Module 7 - Schedule Risk Analysis_Rev0 (2)

PROJECT CONTROLS DEVELOPMENT PROGRAM

MODULE 7– SCHEDULE RISK ANALYSIS

PCDP Module 7 - Schedule Risk Analysis Rev. 0

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 7 - SCHEDULE RISK ANALYSIS Rev

Description

Originator

Review

Approved

Date

0

Released for Global Implementation

Ed Cimic

Project Controls R5 Management Team

Project Controls R5 Management Team

1 Nov 2011

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PROJECT CONTROLS DEVELOPMENT PROGRAM

This Training Module is part 7 of an 8 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 1 - Introduction To Project Controls Module 2 - EPC Schedule Development (including P6 user skills) Module 3 - Services Management (including InControl V8.0 user skills) Module 4 - Commercial Performance Management Module 5 - Introduction to TIC Cost Estimation Module 6 - TIC Management (including Prediction Plus / InControl V10 user skills) Module 7 - Schedule Risk Analysis (including Primavera Risk Analysis user skills) Module 8 - 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

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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?

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1.1 Uncertainty and Risk in Cost Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.0 Project Risk Management 2.1 Risk Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2.2 Risk Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3 Qualitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2.4 Quantitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2.5 Risk Response Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2.6 Risk Monitoring & Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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3.0 Quantitative Schedule Risk

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3.1 Schedule Risk Analysis: Key Steps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.2 Basic Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.0 Cost Risk Analysis Process

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4.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 4.2 Can we meet the deadline? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4.3 Main Execution Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4.4 Contract 1- EPCM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4.5 Contract 2 - Module Fabrication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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6.6 Contract 3 - Transport & Installation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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6.7 Contract 4 - Brownfield Modifications / Tie-ins / HUC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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6.8 Contract 5 - Accommodation Vessel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Training Exercises Exercise 1 - Develop Cost Risk Analysis Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Exercise 2 - Risk Analysis Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Exercise 3 - Risk Analysis Results & Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

5.0 Glossary of Terms

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Attachment 1 - Risk Model (042_TRN007_xx.xls)

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1 . 0 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 2 - 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-

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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 1 on page 7 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


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 7 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 8 - Cost Risk Analysis.

 It provides a range of possible completion dates (range of expected costs) along with corresponding probabilities

Figure 1 – Activity Duration Uncertainty

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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 3. 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

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~/~ 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.


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.

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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

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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


By using the probability and impact matrix (PIM), a prioritization and ranking can be created, which is updated on the risk register. Each risk in the risk register is evaluated for its likelihood of occurring (probability) and its potential impact on the project. Each of these two values are given a ranking: Risk Probability Scale falls between 0.0 – no probability, and 1.0 – certainty. Risk’s Impact Scale can be descriptive, i.e. very low, low, medium, high, very high; or numeric 0.1/0.3/0.5/0.7/0.9 The risk probability and impact are multiplied together to get a risk score.

This resulting score is used to set priorities and relative risk ranking. WorleyParsons provides guidelines for Likelihood and Consequence scales in risk assessments. (For more, please

refer EMS document CRP-0012) Teams are advised to review the categories and determine a scale that is relevant to their project.

“Sometimes something worth doing is worth overdoing. ~/~ David Letterman Page 11


“Risk Analysis is no more about risk than astronomy is about telescopes. ~/~ Edsger W. Dijkstra

Figure 5– Sample Risk Register

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The main output from the Qualitative Risk Analysis is an updated Risk Register. The next step is to add more details to the register including the following:

events and assigns a numerical rating to those risks individually or evaluates the aggregate effect of all risks affecting the project.

 Relative ranking or priority of

It also presents a quantitative approach to making decisions in the presence of uncertainty.

project risks

 The urgency of the risks  The categorization of the risks  The Risk treatment plan, and  Any trends that were noticed in performing the qualitative risk analysis. An example of the risk register is shown in Fig 5 on page 14.

2.4 QUANTITATIVE RISK ANALYSIS

Performing Quantitative Risk Analysis generally follows the risk identification and qualitative risk analysis. It is the process of numerically analysing the effect of identified risks on project objectives

There are various tools and methods available for quantitative risk analysis process: Data Gathering & Representation techniques (Interviewing) Interviewing uses a structured interview to ask experts about the likelihood and impact of identified risks. After interviewing several experts, for instance, the project manager might create pessimistic, optimistic, and realistic values associated with each risk. Sensitivity Analysis Sensitivity analysis is used to determine which risks have the most potential impact and the

degree of overall project sensitivity to any of the evaluated risks while all other variables are kept constant. It’s the simplest form of risk analysis, which helps to determine which risks have the most potential impact on the project. It examines the extent to which the uncertainty of each project element affects the objective examined, when all other uncertain elements are held at their baseline values. The advantage of this method is that it gives a range of possible outcomes in which critical variables are easily compared in a sensitivity diagram. The weakness of this method is that variables are treated individually, limiting the extent to which combinations of variables can be assessed, and a sensitivity diagram gives no indication of anticipated probability of occurrence.

