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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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            NLC Project Management Control System
                        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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            NLC Project Management Control System
                        Risk and Contingency Analysis
  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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             NLC Project Management Control System
                          Risk and Contingency Analysis
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.

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              NLC Project Management Control System
                           Risk and Contingency Analysis
• 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.

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            NLC Project Management Control System
                        Risk and Contingency Analysis



                  Table 1: Contingency Risk Factors




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            NLC Project Management Control System
                        Risk and Contingency Analysis
         Table 2: Contingency Risk Factors: Technical
Risk      Risk     Definition                              Example(s)
Factor    Range
1         Low      Existing design can be purchased        A commercial VME crate or plug-in module.
                   off the shelf.
2         Low      Minor modifications required to an      A clock module needing a different crystal to
                   existing design.                        operate at a slower speed. A crate needs an
                                                           auxiliary supply for special power.
3         Low      Major Modifications required to an      A clock module modified to run at twice
                   existing design.                        speed with I/O circuit modifications.
                                                           A power supply with 50% increased power
                                                           density.
4         Medium   New design required: Routine.           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.
5         Medium   New design required: Non-routine.       A new clock module operating near the
                                                           maximum speed of available devices.
                                                           A line type modulator requiring a new pulse
                                                           transformer design
6         Medium   New design required: Some R&D           A new clock module operating above the
                   required to solve novel problems.       speed of available devices requires
                                                           interleaving techniques.
                                                           A line type modulator requires a PFN of
                                                           lower impedance than used in earlier designs.
7         Medium   New design required: More than          A new sampling module requires
                   half the design requires R&D to         introduction of an application specific IC that
                   solve novel problems.                   has been used in other designs.
                                                           A new line type modulator requires a
                                                           complete new packaging concept to reduce
                                                           space and assembly costs.

8         High     New design required: More than          A new sampling module requires
                   90% of the design requires R&D to       development of a new type of ASIC that has
                   solve novel problems.                   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.
9         High     State of the art design required: All   A new sampling module using a completely
                   problems are novel or untried.          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.
10        High     State of the art design required:       A new sampling module using a completely
                   Design is untried and exotic            new, untried ASIC design with higher
                   compared with any existing design       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.


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            NLC Project Management Control System
                        Risk and Contingency Analysis
     Table 3: Contingency Risk Factors: Design Maturity
Risk      Risk     Definition                            Example(s)
Factor    Range
1         Low      Detailed design is greater than 50%   For an electronic module, the initial circuit
                   done.                                 design is complete, analog and digital
                                                         simulations are complete, test code for
                                                         programmable devices is written, and board
                                                         layout is more than half done.
2         Low      Detailed design is about 25% done.    For an electronic module, same as above
                                                         except layout is 25% done.
3         Low      Preliminary design and analysis are   For an electronic module, the circuit design,
                   100% done.                            test code for programmable devices and
                                                         simulations are complete, but layout has not
                                                         started.
4         Medium   Preliminary design and analysis are   Simulations on critical parts of preliminary
                   75% done.                             design are done and design of support circuits
                                                         is being completed.
5         Medium   Preliminary design and analysis are   Preliminary circuit design of critical sections
                   50% done.                             are done and simulations are half done
6         Medium   Preliminary design and analysis are   Preliminary circuit design of critical sections
                   10% done.                             is partly done and simulations are started.
7         Medium   Conceptual design, requirements,      Circuit diagrams are not started.
                   specifications, architecture and      Simulations are not started.
                   block diagrams are complete.
8         High     Concept, requirements & rough         Specifications incomplete.
                   specifications, sketches/ block       Block diagram incomplete.
                   diagram only are complete.
9         High     Concept, requirements & rough         Specifications incomplete.
                   specifications only are complete.     Block diagram not started.
10        High     Concept and rough requirements        Requirements incomplete.
                   only are complete.                    Specifications not started.




