Project Contingency

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					NLC Project Management Control System
Risk and Contingency Analysis

Risk and Contingency Analysis

NLC Management Group
Revised March 2, 1999

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Risk and Contingency Analysis

Risk and Contingency Analysis
• • • • • • • •
  Overall Purpose of Contingency Analysis Observations & Current Practice Risk Factors - Current Usage The US ATLAS Model Proposed System Evaluating Effectiveness - Examples Implementation Contingency Management

Purpose
The purpose of the Project Contingency Budget is to generate a reserve of funds sufficient to assure successful completion of a major project on time and within total budget. The purpose of Contingency Analysis is: A. To identify/quantify high risk areas of the project which require priority for R&D funding B. To provide a consistent scoring basis of each line item to enable calculation of the Contingency Budget.

Definitions
• Project Contingency is the sum of individual estimates for each major subsystem • Total Project Budget is the sum of estimated Baseline Project Cost plus estimated

Contingency Budget. • Baseline Project Cost is defined as the estimated cost of completing the project on time and within budget. • Contingency is calculated using Risk Factors that reflect project various unknowns and unanticipated expense.

Observations
• Major accelerator and detector projects typically are budgeted with contingencies of 25-35%. • Projects typically overrun their budgets. • The health of a project depends on having contingency available late in the project when all major overruns and schedule conflicts are felt at once. • Strong budget controls are most necessary early in the project to avoid depleting contingency reserves. • In high technology ventures which push the state of the art, ED&I is typically significantly underestimated, followed by labor costs for manufacturing and installation. The latter is expensive (Davis-Bacon) labor. • Manufacturing costs can have a wide range in a high tech project. If the item is based on well established manufacturing technologies (e.g. magnet machining, non-exotic tooling and finishing), reasonably accurate predictions can be made. If the processes

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are not well established, such as in radiation-hardened chip design and manufacture, with very few highly specialized vendors, estimating with error bars of less that +/100% are difficult. • Learning Curves (i.e. predicting quantity manufactured pricing of a new design) are subject to the same ranges, and quantity pricing could go positive as well as negative for exotic technologies. • Learning curves require justification for their use documented in the Cost Book.

Risk Factors - Present Usage
• DoE has adopted the use of a Risk Analysis to calculate Contingency. • Traditional Risk Factors include: Technical, Cost and Schedule • The ATLAS (LHC) group refined these to include a Design Maturity Risk Factor because they felt intuitively that risk factors (interpreted linearly as percentages of line item cost) were too low. • Additional Weighting Factors have been applied to resultant Technical and Cost risks depending on whether single or composite risks are present.

Adoption of a System
• ATLAS treats risk factors linearly, as a percentage of Baseline cost, with weighting factors introduced to introduce a limited degree of (more realistic) non-linearity. • The ATLAS system works but is awkward to use and weighting factors are confusing to estimators. • A minimum modification would be to expand ranges of basic risk factors and eliminate weighting factors. • Design Maturity is a good concept and should be retained. • Manufacturing/vendor risk should be added to highlight special large volume manufacturing estimating that is typical of many NLC systems.

Proposed System of Risk & Contingency Analysis
The basic proposal is first, to adopt five Risk Factors: • Technical • Design Maturity • Manufacturing/Vendor • Cost • Schedule • Estimators (Engineering) select and record Risk Factors for appropriate sub-units. • Management develops an appropriate algorithm to combine Risk Factors to derive a Percentage of the Baseline line item cost. • Cap the maximum Risk Scores as follows: – Technical: 10 = 100% – Manufacturing: 10 = 100% – Design Maturity 10 = 40% – Cost: 10 = 50% – Schedule: 10 = 20% • Management applies the algorithm combining risk scores to achieve a total estimate for each appropriate line item.

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The Risk Factor Table and expanded tables of examples are shown in Tables 1 through 6.