It is performed on risks that have been prioritized by the Qualitative Risk Analysis process as potentially and substantially impacting the project’s competing demands. Quantitative Risk Analysis analyses the effect of those risk

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Probability Analysis Probability analysis overcomes the limitations of sensitivity analysis by specifying a probability distribution for each variable.

 Triangular, if Optimistic (Min), Pessimistic (Max) and Most Likely scenarios are used.

The disadvantage of using the probability analysis method is that defining the probability of occurrence for any specific variable may be difficult, as every project is different.

Probability distributions are mathematical representations that show the probability of an event occurring.

Expected Monetary Value Analysis (EMV)

The probability is usually expressed as a table or graph. Consider flipping a coin as an example.

Expected monetary value analysis takes uncertain events and assigns a most likely monetary value.

There would be two possible outcomes from this event: head or tail.

It is a statistical concept that calculates the average outcome of future scenarios.

Now imagine flipping this coin six times. Doing this, the probability of the coin landing on heads a given number of times can be analysed.

 Normal or Log Normal, if mean and standard deviation are used.

EMV is calculated by multiplying the outcome’s values and probabilities, and adding them together.

Probability distributions are very useful for analysing risks. They consider situations where any or all of risk variables can be changed at the same time, allowing the project manager to take a good look at the probability of an event occurring and to make a rational decision about how to approach the risk. The most typical probability distributions used in quantitative risk analysis are:

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Opportunities are expressed as positive and threats are expressed as negative values.

EMV is typically calculated by using decision tree analysis. Decision Tree Analysis

 Other common distribution types include: trigen, uniform, beta, pert, etc.

Decision trees describe a decision under consideration and the implications of choosing one or another of the available alternatives. It incorporates probabilities of risks and the costs or rewards of each logical path of events and future decisions.

“When someone says he’s going to put all his cards on the table, always look up his sleeves” ~/~ Lord Leslie Hore-Belisha


“If builders built buildings the way programmers wrote programs, then the first woodpecker that came along would destroy civilization.” ~/~ Murphy's Laws of Technology

Solving the decision tree indicates which decision yields the greatest expected value to the decision maker when all the uncertain implications, costs, rewards, and subsequent decisions are quantified. Modelling and Simulation

Modelling and simulation methods are approaches that translate the uncertainties into their potential impact on project objectives. There are almost as many types of simulation as there are projects; however, one technique used for schedule and cost risk analysis is Monte Carlo simulation. Cost risk modelling and Monte Carlo simulation using @Risk software is the preferred method used by WorleyParsons. Sched-

ule risk modelling and Monte Carlo simulation using Primavera Risk Analysis Expert (formerly Pertmaster) is the preferred method used by WorleyParsons. 2.5 RISK RESPONSE PLANNING

Earlier, in the process of Plan Risk Management, we created a general approach to risk ( the risk management plan). Then, in risk identification process, we created a list of risks and started our risk register.

Then we qualitatively and quantitatively analysed the risks, and now we are ready to create a detailed plan for managing the risks. This is exactly what Risk Response Planning does; it creates a plan for how each risk will be handled. The resulting plan is actionable, meaning that it assigns specific tasks and responsibilities to specific team members. Remember that risk can be a positive (opportunity) or negative (threat) event.

Figure 6 – Sample Decision Tree

Strong Demand Build New Plant

Build or Upgrade?

False - $ 120

65% $200

$80M

EMV of the Chance Node $ 41.5M Weak Demand

35% $ 90

-$30M

Weak Demand

65% $120

$70M

EMV of the Decision $ 49

Upgrade Existing Plant

True - $ 50

EMV of the Chance Node $ 49.0M Strong Demand

35% $ 60

$10M

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Therefore, careful consideration must be given to each risk, whether the impact of that risk is positive or negative. Avoidance Avoidance is changing project plan to eliminate risk, to isolate the project objectives form the risk’s impact, or to relax the objective that is in jeopardy. Examples of this method are extending the schedule, reducing scope to avoid high-risk activities, adopting familiar approach instead of innovative one, and avoiding an unfamiliar subcontractor. Transference Transferring a risk is shifting the negative impact of a threat, along with the ownership of the response, to a third party. Contractual agreements, warranties, and insurance are common ways to transfer risks. Mitigation Mitigating a risk is the reduction in the probability and/ or impact of an adverse risk event to an acceptable threshold. For instance, if you were concerned about the risk of winter weather damage to a construction project, a mitigation plan can

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be to construct the building outside of the winter season.

Enhance

As stressed earlier, risks can be positive or negative, and where positive risks are concerned, the project manager wants to take steps to make them more likely.

