Accommodation Vessel 239 24-Apr-11 18-Dec-11 1-17-GEN-13 SS 112 2-06-MFD-20 Pre-Fab / Erection Primary & Secondary Steel 217 18-Sep-11 21-Apr-12 3-17-MFD-00 FS 6-05-PSA-00 FS 2-06-MFD-28 Mechanical Equipment Installation 21 26-Feb-12 FS 2-06-MFD-24 Piping Pre-Fabrication / Erection 154 6-Nov-11 7-Apr-12 6-05-PBA-00 SS 211 2-06-MFD-30 Elect / Inst Equipment & Bulks Installation 112 1-Jan-12 21-Apr-12 2-06-MFD-20 FF 2-06-MFD-28 SS 2-07-MFD-20 Onshore Pre-Commissioning 2-08-MFD-22 Load Out & Sea fastening 4-06-BFM-20 Tie-In Pre-Works & Major Hot Works 105 14 84 17-Mar-12 6-05-PEB-00 13-Feb-12 27-May-12 2-06-MFD-30 FF 1-03-EDA-00 FS 1-03-EDB-00 FS 6-05-PBA-00 FS 6-05-PED-00 FS 28-May-12 10-Jun-12 2-07-MFD-20 FS 2-06-MFD-28 FS 2-06-MFD-24 FS 6-Nov-11 28-Jan-12 2-06-MFD-30 FS 6-05-PBA-00 SS 3-17-BFM-00 FS 3-17-ACV-00 FS 4-13-BFM-24 Module Pre-Works 140 29-Jan-12 10-Jun-12 4-06-BFM-20 FS 3-09-IND-20 21 11-Jun-12 1-Jul-12 3-17-IND-00 FF 4-13-BFM-24 FS 2-08-MFD-22 FS 3-09-IND-20 FS 26-Aug-12 4-15-HUC-20 FS Module Transportation and Installation 4-15-HUC-20 HUC Compression Module / Start-Up Works 56 1-17-GEN-24 Start Up / Hand-Over (Note 1) Page 40 2-Jul-12 26-Aug-12 14 29 211 -42 PCDP Module - Schedule Risk Analysis Rev 10 Similar to the functionality of Primavera P6, Primavera Risk Analysis is relatively straightforward to populate with Activity Details: Name: Activity ID from page 40 list of schedule drivers 10 Select Menu Item Insert / New Task, if a new task needs to be inserted Remaining Duration: Remaining Duration from page 40 list With the Task Details General tab selected, enter in the data as follows: Description: Activity Description from page 40 list Calendar: Day Tasks Details window is displayed at the bottom section of the screen I f not, the Task Details can be viewed in two ways: A.– Menu Item View / Task Details toggle item, or B.– while on activity line, by right click and selection of Task Details Page 41 PCDP Module - Schedule Risk Analysis Rev 11 11 With the Task Details Links tab selected, enter in the Predecessors data as follows: Name: Activity ID from page 40 list (note, all “Driving” predecessors will be indicated in red) Activity Activity Description 12 ID GN000 Tatanka Gas Development EP000 Procurement & Contracts EC000 Construction / Fabrication ET000 Transport & Installation / HUC Type: Relationship Type from table on page 40 Lag: Lag from page 40 list All Successor links will be populated automatically for each Activity based on it’s link to other Activities As with the EPC Schedule Development, whereby activity coding was used to organize and group the schedule activities, the schedule risk model activities may also be grouped Primavera Risk utilises Summary Activities for grouping purposes 12 Add the following Summary Activities using the Menu Item Plan / Organize No logic is applied to these Activities 13 Once these Summary Activities have been added, in turn, select the Activities associated with each Summary Activity (see page 43) and click on the Demote button from the main toolbar (short-cut, Ctrl+Alt+right arrow) Page 42 Select all Activities below Summary Activity GN000 – “Tatanka Gas Development” and repeat the process input data and has added the Summary Activities, the Schedule Risk Model is ready for the risk ranging exercise to be conducted (see page 44) Once the Project Services Engineer has populated the Schedule Risk Model with activity risks Save the Schedule Risk Model PCDP Module - Schedule Risk Analysis Rev Activity Activity Rem Early Early ID Description Dur Start Finish 603 2-Jan-11 26-Aug-12 (Days) GN000 Tatanka Gas Development 1-17-GEN-13 Start EPCM 02/Jan/11* 1-03-EDA-00 Module Detailed Design 266 2-Jan-11 24-Sep-11 1-03-EDB-00 Brown Field Mods Detailed Design 266 2-Jan-11 24-Sep-11 EP000 Procurement & Contracts 577 16-Oct-10 14-May-12 6-05-PED-00 ETA Compressor & Turbine Package 456 16-Oct-10 14-Jan-12 6-05-PBA-00 RFQ, TBE, PO, ETA Piping, E & I Bulks 281 9-Apr-11 14-Jan-12 6-05-PSA-00 RFQ, TBE, PO, ETA Primary Struct Steel 294 28-Nov-10 17-Sep-11 6-05-PEA-00 RFQ, TBE, PO, ETA Suction Scrubber 379 12-Feb-11 25-Feb-12 2-17-MFD-00 Contract Award / Mobilise – Module Fabrication 197 23-Jan-11 7-Aug-11 3-17-IND-00 Contract Award / Mobilise – Transport & Installation 345 5-Jun-11 14-May-12 4-17-BFM-00 