Rationale for Risk Factor Caps
If an estimate cannot be contained within 100%, since the reliability of numbers greater than 100% is very poor, indications are that much more work needs to be done to resolve the uncertainties so the item can be budgeted with reasonable confidence. • Technical or Manufacturing difficulty: A maximally high risk for one of these could cause an estimate to be off by 100% or more. • Design Maturity: Refers to the state of current design, not the design difficulty per se. Therefore a contingency is needed to guard against underestimating duration or scope of effort. For this, 40% is a high contingency. • Cost: Refers primarily to lack of information on which to base cost, occurring mainly in the early stages of a project. Scaling estimates for quantity manufacturing of a unique design is an example where large errors are possible. A maximum of 50% is a high contingency. • Schedule: A certain contingency will be spent because of delays during which costs accumulate across a wide front because of the “standing army” problem. These delays rarely are felt early in a project (although they are present and modern tools attempt to identify them) but accumulate and become critical in the late stages. An overrun of 20% for reasons of schedule alone is a very large contingency. • If the combined net risk for a Subsystem or Component is higher than 50%, the Subsystem in question clearly should be flagged for more R&D before it can be confidently budgeted. • A Major Subsystem (major cost driver) with >50% cost risk (e.g. Klystron, Modulator, DLDS component or Beamline Structure) could jeopardize the entire project unless risks are contained via R&D prior to CDR.

Evaluation by Reviewers • Contingency Analysis is not an exact science and is at best subjective. The best tests
are based on real examples generated by experienced people. It helps to have experienced reviewers to help bring reality to the estimates.

Implementation

• Subsystem managers via RAM1 Teams are primarily responsible for bottoms-up cost

analysis. (See Table 7 for example RAM Teams.)
• Area and Subsystem managers should seek help from outside their own groups as

needed to make sure they are getting the best available cost estimating expertise.
• RAM Teams are designed to resolve apparent discrepancies in estimating of similar

objects between groups. This will help standardize definitions and models and lead to more consistent estimating. • Contingency should be estimated after baseline costs.
1

RAM refers to “Responsibility Assignment Matrix.” RAM Teams have been formed to cover all major Subsystems. Refer to the document, “Subsystem Top Level Cost Summaries,” for details on the RAM team estimating procedures. f2dce0d5-14a8-4ac0-be27-32d96ddada6c.doc Page 4 12/14/09 4:47 AM

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• Calculation of contingency will be performed by Management as a post process and

then reviewed with each Area and Subsystem manager.

Contingency Budget Management & Change Control Board (CCB)
• The Contingency Budget is managed by the Project Management Group • Contingency is allocated through a formal procedure and results in movement of funds in the current budget out of Contingency and into the appropriate subsystem budget. • Contingency management also consists of moving unneeded funds away from a subsystem budget and into the Contingency budget. • The group that makes decisions on Contingency is called a Change Control Board (CCB). The members are usually senior managers appointed by the Project Director. • Budget changes after a CCB action are immediately documented in the Project Budget presentations by the Planning Group. 2 • Earned Value milestones are recalculated to reflect the new approved budgets . • A history of CCB actions is maintained so the budget history of each subsystem can be monitored. • As a general procedure, all subsystem budgets are periodically reviewed with a bottoms-up Cost to Complete analysis. • If the overall project baseline (Estimate at Complete, or EAC) changes significantly, e.g. due to cost overruns or schedule slip, the entire project may be Re-Baselined as required by top management and the DoE.

Summary
• Contingency Analysis for NLC consists of a Risk Analysis by Estimators, followed by

• • •

•

•

application of an algorithm by Project Management to calculate Contingency for each line item. The line items are summed alongside the Work Breakdown Structure (WBS) presentation to arrive at a Project Contingency Budget. The Contingency Budget is managed independently of the Baseline Budget. Compared with prior Risk Analysis systems, NLC will use an expanded set of Risk Factors, Risk Factor caps, no Weighting Factors, and an algorithm for converting scores to a Contingency Budget. Subsystem Managers are responsible for Risk Factor scoring, with Project Management responsible for the integrated Contingency Budget calculation and management. Experts/specialists will be used to review budget as well as contingency estimates for consistency of approach and application.