Enhancing is modifying the “size” of an opportunity by increasing probability and/or positive impacts, and by identifying and maximizing key drivers of these positive-impact risks.

The following are specific strategies taken to capitalize on the positive risks.

Enhancing a positive risk first requires understanding the underlying causes of the risk.

Exploit

By working to influence the underlying risk triggers, you can increase the likelihood of the risk occurring.

Exploit means eliminating the uncertainty associated with an upside risk by making the opportunity definitely happen. For instance, if a positive risk of finishing the project early is identified, then adding more talented resources to ensure that the project is completed early would be an example of exploiting the risk. Share In order to share a positive risk, the project seeks to improve their chance of risk occurring by working with another party. For example, if a contractor identifies a positive risk of getting a large order, they may determine that sharing that positive risk by partnering with another contractor would be an acceptable strategy.

For example, an airline might add flights to a popular route during holidays to enhance traffic and profitability during heavy travel times.

“If an expert says it can’t be done, get another expert” ~/~ David BenGurion


Acceptance Acceptance is often a reasonable strategy for dealing with risk, whether positive or negative. When accepting a risk you are simply acknowledging that the best strategy may not be to avoid, transfer, mitigate, share, or enhance. Instead, the best strategy may be simply to accept it and continue with the project. There are two kinds of acceptance strategies:

Passive Acceptance: requires no action, leaving project team to deal with the threats or opportunities as they occur. Active Acceptance: establishing a contingency reserve, including amounts of time, money, or resources to handle known, or sometimes potential, unknown threats or opportunities. Acceptance may be the best strategy if the cost or impact of the other strategies is too great.

“There’s no secret about success. Did you ever meet a successful man that didn't tell you all about it?”

Contingent Response Strategy A contingent response strategy is one where the project team may make one decision related to risk, but make that decision contingent upon certain conditions. It is a response designed for use only if certain events occur, or predefined conditions take place.

For example, a project team may decide to mitigate a technology risk by hiring an outside firm with expertise in that technology, but that decision might be contingent upon the outside firm meeting intermediate milestones related to that risk. The Risk Response Planning is recorded in the Risk Register. The risk register which is developed in risk identification is further updated during qualitative and quantitative risk analysis. In Risk Response Planning process, appropriate responses are chosen, agreed-upon, and included in the risk register. Components of the risk register at this point can include:

 Identified risks, their descriptions, their causes (eg. RBS element), and how they may affect project objectives.

 Risk owners and assigned responsibilities

 Outputs from the qualitative and quantitative risk analysis, including prioritized risks and probabilistic analysis of the project.

 Agreed-upon response strategies.

 Specific actions to implement the chosen response strategy.

 Symptoms and warning signs of risks’ occurrence.

 Budget (or schedule) activities required to implement the chosen responses.

 Contingency reserves designed to provide for stakeholders’ risk tolerances.

 Contingency plans and triggers that call for their execution.

 Fallback plans for use as a reaction to a risk that has occurred, and the primary response proves to be inadequate.

 Residual risks that are expected to remain after planned responses have been taken, as well as those that have been deliberately accepted.

 Secondary risks that arise as a direct outcome of implementing a risk response.

 Contingency reserves that are calculated based on the quantitative cost risk analysis.

~/~ Kim Hubbard Page 17


2.6

RISK MONITORING & CONTROL

Plans have to be re-assessed and re-evaluated. Where risk is concerned, we’ve done quite a bit of planning, identifying, analysing, and predicting, but the process of Risk Monitoring & Control takes a look back to evaluate how all of that planning is lining up with reality. Monitor and control risks is a process that is performed almost continually throughout the project. Risk Assessment As you perform a project, your information about risks changes. You should assess this information as often as necessary in order to make sure that the risk needs of the project are current and accurate. Risk Audits Risk audits are focused on overall risk management. In other words, they are more about the top-down process that are about the individual risks. Periodic risk audits evaluate how the risk management plan and the risk response plan are working as the project progresses and

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also whether or not the risks that were identified and prioritized are actually occurring.

at how the project has met its goals for delivering the scope over time.

Variance and Trend Analysis

Reserve Analysis

Variance analysis focuses on the difference between what was planned and what was executed.

The project reserve can apply to schedule or cost.

Trend analysis shows how performance is trending. The reason trend analysis is important is that a one-time snapshot of cost may not cause concern, but a trend showing worsening cost performance may indicate that things are steadily worsening and may indicate that a problem is imminent. Technical Performance Measurement Performance can take on many flavors. In the risk context, technical performance measurement focuses on functionality, looking

Periodically, the project’s reserve, whether cost or time, should be evaluated to ensure that it is sufficient to address the amount of risk the project expects to encounter. Status Meetings This particular technique is not necessarily suggesting that specially called status meetings related to risk are called. Instead, it is suggesting to create a project culture where bringing up items related to risk is always acceptable and risk is discussed regularly.