Contract Award / Mobilise – BF/Tie-Ins/HUC 197 5-17-ACV-00 Contract Award / Mobilise – Accommodation Vessel 239 24-Apr-11 18-Sep-11 10-Jun-12 13-Mar-11 25-Sep-11 18-Dec-11 EC000 Construction / Fabrication 267 2-06-MFD-20 Pre-Fab / Erection Primary & Secondary Steel 217 18-Sep-11 2-06-MFD-28 Mechanical Equipment Installation 21 26-Feb-12 17-Mar-12 2-06-MFD-24 Piping Pre-Fabrication / Erection 154 6-Nov-11 7-Apr-12 1-Jan-12 21-Apr-12 21-Apr-12 2-06-MFD-30 Elect / Inst Equipment & Bulks Installation 112 2-07-MFD-20 Onshore Pre-Commissioning 105 13-Feb-12 27-May-12 2-08-MFD-22 Load Out & Sea fastening 14 28-May-12 10-Jun-12 4-06-BFM-20 Tie-In Pre-Works & Major Hot Works 84 4-13-BFM-24 Module Pre-Works ET000 3-09-IND-20 6-Nov-11 28-Jan-12 134 29-Jan-12 10-Jun-12 Transport & Installation / HUC 77 11-Jun-12 26-Aug-12 Module Transportation and Installation 21 11-Jun-12 1-Jul-12 4-15-HUC-20 HUC Compression Module / Start-Up Works 56 2-Jul-12 26-Aug-12 1-17-GEN-24 Start Up / Hand-Over (Note 1) 26-Aug-12 Page 43 PCDP Module - Schedule Risk Analysis Rev EXERCISE 2: SCHEDULE RISK ANALYSIS PROCESS Risk Ranging Workshop In a ‘live’ project environment, a formal schedule risk ranging Workshop will be conducted based on the model that has been developed The purpose of the workshop will be for the representatives from both CROC and WorleyParsons to discuss and collectively agree upon the appropriate level of risk associated with each of the identified key schedule drivers Therefore it would be advisable to issue the Schedule Risk Model to the participants prior to the Workshop taking place in order for a review of the Model to be made Conducting the Risk Ranging Workshop In order for the Workshop to be as constructive as possible, it is important that ‘appropriate’ participants are involved As with determining the key Schedule Drivers, representative from both from CROC and WorleyParsons will be involved:  Project Manager  Project Services Manager and/ or Project Planning Engineer  Engineering Manager  Procurement / Contracts Manager  Construction Manager  Commissioning Manager In addition, a Risk Analysis Facilitator (preferably not part of the Project Team) will guide the participants through the Workshop Page 44 process to ensure focus is maintained and the Workshop is conducted as effectively as possible It is also important to note that the abovementioned participants should have:  The authority to make key decisions and are able to approve any required actions  Detailed knowledge and experience of both the Technical and Commercial aspects of each phase of the Project  Knowledge of the specific approvals and permit requirements of the authority where the Works are to be carried out, i.e government, safety inspectors, etc Applying the Triangular Distribution As described in Chapter 3, the principle of schedule risk ranging is to select a probability distribution function (duration function) to each of the identified key schedule drivers activities, i.e Minimum (Optimistic), Most Likely (Realistic) and Maximum (Pessimistic) durations In order to make an objective evaluation of the distribution of the duration values, it is important first to define what project risk actually is Chapter 5.0 of this module offers some key definitions of the risk management terms Project risk can be defined as: “An uncertain event or condition that, if it occurs, has a positive or negative effect on project’s objectives” Therefore factors that will need to be considered include: Project Management:  Project Duration / Project Schedule  Scope Definition and Estimate  Project Organisational Model and Implementation Engineering and Design:  Design Criteria / Quality  Technology to be utilised  Interface between Procurement and Construction Procurement and Contracts:  Market Conditions  Tender Evaluation and Purchase Order Cycle  Client Approval Cycles  Vendor Performance (especially in periods of high demand)  Manufacturing Process PCDP Module - Schedule Risk Analysis Rev Construction and Fabrication:  Site Supervision and Labour skill level  Geographical Location (and corresponding Weather Window)  Site Safety / Access  Contractor Performance  Design Changes during Con- Activity ID struction Activity Description Transport and Installation:  Heavy Lift Vessel availability  