2

Earned Value is the budget analysis methodology used to evaluate progress toward the particular line item goal. It operates by setting a value for the line item, and then measuring actual estimated versus planned progress. Both cost and schedule variances are tracked and translated into an Earned Value. Ideal tracking will result in zero variances at a given time. f2dce0d5-14a8-4ac0-be27-32d96ddada6c.doc Page 5 12/14/09 4:47 AM

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Table 1: Contingency Risk Factors

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Table 2: Contingency Risk Factors: Technical
Risk Factor
1 2

Risk Range
Low Low

Definition
Existing design can be purchased off the shelf. Minor modifications required to an existing design. Major Modifications required to an existing design.

Example(s)
A commercial VME crate or plug-in module. A clock module needing a different crystal to operate at a slower speed. A crate needs an auxiliary supply for special power. A clock module modified to run at twice speed with I/O circuit modifications. A power supply with 50% increased power density. A new clock module of a type designed before. A line-type modulator, of a type that has been built before, requiring design to 20% higher output voltage and current. A new clock module operating near the maximum speed of available devices. A line type modulator requiring a new pulse transformer design A new clock module operating above the speed of available devices requires interleaving techniques. A line type modulator requires a PFN of lower impedance than used in earlier designs. A new sampling module requires introduction of an application specific IC that has been used in other designs. A new line type modulator requires a complete new packaging concept to reduce space and assembly costs. A new sampling module requires development of a new type of ASIC that has been prototyped, along with a completely new board design. A new line type modulator design combining solid state switching in place of thyratrons along with impedance and transformer changes. A new sampling module using a completely new, untried ASIC design with higher dynamic range, accuracy and speed than attempted before. A new modulator using solid state switches with an induction transformer configuration. A new sampling module using a completely new, untried ASIC design with higher dynamic range, accuracy and speed than attempted before. A new modulator using solid state switches in an induction transformer configuration, driving several loads in tandem at unprecedented power levels. 12/14/09 4:47 AM

3

Low

4

Medium

New design required: Routine.

5

Medium

New design required: Non-routine.

6

Medium

New design required: Some R&D required to solve novel problems.

7

Medium

New design required: More than half the design requires R&D to solve novel problems.

8

High

New design required: More than 90% of the design requires R&D to solve novel problems.

9

High

State of the art design required: All problems are novel or untried.

10

High

State of the art design required: Design is untried and exotic compared with any existing design

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Table 3: Contingency Risk Factors: Design Maturity
Risk Factor
1

Risk Range
Low

Definition
Detailed design is greater than 50% done.

Example(s)
For an electronic module, the initial circuit design is complete, analog and digital simulations are complete, test code for programmable devices is written, and board layout is more than half done. For an electronic module, same as above except layout is 25% done. For an electronic module, the circuit design, test code for programmable devices and simulations are complete, but layout has not started. Simulations on critical parts of preliminary design are done and design of support circuits is being completed. Preliminary circuit design of critical sections are done and simulations are half done Preliminary circuit design of critical sections is partly done and simulations are started. Circuit diagrams are not started. Simulations are not started. Specifications incomplete. Block diagram incomplete. Specifications incomplete. Block diagram not started. Requirements incomplete. Specifications not started.

2 3

Low Low

Detailed design is about 25% done. Preliminary design and analysis are 100% done.

4

Medium

Preliminary design and analysis are 75% done. Preliminary design and analysis are 50% done. Preliminary design and analysis are 10% done. Conceptual design, requirements, specifications, architecture and block diagrams are complete. Concept, requirements & rough specifications, sketches/ block diagram only are complete. Concept, requirements & rough specifications only are complete. Concept and rough requirements only are complete.

5 6 7

Medium Medium Medium

8

High

9 10

High High

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Table 4: Contingency Risk Factors: Manufacturing/Vendor
Risk Factor
1

Risk Range
Low

Definition
Requires existing off the shelf tooling. Requires small amount of new tooling. Known vendor capacity is inadequate for production needs. Extensive multiple item new tooling required. New part requires new tooling for manufacturing. Vendors need to be qualified. Both new tooling and new processes are required.