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                        Risk and Contingency Analysis
                  Table 4: Contingency Risk Factors:
                        Manufacturing/Vendor
Risk      Risk     Definition                              Example(s)
Factor    Range
1         Low      Requires existing off the shelf         Standard processes for PC board circuit
                   tooling.                                production, 10 mil traces and 10 mil spacing,
                                                           6 layers typical.
2         Low      Requires small amount of new            New programs for auto-insertion of PC
                   tooling.                                components or hybrid IC auto-bonding.
3         Low      Known vendor capacity is                Need to find additional vendors and qualify
                   inadequate for production needs.        those with limited experience in Research
                                                           component manufacturing.
4         Medium   Extensive multiple item new tooling     New test fixtures such as manually operated
                   required.                               probe cards need to be designed and built for
                                                           special IC or hybrid testing at the vendor.
5         Medium   New part requires new tooling for       A special beam position monitor requires
                   manufacturing. Vendors need to be       specialized test jigs for accurately positioning
                   qualified.                              feedthroughs.
6         Medium   Both new tooling and new processes      The above BPM in addition requires a special
                   are required.                           brazing technique that will hold a tolerance
                                                           of less than 2 microns on the electrical center
                                                           of the device.
7         Medium   State of the art part requires vendor   The above BPM in addition requires that the
                   training and qualification              vendor qualify each part using a fast pulsed
                                                           wire alignment technique with an automated
                                                           mechanical scanner.
8         High     Both state of the art tooling and       The above BPM in addition requires vacuum
                   processes both required.                cleaning and qualification to 10E-9 Torr.
9         High     Unique or exotic part requires new      The above BPM in addition requires that
                   tooling, processes and vendor           vendor equip a clean room and vacuum
                   qualification.                          facility to perform all tests in a production
                                                           mode.
10        High     Unique or exotic part requires          The above BPM in addition requires that
                   exotic tooling, processes, and          vendor’s technicians take special training in
                   vendor training & qualification.        electron beam welding and vacuum
                                                           instrumentation in a clean room environment.




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            NLC Project Management Control System
                        Risk and Contingency Analysis
             Table 5: Contingency Risk Factors: Cost
Risk      Risk     Definition                              Example(s)
Factor    Range
1         Low      Off the shelf catalog item.             A standard CAMAC or VME crate available
                                                           from several vendors.
2         Low      Vendor quote from established           Drawings are detailed, e.g. a mechanical part
                   drawings.                               that has been prototyped or a PC board
                                                           complete to the Fabrication documentation
                                                           (Gerber files, mechanical fabrication
                                                           drawings).
3         Low      Vendor quote from design sketches.      Printed circuit board that has a preliminary
                                                           parts placement drawing and board outline so
                                                           vendor can estimate trace density and number
                                                           of through holes.
4         Medium   In-house estimate from previous         Printed board size and density are roughly
                   experience.                             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.
5         Medium   In-house estimate backed by limited     A number of design changes have been made
                   experience.                             from a previous design but the lab has very
                                                           limited experience in fabricating this
                                                           particular item.
                                                           Vendors may or may not be consulted.
6         Medium   In-house estimate backed by             The item is new and there is little to no in-
                   minimum experience.                     house engineering experience for costing a
                                                           comparable design. Vendors may or may not
                                                           be consulted.
7         Medium   In-house estimate backed by no          The item is new to the responsible group and
                   direct experience.                      they must rely completely on the limited cost
                                                           estimating judgment of a third party.
8         High     Top down estimate from a similar        A large expensive item(s) is being estimated
                   program.                                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.
9         High     Top down estimate from very             Differences with the comparable are
                   roughly similar program.                significant and reliance is on a third party.
10        High     Engineering judgment with no            Limited experience on which to base
                   available comparables.                  engineering judgment and no direct
                                                           comparables available.




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                        Risk and Contingency Analysis
         Table 6: Contingency Risk Factors: Schedule
Risk      Risk     Definition                            Example(s)
Factor    Range
1         Low      Schedule slippage has little or no    A remote monitoring system that is not
                   impact on another item.               essential to operate the machine so that late
                                                         delivery can be tolerated.
2         Low      Schedule slippage delays               A chip or hybrid IC that is late may hold up
                   completion of a non-critical-path     final testing of some boards in a system.
                   item.
3         Low      Schedule slippage delays              A late chip or hybrid delays monitoring
                   completion of several non-critical-   circuits associated with several different
                   path items.                           subsystems.
4         Medium   Schedule slippage of this item        A component that is late holds up testing of a
                   delays completion of a major          major component that is needed to check the
                   component in a subsystem.             system as a whole. E.g. a BPM or RF control
                                                         module.
5         Medium   Schedule slippage of this item        A custom chip used in several different
                   delays completion of several major    modules of a subsystem.
                   components in a subsystem.            Standard magnet flags and interconnect
                                                         hardware impacts multiple units.
6         Medium   Schedule slippage of this item        A modular BPM system with several
                   delays completion of a minor          modules may suffer delay in delivery of one
                   subsystem.                            of the modules. Parts of the system can still
                                                         be installed and commissioned by swapping a
                                                         working module.
7         Medium   Schedule slippage delays              A generic piece of software (e.g. drivers and
                   completion of multiple minor          panels) that supports both BPM and RF
                   subsystems.                           subsystems can delay both subsystems.
8         High     Schedule slippage delays              Slippage in delivery of vacuum pump power
                   completion of a major subsystem.      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.
9         High     Schedule slippage delays              Delay in completion of the central control
                   completion of multiple major          system/ micro farm that operates all network
                   systems.                              traffic for data acquisition, control, timing
                                                         and feedback will delay checkout of multiple
                                                         major systems.
10        High     Schedule slippage delays              Delay of klystron modulator installation and
                   completion of the total project.      checkout in turn delays checkout of
                                                         associated installed RF system and linac
                                                         structure, in effect slipping the entire
                                                         machine schedule.