Marine Spread(s)  Weather Conditions Minimum Duration (Days) Most Likely (Days) Maximum Duration (Days) 1-17-GEN-13 Start EPCM n/a n/a n/a 1-03-EDA-00 Module Detailed Design 252 266 280 1-03-EDB-00 Brown Field Mods Detail Design 234 266 280 6-05-PED-00 ETA Compressor & Turbine Package 442 456 477 6-05-PBA-00 RFQ, TBE, PO, ETA Piping, E & I Bulks 274 281 309 6-05-PSA-00 RFQ, TBE, PO, ETA Primary Struct Steel 288 294 351 6-05-PEA-00 RFQ, TBE, PO, ETA Suction Scrubber 372 379 407 2-17-MFD-00 Contract Award / Mobilise – Module Fabrication 183 197 330 3-17-IND-00 Contract Award / Mobilise – Transport & Installation 337 345 379 4-17-BFM-00 Contract Award / Mobilise – Brownfields/Tie-Ins/HUC 190 197 253 5-17-ACV-00 Contract Award / Mobilise – Accommodation Vessel 232 239 295 2-06-MFD-20 Pre-Fab / Erection Primary & Secondary Steel 210 217 238 2-06-MFD-28 Mechanical Equipment Installation 18 21 34 2-06-MFD-24 Piping Pre-Fabrication / Erection 147 154 175 2-06-MFD-30 Elect / Inst Equipment & Bulks Installation 105 112 126 2-07-MFD-20 Onshore Pre-Commissioning 98 105 112 2-08-MFD-22 Load Out & Seafastening 14 14 17 4-06-BFM-20 Tie-In Pre-Works & Major Hot Works 77 84 98 4-13-BFM-24 Module Pre-Works 126 134 154 3-09-IND-20 Module Transportation and Installation 21 21 28 4-15-HUC-20 HUC Compression Module / Start-Up Works 49 56 70 1-17-GEN-24 Start Up / Hand-Over n/a n/a n/a Page 45 PCDP Module - Schedule Risk Analysis Rev Below is a step-by-step guide to populating the above distribution of values into the Schedule Risk Model: 1 Click anywhere on the activity line to display the Task Details window for that activity With the Risks, Duration tabs selected, enter in the data as follows: Tick Risk On: this is to ensure that the Activity is included during the simulation Distribution: Triangle (type of distribution that will be applied to the Activity) Minimum: Minimum Duration from the above table Most Likely: Most Likely Duration (i.e Remaining Duration) from the above table Maximum: Maximum Duration from the above table Notes: Because Activities 1-17GEN-13 – “Start EPCM” and 117-GEN-24 “Start Up / HandOver” are Milestones (with zero durations), it is not possible to apply a Risk Range distribution to these Activities Similarly, it is not possible to apply a Risk Range distribution to the previously created Summary Activities Once the Project Services Engineer has populated the Schedule Risk Model with the distribution of durations, the Model can be printed out: Select Menu Item File / Page Setup from the main toolbar With the Page tab selected, use the Scaling option to fit one page Note: The Header and Footer of the Barchart can be formatted to suit reporting and presentation requirements Once the Schedule has been printed out and the ‘Monte Carlo’ simulation can be run Save the Schedule Risk Model Page 46 PCDP Module - Schedule Risk Analysis Rev Running the simulation Below is a step-by-step guide to running the simulation on the Schedule Risk Model: Select Risk, Run Risk Analysis from the main toolbar (or press F10) Click Analyse Click Complete Generating the Analysis Graphs As a default, once the simulation has been run, the Probability Distribution graph will be generated This is a graphical representation in the form of a cumulative distribution representing the likelihood of the project completing on or before each possible date The Probability Distribution can be generated for the entire project or for a specific activity or milestone Graphical Area: a.) Distribution (start of interval) [X axis]: represents the possible completion dates for the Project that were determined during the simulation b.) Hits [Y1 axis]: represents the number of times a specific date was selected during the simulation c.) Cumulative Frequency [Y2 axis]:represents the probability (measured in %) that the Project will be completed by a certain date B C A Page 47 PCDP Module - Schedule Risk Analysis Rev Tabular Area - Statistics d.) Minimum : minimum date value of the Probability Distribution, i.e the earliest Project completion date resulting from the simulation e.) Maximum : maximum date value of the Probability Distribution, i.e the latest Project Completion date resulting from the simulation f.) Mean : mean date value of the Probability Distribution, i.e the most probable