“If opportunity doesn’t knock, build a door” ~/~ Milton Berle


3 . 0 Q U A N T I TAT I V E S C H E D U L E R I S K A N A LY S I S

“Nothing is so good as it seems beforehand’ ~/~ George Eliot

3.1 SCHEDULE RISK ANALYSIS: KEY STEPS

In Section 1 we briefly addressed the subject of CPM (Critical Path Method) and its deterministic nature in relation to uncertainty and probabilistic approach. It is important to understand that the schedule risk analysis does not replace the CPM but it takes it beyond its reach. The CPM remains the key building block in the whole process, as the quality of the CPM schedule is directly related to the quality of risk analysis outputs. In other words, the results of the schedule risk analysis (and the same applies to cost risk analysis for cost estimates), do not change the project schedule (or cost estimate) but may directly or

indirectly help to improve them based on the informed decisions made in conjunction with these results. In practice, we also see more of “risk adjusted schedules”, but more as a result of informed decisions made... The major steps in schedule risk analysis are: CPM Schedule Development

 Develop a quality CPM schedule that reflects the project scope and execution strategy

 The schedule should show the important project structure and clearly define parallel paths and their meeting points

 In the case of large number of

first, then expand if necessary — use of “risk banding” or QRTs (Quick Risk Templates) may be an option for large numbers of activities

 Avoid open ends in the schedule logic, they compromise the schedule integrity

 Date constraints should be removed, or minimal Risk Inputs and Activity Duration Ranges Risk inputs into the model can be performed in a number of ways, depending on which tool is chosen for it: Primavera P6 or Primavera Risk Analysis (previously known as Pertmaster), and using one or combination of techniques explained in Section 2:

activities, focus on those on critical and near critical paths

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 Assess the activity duration ranges as three point estimates: optimistic, likely and pessimistic

Review Project Schedule and Aspects of each Project Stage

Schedule Basis Document Critical & Near-Critical Paths, Logic, Constraints, Calendars,

 Keep in mind that in the CPM schedule, original activity durations may not be the most likely ones.

 Choose / Determine appropriate PDFs (Probability Distribution Function)

Develop Schedule Risk Model in Primavera P6 or in Primavera Risk Analysis

Simulation, Reporting, Decision Making Simulation is performed using the Primavera Risk Analysis (Pertmaster), a Monte Carlo Method based schedule and cost analytics tool. The results of simulation provide the answers to a number of critical questions like:

Key Schedule Drivers Risk Inputs Layout

Appropriate Participants Conduct Risk Ranging Session

Risks Register Choice of PDFs

Run Simulation

Monte Carlo Simulation using Primavera Risk Analysis

 Are the major milestones dates and project completion date feasible or achievable

 How likely those dates are, therefore whether the overall project duration is the most likely one or not

Probability Distribution Generate Analysis Graphs

Sensitivities, Index ‘Tornado’ Graphs, P10 / P90 Windows and Mean Dates

 How much time or how many days of contingency might be needed to bring the completion date(s) to an acceptable risk tolerance levels. Schedule Risk Analysis and Flow Diagram The following flowchart illustrates the major steps and processes involved:

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Prepare Schedule Risk Analysis Report

Detailed narrative of Schedule Development Rationale behind Key Schedule Drivers Conclusion / Recommendation Risk Analysis Outputs and Graphs

“The truth is like sunlight, people used to think it was good for you” ~ /~ Nancy Gribble


Figure 3.2.1 - Deterministic Single Logical Path Schedule

Figure 3.2.2 - Probabilistic Single Logical Path Schedule

3.2. BASIC PRINCIPLES Single Logical Path Schedule To demonstrate the basic principles of what was described on previous pages, we will start with the simple schedule shown in Figure 3.2.1 - Single Logical Path Schedule.

The CPM also predicts the finish date. But how likely is the predicted project finish date?

mum and maximum, a number of project finish dates are obviously possible.

As the Figure 3.2.2 shows, the introduction of schedule probabilistic view, where activities durations are not certain but can take any value between defined mini-

Figure 3.2.3 shows an example of a triangular PDF for one activity minimum, likely and maximum (Activity A1010 - Design Line #1).

Figure 3.2.3 - Triangle PDF (for A1010)

The activities in the CPM schedule are sequential, with all FS (finish-to-start) relationships, (with the exception of project finish milestone having FF, finishto-finish relationship). The activity durations are fixed and because of no overlap between them, the total project duration is the sum of all activity durations.