Example(s)
Standard processes for PC board circuit production, 10 mil traces and 10 mil spacing, 6 layers typical. New programs for auto-insertion of PC components or hybrid IC auto-bonding. Need to find additional vendors and qualify those with limited experience in Research component manufacturing. New test fixtures such as manually operated probe cards need to be designed and built for special IC or hybrid testing at the vendor. A special beam position monitor requires specialized test jigs for accurately positioning feedthroughs. The above BPM in addition requires a special brazing technique that will hold a tolerance of less than 2 microns on the electrical center of the device. The above BPM in addition requires that the vendor qualify each part using a fast pulsed wire alignment technique with an automated mechanical scanner. The above BPM in addition requires vacuum cleaning and qualification to 10E-9 Torr. The above BPM in addition requires that vendor equip a clean room and vacuum facility to perform all tests in a production mode. The above BPM in addition requires that vendor’s technicians take special training in electron beam welding and vacuum instrumentation in a clean room environment.

2 3

Low Low

4

Medium

5

Medium

6

Medium

7

Medium

State of the art part requires vendor training and qualification

8 9

High High

Both state of the art tooling and processes both required. Unique or exotic part requires new tooling, processes and vendor qualification. Unique or exotic part requires exotic tooling, processes, and vendor training & qualification.

10

High

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Table 5: Contingency Risk Factors: Cost
Risk Factor
1 2

Risk Range
Low Low

Definition
Off the shelf catalog item. Vendor quote from established drawings.

Example(s)
A standard CAMAC or VME crate available from several vendors. Drawings are detailed, e.g. a mechanical part that has been prototyped or a PC board complete to the Fabrication documentation (Gerber files, mechanical fabrication drawings). Printed circuit board that has a preliminary parts placement drawing and board outline so vendor can estimate trace density and number of through holes. Printed board size and density are roughly known and a similar job is used as a cost model. A magnet of a standard type but with different dimensions of one built before. Vendors may or may not be consulted. A number of design changes have been made from a previous design but the lab has very limited experience in fabricating this particular item. Vendors may or may not be consulted. The item is new and there is little to no inhouse engineering experience for costing a comparable design. Vendors may or may not be consulted. The item is new to the responsible group and they must rely completely on the limited cost estimating judgment of a third party. A large expensive item(s) is being estimated by looking at a similar program and extrapolating, without any detailed design parameters to solicit a vendor quote. Example, a large cryostat or specialized vacuum structure; an RF cavity of completely unique design. Differences with the comparable are significant and reliance is on a third party. Limited experience on which to base engineering judgment and no direct comparables available.

3

Low

Vendor quote from design sketches.

4

Medium

In-house estimate from previous experience.

5

Medium

In-house estimate backed by limited experience.

6

Medium

In-house estimate backed by minimum experience.

7

Medium

In-house estimate backed by no direct experience. Top down estimate from a similar program.

8

High

9 10

High High

Top down estimate from very roughly similar program. Engineering judgment with no available comparables.

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Table 6: Contingency Risk Factors: Schedule
Risk Factor
1

Risk Range
Low

Definition
Schedule slippage has little or no impact on another item. Schedule slippage delays completion of a non-critical-path item. Schedule slippage delays completion of several non-criticalpath items. Schedule slippage of this item delays completion of a major component in a subsystem. Schedule slippage of this item delays completion of several major components in a subsystem. Schedule slippage of this item delays completion of a minor subsystem.