Project Completion date resulting from the simulation g.) Max Hits : the maximum number of hits that were made during the simulation h.) Standard Deviation : shows how much variation or "dispersion" there is from the average (mean, or expected value) A low standard deviation indicates that the data points tend to be very close to the mean, whereas high standard deviation indicates that the data are spread out over a large range of values i.) Selected Confidence : as the Cumulative Frequency [Y2 axis] is selected in the Graphical Area, this will be reflected in terms of % j.) Deterministic Finish : represents the originally determined Project Completion date as defined by the Schedule, i.e based on Activity durations, logic, etc only k.) Probability Page 48 : this represents the probability (measured in %) that the Deterministic Finish date (originally determined Project Completion date) will be achieved based upon the simulation that has been carried out PCDP Module - Schedule Risk Analysis Rev Once the Probability Distribution graph for the overall project finish date has been generated and printed out, other graphs can be generated as well To generate the Probability Distribution for a specific activity or milestone, use the hierarchy list to the left of the graph (WBS and tasks) select one that fits the criteria, i.e key interim milestone, or start and/or finish of an important activity Sensitivity and Index ‘Tornado’ Graphs Sensitivity can be measured for an activity as it gives an indication of how much the duration of each activity affects the overall project completion date or the completion date of other activities It can also be used for identifying activities that are most likely to cause delay to the project A series of ‘Tornado’ graphs are available to graphically display and rank sensitivity, schedule sensitivity index, criticality and cruciality values for each Activity Selection of variety of sensitivity graphs is available under the Menu Item Reports / Tornado Graph from the main toolbar Schedule Sensitivity Index ‘Tornado’ Graph The Schedule Sensitivity Index (expressed in %) identifies and ranks the activities most likely to influence the overall project duration and/or project completion date Graph formatting options are also available Page 49 PCDP Module - Schedule Risk Analysis Rev Duration Sensitivity ‘Tornado’ Graph Duration Sensitivity (expressed in %) is a measure of the correlation between the duration of an activity and the duration of the project The activity with the highest Duration Sensitivity is the activity that is most likely to increase the overall project duration Criticality ‘Tornado’ Graph Criticality (expressed in %) is a measure of how often a particular activity was on the Critical Path during the analysis Activities with a high Criticality Index are more likely to cause delay to the project as they are more likely to be on the Critical Path If an activity has a 100% Criticality Index it means that during the analysis no matter how the activity durations varied, the Critical Path always included that activity Therefore the completion of the activity is likely to be key in completing the project on time 8 Cruciality ‘Tornado’ Graph Cruciality is calculated from the Duration Sensitivity and the Criticality Index Cruciality = Duration Sensitivity x Criticality Index Duration Sensitivity can display low positive and negative values for activities that are not on the Critical Path These low values are due to random correlation between the activity and the project duration Page 50 Cruciality is designed to remove low positive and negative values by multiplying Duration Sensitivity by the Criticality The participant is to print out all the Sensitivity and Index ‘Tornado’ Graphs Save the Schedule Risk Model PCDP Module - Schedule Risk Analysis Rev EXERCISE 3: SCHEDULE RISK ANALYSIS RESULTS AND REPORTS Interpreting the Analysis Results The analysis conducted is an extremely useful mechanism to identify the elements of risk to the project; however this is only one view Combining these results with professional experience will need to be applied to determine what options are available to increase the ‘level of probability of overall project success’ Analysis Results Exercise Based upon the analysis that has