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Figure 3.2.4 - Single Path Range of Project Finish Dates

Figure 3.2.4 shows the result of simulation with the range of possible project finish dates. Given the defined risk inputs (Figure 3.2.2), the risk outputs show that the original (deterministic) project finish is unlikely - only 15% (P15). A number of days of contingency would be needed to bring the project completion date to P50 or higher. Parallel Logical Paths Schedule Most of our project schedules are not as simple as the one used on

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the previous page. Typical scenario is that there are many more activities, with more complex logical relationships, with multiple logical paths, etc. To prove that the more complex schedules are more risky, we expand the single logical path schedule to two parallel logical paths schedule. Also, the second logical path added is identical to the first one. (See Figure 3.2.5 on page 23). The activity durations, length of both paths and project finish date are the same.

It is also assumed that the uncertainties around both paths’ activities are the same. Performing the simulation based on these risk inputs generates the output report with the range of different expected project finish dates. More importantly, the output shows that the deterministic project finish is now only 2% likely, a product of two independent logical paths probability of 15% each (15% X 15% = 2.25% or P2!).

“Being on a tightrope is living, everything else is waiting” ~/~ Karl Wallenda


Figure 3.2.5 - Probabilistic Parallel Logical Paths Schedule

The comparison of results shows that:

 Two-paths schedule is more risky because each logical path may delay the project

 The risk is increased at the logical paths converging points

(that can be said for any interim project milestone where two or more logical paths merge)

 Two-paths schedule is more risky at the optimistic and mean ranges of dates than at the pessimistic ranges of dates

As the range of expected finish dates is different, in this scenario we would need to add more time (days) in contingency to bring the project finish to P50 or more. This is illustrated by Fig. 3.2.6

Figure 3.2.6 - Parallel Paths—Range of Project Finish Dates

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Criticality Index The CPM schedule critical path analysis is useful for a number of reasons:

 It represents the longest logical path determining the earliest project finish date

 Because of that, the delay on the critical path delays the project

 It is usually the path that requires most attention

action would be to focus management attention to the activities on the critical path Pipeline #2. However, the results of risk analysis show that we should focus on the logical path that is near the critical path because it is more risky - See Figure 3.2.8. Therefore, the CPM approach can potentially miss the risks by focusing on the critical path activities instead on those that are more uncertain and risky

Figure 3.2.7 shows a slightly modified schedule from the previous page example, only one activity has changed as follows:

Criticality Index represents the percentage of iterations for each activity that was on a critical path during the simulation.

 A0120 - Supply, Prefab & In-

Criticality index of 100% means that regardless of how the task durations varied, the critical path always included that activity.

stall Line #1 is now 45 instead of 50 days

 The logic for Piping Line #1 has different inputs for minimum and maximum ranges

Activities with the high criticality index are more likely to cause delay on projects.

The shorter likely duration “promoted” the second logical path to be critical. (Logic Path Piping Line #2)

Criticality Index is typically plotted in the form of “Tornado Diagram”.

Probabilistic Branching When the schedule was created the most likely path and activities have been created. Unlike with CPM approach, the schedule risk modeling allows for probabilistic branching in situations when it is not clear what the outcome of an activity may be. The successor activities may be on different logical paths (branches), depending on the probability of the predecessor outcomes. Figure 3.2.9 shows that two logical paths are possible after the lines are declared ready for testing:

 Pass the test (70% chance) and go to commissioning, or

 Fail the test, for which 30% chance of occurrence is given, which would then require lines to be fixed and re-tested, thus delaying the system commissioning.

If we were to follow the CPM schedule, the logical course of

Figure 3.2.7 - CPM Technique Can Hide Risks

“Look twice before you leap” ~/~ Charlotte Bronte

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Figure 3.2.8 - Criticality Index

“And the trouble is, if you don’t risk anything, you risk even more” ~/~ Erica Jong

For every iteration of the simulation one action is chosen randomly using the assigned probability and the other outcomes are ignored. The results of risk analysis, as in Figure 3.2.10, show that:

 Frequency distribution results (histogram) get a shape of distinct humps that represent

branched probabilities

 Cumulative probability distribution gets a “shoulder” shape at the branching probabilities Conditional Branching

It is helpful in what-if scenarios where triggers like missed dates or excessive costs reach beyond preset thresholds. The outcomes and logical paths beyond these triggers are then different than originally planned.

Similar to probabilistic branching, the conditional branching models special project conditions and their consequences.

Figure 3.2.9 - Probabilistic Branching

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Figure 3.2.10 - Probabilistic Branching Result

Correlation In broad statistical terms, correlation represents a relationship between two or more random variables… Correlation can be positive or negative, and is expressed as a range between 1 (perfect increasing correlation) and –1 (perfect decreasing correlation). Correlation value of 0 (zero) indicates that variables are uncorrelated. Using correlation in schedule risk modeling is useful and recommended, as it prevents unrealistic situations during the simulation.

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The random sampling gets “driven” in a sensible way to reflect the degree of correlation between variables. For example, if the foundation size increases, the excavation requirement will likely increase which in turn will proportionally increase the time required for back filling and compacting. In this case of positive correlation, a single iteration random sampling will choose the values from the variables PDFs reflecting the degree of correlation. PDF Selection Probability Distribution Functions (PDFs) were already mentioned earlier.