Example(s)
A remote monitoring system that is not essential to operate the machine so that late delivery can be tolerated. A chip or hybrid IC that is late may hold up final testing of some boards in a system. A late chip or hybrid delays monitoring circuits associated with several different subsystems. A component that is late holds up testing of a major component that is needed to check the system as a whole. E.g. a BPM or RF control module. A custom chip used in several different modules of a subsystem. Standard magnet flags and interconnect hardware impacts multiple units. A modular BPM system with several modules may suffer delay in delivery of one of the modules. Parts of the system can still be installed and commissioned by swapping a working module. A generic piece of software (e.g. drivers and panels) that supports both BPM and RF subsystems can delay both subsystems. Slippage in delivery of vacuum pump power supplies delays installation of the electronics subsystem and prevents pump down and checkout of the main vacuum system for a major part of the machine. Delay in completion of the central control system/ micro farm that operates all network traffic for data acquisition, control, timing and feedback will delay checkout of multiple major systems. Delay of klystron modulator installation and checkout in turn delays checkout of associated installed RF system and linac structure, in effect slipping the entire machine schedule.

2

Low

3

Low

4

Medium

5

Medium

6

Medium

7

Medium

8

High

Schedule slippage delays completion of multiple minor subsystems. Schedule slippage delays completion of a major subsystem.

9

High

Schedule slippage delays completion of multiple major systems.

10

High

Schedule slippage delays completion of the total project.

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Subsystem Team Engrg Team Coordinator Engineers Engineering Tasks Sources Specials Team Vacuum Team Magnets Team Movers & Girders Team Cable Group Kickers Team LLRF Team Modulators Team RF Sources Team
TBD

e+/e- Sources Special Systems Vacuum Systems (Non-RF) Magnet Systems

Sheppard
Eriksson,Millage,McKee,

Cornuelle/Larsen Cornuelle/Larsen

Weinberg,Porter,Hamner Rago, McKee, Ringwall, Spencer, Bellomo, Leyh, Donaldson, Rodriguez McKee, Ringwall, Yu,

Movers/Girders Systems

Cornuelle/Larsen Larsen Larsen

Munro, Browne, Roster, Bowden Rodriguez et al Cassel, Pappas, Ross Schwarz, Corredoura,

Cable Systems Kicker Systems LLRF Systems RF Modulators Baseline RF Klystrons/Waveguide /Structures/Cavities Systems BPM Systems

Larsen Larsen Cornuelle

Munro Gold, Krasnykh, Akre, Eichner, Phillips Millage, Ringwall, Fant, Millage, Rago Neubauer, Tantawi, Wang, Jongewaard

BPMs Team Collimators/Beam Dumps /Optical Anchor Team Special Instrumentation Systems Team Area Installation/ Alignment Team Area Management Teams Manufacturing Facilities Controls Team

Smith, Corredoura,

Larsen

Johnson, Weinberg, Munro Doyle, Eriksson, Porter,

Cornuelle Larsen

Hamner Doyle, Weinberg, Cisneros, Tilghman, Firsch, Bernstein, Thompson Ruland, Schultz, Ross Area Managers,

Collimator/Beam Dump/ Optical Anchor Systems Profile Monitor/SR Monitor/ Toroid/Wire Scanner/ Laser Wire Systems

Cornuelle

Area Managers Cornuelle Larsen

Area Installation Sources, DRs, Pre-Linacs, Area Coordinators Main Linacs, Beam Delivery, Irs Area Management Area Coordinators Sources, DRs, Pre-Linacs, Main Linacs, Beam Delivery, Irs Rago,Weinberg,Munro Manufacturing Facilities. Humphrey, Fuller Global Controls Clark, Shoaee, Cisneros, Protection Systems Ortega, Tilghman, Software Systems Kroutil, Bong, Bennett, Timing Systems
Crane, Rago Corvin Area Mgrs, Lavine,

Conventional Facilities R&D BL Mgmt/Coord BL Commissioning Pre-Ops Project Mgmt

Ives

Burke

Raubenheimer, Phinney

Conventional Facilities R&D Beamlines Mgmt/Coord (WBS 119) Beamline Commissioning (WBS 16) Pre-Operations (WBS 17) Project Management (WBS 19)

Note: These NLC Project Teams are responsible for Technical Planning, Definition, Engineering, Costing, Scheduling and Risk and Reliability Analysis of the PreConceptual Phase of the NLC. Supporting R&D is being conducted by collaborating groups at SLAC, KEK, LLNL and LBNL.

Table 7: RAM Teams Examples
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