been conducted, several key results can be determined The participant is to answer the questions in Table along with indicating the source of the answer Conclusions and Recommendations Exercise From the results indicated previously, the participant should be able to determine some key conclusions along with the respective recommendation (or mitigation measure) in Table (page 52) An example has been populated as a starting point: Table 1—Analysis Results Exercise Question Answer Source What is the Deterministic Completion Date of the Project and the probability of the date being achieved? Identify the P50 (50% Probability) and P90 (90% Probability) Completion Dates for the Project Identify the top three (3) ranking activities which will have the most likely influence on the Project’s overall duration and/or Completion Date Identify the top three (3) ranking activities which will have the most likely influence on increasing the Project’s overall duration Identify the activities spent the most time on the Critical Path during the analysis and describe how this affects the overall Project Page 51 PCDP Module - Schedule Risk Analysis Rev Table 2—Conclusions and Recommendations Exercise Conclusion Recommendation (Mitigation) Delivery of the Compressor and Primary Structural Steel will have the biggest impact on the Construction Phase and ultimately the overall Project Completion Tight expediting and regular interface with the respective Vendor to ensure that there is no slippage in the ETA dates Page 52 PCDP Module - Schedule Risk Analysis Rev G L O S S A RY O F T E R M S Risk An uncertain event or condition that, if it occurs, has a positive or negative effect on project’s objectives  Can be objective or subjective  Requires personal judgment  Risk (taking or averting) culture – tolerance to risk Threat A condition or situation unfavorable to the project, a negative set of circumstances, a negative set of events, a risk that will have a negative impact on a project objective if it occurs, or a possibility for negative changes Threat is opposite of Opportunity Opportunity A condition or situation favorable to the project, a positive set of circumstances, a positive set of events, a risk that will have a positive impact on a project objective, or a possibility for positive changes Opportunity is opposite of Threat Uncertainty The possibility that events may occur which will impact the project either favorably or unfavorably Lack of knowledge of future events Uncertainty gives rise to both Opportunity and Threat Total Certainty All information is known – (“knowns”) Total Uncertainty No information is available and nothing is known By definition, total uncertainty cannot be envisaged (“unknown unkowns”) Probability The likelihood of occurrence The ratio of the number of chances by which an event may happen (or not happen) to the sum of the chances of both happening and not happening Monte Carlo Method Simulation by means of random numbers Measures of Central Tendency: Mode – The value that occurred most frequently in an array or range of data Known as most likely value Median – The value that is in the middle of the range of data It is the same as the 50 percentile Mean – The average of all the values Also known as expected value Measures of Dispersion: Range – The difference between maximum and minimum data value Variance – A measure of how much the distribution is spread from the mean A high variance indicates results are spread out It is the average of the squared distance of all generated values from their mean Standard Deviation – How much a variable deviates from the mean Assumes the distribution is normal and not skewed It is calculated as the square root of the variance Page 53 ... Exercise - Risk Analysis Results & Reports 51 5 .0 Glossary of Terms 53 Attachment - Risk Model (04 2_TRN0 07 _ xx.xls) Page PCDP Module - Schedule Risk Analysis Rev. .. 90 -$ 30M Weak Demand 65% $1 20 $ 70 M EMV of the Decision $ 49 Upgrade Existing Plant True - $ 50 EMV of the Chance Node $ 49.0M Strong Demand 35% $ 60 $10M Page 15 PCDP Module - Schedule Risk Analysis. .. PCDP Module - Schedule Risk Analysis Rev Risk Analysis is no more about risk than astronomy is about telescopes ~/~ Edsger W Dijkstra Figure 5– Sample Risk Register Page 12 PCDP Module - Schedule