In this sub-section just a few additional details are added. It is clear that PDFs are used to model the range of activity possible durations (or costs). There is a number of available PDFs to be chosen, each meant to provide the best representation of possible values and corresponding probabilities for a variable, in this case activity duration. Using the example of two PDFs, used quite often, we want to demonstrate the importance of choosing the appropriate PDF for activities risk inputs modeling:


Triangular distribution is commonly used due to its simple set of parameters that make it easy to relate to real life situations— Figure 17 The expected value is calculated as a simple arithmetic mean of minimum, likely and maximum values.

Triangular PDF is regarded as a “conservative” distribution.

likely duration and its extremes tail off more quickly.

BetaPert distribution uses the same set of parameters as Triangle PDF, and it also models many activity durations well— Figure 18.

The expected value is calculated using PERT formula.

Using BetaPert PFD suggests greater confidence in the most

Figures 17 and 18 show the differences in expected values for the same uncertainty ranges with two different PDFs applied.

Figure 17—Triangular PDF

Figure 18—BetaPert PDF

“When you work alone, all your annoying habits are gone” ~/~ Marrill Markoe Page 27


4 . 0 E X E R C I S E S - S C H E D U L E R I S K A N A LY S I S

Previous sections covered the project risk management in general and also focused on key aspects of the schedule quantitative risk analysis. Applying the techniques and tools available brings us to the actual simulation, running the reports, interpretation of results and final decision making. Some of these may involve going back to the model inputs or other parameters in order to modify them, and through this iterative process we expect to arrive at the outcomes that will best support project objectives. The importance of the risk register is outlined in Chapter 2 along with the available WorleyParsons in house developed tool and/or other external tools.

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Primavera Risk Analysis (Primavera Risk Expert) also offers the same in a convenient and powerful way. Risk register, risk scoring matrix, risk tolerance criteria, are all integrated within the model, so that linking the risks with the schedule activities becomes an easy task. This functionality allows the risk analysis facilitator and team, to build “risk impacted schedule”, refine it, re-run it, and analyze results, both pre and postmitigation. A number of additional features are available in Primavera Risk Analysis including the cost risk management capability, probabilistic cash-flows, etc., but these will not be the subject of discus-

sion in this module. Module 8 is dedicated to Cost Risk Analysis, along with the examples of modeling using the @Risk as the tool of choice. As the whole process of schedule risk analysis and simulation using Primavera Risk Analysis will be demonstrated in the coming chapters and training exercises, we will not repeat that process here. Instead, we will start with the (re) introduction of our Tatanka project facts, as in other PCDP modules, and take it though the schedule risk modeling, simulation and interpretation of results in step-by-step increments.


4.1 BACKGROUND

throughput was 356 MMscfd.

Creer Oil Company (CROC) is the operator of the Tatanka Gas to Power development located in South East Asia. The development is based on the Apache gas fields.

In response to sustained higher demand, a compression module shall be designed to handle an increase in processing capacity from 356 MMscfd to 530 MMscfd.

Gas is delivered from the Apache ‘A’ Platform via a 377 km marine pipeline to the Sioux Terminal for processing prior to onward transmission to the Cheyenne Power station.

A provision was made in the original platform design for the addition of a compression module to boost gas pressure to the required pipeline pressure.

Production commenced from the Apache Platform in December 2002. Original design

It was envisaged that compression would not be required until 2012, when the reservoir pres-

sure was predicted to fall below that required for design export gas flow rate. The start up date for the compression facilities is currently targeted for 26 Aug 2012. The FEED for the compression project commenced on 19 Sep 2010, and is scheduled to complete on 25 Dec 2010. The execution-phase is scheduled to commence on Jan 1, 2011

TATANKA GAS TO POWER DEVELOPMENT

Upstream - Apache ‘A’ Platform

Midstream - Sioux Terminal

Power - Cheyenne Power

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4.2 CAN WE MEET THE DEADLINE?

WorleyParsons has been awarded the FEED (consisting of Evaluate and Define phases) with the option to take responsibility for the EPCM (execute) work-phase for Apache Compression Module. As part of the due diligence, the question that is often asked is can the schedule deadlines be met? Are the dates realistic? Are there major concerns? As discussed in PCDP Module 2, the EPC schedule was prepared as part of the modular training program. Therefore, reference within this document is made to the EPC Schedule prepared in Module 2.

projects often overrun their schedules. The level of uncertainty is the highest during the start of the project and gets progressively better as the project continues. This is applicable during each of the project phases. The level of uncertainty decreases as one moves from Evaluate phase (FEED) to Execute phase (Detailed Engineering) . The schedule clearly identifies the activities that need to be performed. It has the timeline required along with its activites’ logical relationships . It might be resource loaded to complete the task at hand.