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               NLC Project Management Control System
                             Risk and Contingency Analysis
    Subsystem Team            Engrg Team            Engineers             Engineering Tasks
                              Coordinator

    Sources Specials                                     TBD              e+/e- Sources Special Systems
         Team                  Sheppard
        Vacuum                                 Eriksson,Millage,McKee,    Vacuum Systems (Non-RF)
         Team               Cornuelle/Larsen   Weinberg,Porter,Hamner
        Magnets                                Rago, McKee, Ringwall,     Magnet Systems
         Team               Cornuelle/Larsen   Spencer, Bellomo, Leyh,
                                                Donaldson, Rodriguez
        Movers &                                McKee, Ringwall, Yu,      Movers/Girders Systems
      Girders Team          Cornuelle/Larsen   Munro, Browne, Roster,
                                                       Bowden
      Cable Group               Larsen             Rodriguez et al        Cable Systems
        Kickers                                 Cassel, Pappas, Ross      Kicker Systems
         Team                   Larsen
         LLRF                                   Schwarz, Corredoura,      LLRF Systems
         Team                   Larsen                  Munro
       Modulators                               Gold, Krasnykh, Akre,     RF Modulators Baseline
         Team                   Larsen             Eichner, Phillips
      RF Sources                                  Millage, Ringwall,      RF Klystrons/Waveguide
         Team                  Cornuelle         Fant, Millage, Rago      /Structures/Cavities
                                                 Neubauer, Tantawi,       Systems
                                                 Wang, Jongewaard
          BPMs                                   Smith, Corredoura,       BPM Systems
          Team                  Larsen           Johnson, Weinberg,
                                                        Munro
 Collimators/Beam Dumps                        Doyle, Eriksson, Porter,   Collimator/Beam Dump/
  /Optical Anchor Team         Cornuelle               Hamner             Optical Anchor Systems
           Special                                Doyle, Weinberg,        Profile Monitor/SR Monitor/
      Instrumentation           Larsen           Cisneros, Tilghman,      Toroid/Wire Scanner/
         Systems                                  Firsch, Bernstein,      Laser Wire Systems
            Team                                     Thompson
      Area Installation/                        Ruland, Schultz, Ross   Area Installation
         Alignment             Cornuelle           Area Managers,       Sources, DRs, Pre-Linacs,
            Team                                  Area Coordinators     Main Linacs, Beam Delivery, Irs
    Area Management                                                     Area Management
           Teams            Area Managers         Area Coordinators     Sources, DRs, Pre-Linacs,
                                                                        Main Linacs, Beam Delivery, Irs
 Manufacturing Facilities      Cornuelle        Rago,Weinberg,Munro     Manufacturing Facilities.
                                                   Humphrey, Fuller     Global Controls
     Controls Team              Larsen         Clark, Shoaee, Cisneros, Protection Systems
                                                  Ortega, Tilghman,     Software Systems
                                                Kroutil, Bong, Bennett, Timing Systems
                                                    Crane, Rago
  Conventional Facilities         Ives                 Corvin             Conventional Facilities
          R&D                                                             R&D
    BL Mgmt/Coord                                Area Mgrs, Lavine,       Beamlines Mgmt/Coord (WBS 119)
   BL Commissioning              Burke             Raubenheimer,          Beamline Commissioning (WBS 16)
       Pre-Ops                                         Phinney            Pre-Operations (WBS 17)
     Project Mgmt                                                         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 Pre-
 Conceptual 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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