Schedule delays cause problems for the project owners and contractors.

All this is based on the known scope and best available information at the time of a project plan / schedule being developed.

Delay claims for equitable adjustments can amount to millions of dollars. Experience tells that

The method by which the planner could have obtained these inputs from, could be as follows:

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Expert Judgement: The planner and the stakeholders might provide their expert judgement with respect to the durations and resources required to complete the task. Analogous Estimating: In other cases the duration could be based on a the actual duration expended on a previous similar project activity. Parametric Estimating: The activity durations are estimated quantitatively based on dividing total work by the productivity rate and the number of resources being employed. As these activities are all estimated durations; there is still uncertainty in achieving the dates. As activities are also logically linked we find that some inputs from preceding activities might have greater impact in pushing out certain succeeding activities.


This uncertainty arises because planners do not have perfect information about future events and because assumptions that underpin a schedule may not be accurate or well understood. For example, technical information, which often forms the basis of the schedule, is at times, uncertain, undefined, or unknown when EPC schedules are prepared. New system development may involve further uncertainty due to unproven or advanced technologies, and optimistic program assumptions can lead to extended development or the need to substitute alternative technologies. Future economic conditions (availability of skilled resources) are another example of uncertainty that planners face. The accuracy of the activity dura-

tions are improved if one takes into account the risk involved and then baseline the schedule. Schedule risk analysis is the process of associating a degree of confidence with each schedule duration estimate. The combination of defining probability distributions for various scheduled task durations and establishing network relationships among the tasks allow one to forecast the probability of meeting the targeted key milestone dates. The key objectives of conducting a schedule risk analysis are to:

 Determine the probability or “chance” of completing the project on time

date (as determined in the EPC Schedule)

 Determine the confidence level (measured in %) of completing the project by a specific date

 Determine what the ‘true’ Critical Path of the project is

 Identify what Activities are most likely to cause a delay to the overall project completion date The aim of this PCDP Training Module is to provide hands-on guideline to assist a project controller in developing and conducting a schedule risk analysis on the previously developed EPC schedule for the Tatanka project.

 Identify the probabilistic completion date of the project rather than the deterministic

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4.3 MAIN EXECUTION CONTRACTS

In an effort to meet aggressive target completion dates, CROC has decided to execute the project using a combination of the following execution contracts:

 Single EPCM Contractor (WorleyParsons)

 Single Module Fabrication Contract

 Single Transport & Installation

CROC KEY MILESTONE DATES

The contracting strategy above has been developed to support the following key milestone dates:



PO Award Compressor/Turbine Package

17 Oct 2010



Start EPCM

2 Jan 2011



ETA Compressor/Turbine Package

14 Jan 2012



Module Load-out

10 Jun 2012



Module Installation

25 Jun 2012



Start Up

26 Aug 2012

Contract

 Single Brown Field Modification / Tie-In / HUC Contractor

 Single Accommodation Vessel Contract The contract strategy is based on all Procurement to be done by EPCM contractor and free-issued to the respective contractors. 4.4 CONTRACT 1 - EPCM WorleyParsons has been awarded the EPCM Contract and as such, responsible to deliver this project on time and on budget. The EPCM contract covers services for Engineering, Procurement & Construction Management & Support, and includes the following scope of work:

 Detail Design of Module  Detail Design of Brownfield and Tie-in works

 Follow-on engineering, Construction support

 Procurement services of all equipment and material (issue RFQ’s, Technical & Commercial Bid Evaluations, Award Recommendations to CROC and prepare P.O on behalf of CROC)

 Vendor inspection and expediting for materials and equipment (ROS-dates and VDR).

 Provision of full EPC Management (fabrication, installation and commissioning

4.5 CONTRACT 2 – MODULE FABRICATION

This contract will be for the fabrication of the Apache Compression module. This contract is intended to be placed on a fixed price lump-sum basis, with the alternative option for a unit rate contract, depending upon timing for contract award. The IFB-Package will be developed by WorleyParsons as one of their deliverables.

The contract will be on a reimbursable basis.

The module fabrication contract shall be awarded 4 weeks prior to mobilisation of the fabrication contractor.

Due to the fast-track nature of the project, the Execution Phase (EPCM) will commence directly after Completion of the Feed Phase.

A further 6 weeks was allowed for mobilisation and sitepreparations prior to commencement of the fabrication works.

In order to achieve the target project schedule-dates, the intent is to award the EPCM contract to WorleyParsons (Roll-over).

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Subsequently, there is no requirement for ITB package preparation for the EPCM contract.


4.6 CONTRACT 3 – TRANSPORT & INSTALLATION

A separate contract for the transport and installation of the compression module. The contract would be a fixed price lump-sum with risk associated with weather to be mutually agreed. The IFB Package will be developed by WorleyParsons as one of their deliverables. The Transport & Installation contract shall be awarded early in the Execution-phase to lock-in the heavy lift vessel and to allow the installation contractor to have the necessary input into the design.

Commissioning works. The contract will be awarded on Cost+ reimbursable basis with an agreed budget-cap per workpackage.

4 weeks was allowed for mobilisation prior to Module Load-out date.

The IFB Package will be developed by WorleyParsons contractor as one of their deliverables.

4.7 CONTRACT 4 - BROWN

The BF/HUC contract shall be awarded 4 weeks prior to mobilisation of the BF/HUC contractor.

FIELD MODIFICATIONS / TIE-INS / HUC

Contract for all offshore Module Installation Pre-works, Brown Field Modifications, Shutdown Tie-in works, and Hook-up &

6 weeks was allowed for mobilisation and site-preparations prior to commencement of the BF/ HUC works.

4.8 CONTRACT 5 ACCOMMODATION VESSEL

A contract for the Accommodation barge to be utilized for the Maintenance/Tie-in Shutdown through to Final Hand-over. Contract will be based on Dayrates for bare vessel plus additional charge per person. The available barges will be reviewed during the FEED, and award should be early in the EPCM to ensure availability. 4 weeks was allowed for mobilisation prior to commencement of Maintenance/Tie-in Shutdown.

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 Expediting of Equipment delivery to site

 Expediting of Vendor Data to support Engineering AFC Deliverables Construction / Fabrication

 Delivery Major Equipment and Bulk Material

 Maximising of Onshore Precommissioning Works

Based upon these discussions, for which earlier risk management processes and steps have been used as inputs (i.e. risk register, risk ranking, etc.), the schedule risk model can be developed EXERCISE 1: DEVELOP SCHEDULE RISK ANALYSIS MODEL

The exercise here is to develop the schedule risk-model in Primavera Risk Analysis.

Transport & Installation

 Availability of Heavy Lift Ves Load-Out Milestone Date

Once logged onto Primavera Risk Analysis, selection can be made as:

 Hook-Up and Commissioning:

 File / Open, if the project

sel The initial task of a project controls planner is to identify what the key schedule drivers of the project are and use these to develop a schedule risk model which can be used as the basis for schedule risk analysis. In other words, what aspects of the project will have the biggest impact on the overall success (or failure) of the project’s completion. Areas of the project that will need to be considered are: Detail Engineering

 Request For Quotation Deliverables to support Procurement Phase

 Technical Evaluations to meet Major Equipment award dates

 Technical Evaluations to meet Sub-Contract award dates

 AFC Deliverables to support Fabrication Phase

 Identification and priority of Commissioning Systems handover

 Expediting of Mechanical Completion dates In a ‘live’ project environment, the key schedule drivers for each of the project’s stages will be determined by undertaking a group discussion with the following project participates (both from CROC and WorleyParsons):

 Project Manager  Project Controls Manager and/ or Project Planner

 Engineering Manager  Procurement / Contracts Manager

Procurement

 Construction Manager

 Request For Quotation to meet

 Commissioning Manager

Major Equipment award dates

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Preparatory Work

schedule from Module 2 has already been imported and saved as “.plan” in PRA format schedule from Module 2., or

 File / Primavera, with a couple of key options: Open Primavera Project (via link to P6 Database—admin only) or Open Primavera XER file. 1. If Open Primavera import selection is made, then the first step will be the Schedule Validation, resulting in an Import Log and Schedule Check Report. Please review both log warnings and report. 2. Use Menu Item Plan / Plan Information / General tab to define plan titles and company details, and Dates tab to define: Start: 12-Sep-2010 (as per the EPC Project Schedule) Time Now (Data Date): 02-Jan-2011


1

2

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3

4

3.

Use Menu Item Plan / Plan Options / Date tab to define date format and related preferences.

4.

Use Menu Item Plan / Plan Options / Time tab to define working time, as well as Plan / Calendars to define working week: Each week is 7 days (as with the EPC Schedule, the Schedule Risk Model will be using a 7 day calendar)

5. Once all the above steps are completed, please save the file as a Primavera Risk Analysis Plan: File name: 042_TRN007_XX {Particpant’s initials}

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5


Schedule Risk Model - Layout and formatting

6

Prior to the Project Services Engineer developing the Schedule Risk Model, certain formatting needs to be completed as described below: 6. Select Menu Item Format / Timescale to define how the timescale is to be displayed (please choose the Dates only), timescale format and other available options.

7

7. Select Menu Item Format / Columns —the default columns on a left hand side of a bar chart are as shown in the Screenshot No. 7. Menu Item Format offers a number of additional formatting options, like Lines, Gantt Chart, Individual Task Styles, etc.

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Field

Top

Bottom

Text

Column

Heading

Heading

Alignment

Width

8

Left Columns 1

Name

Activity

ID

Left

8

2

Description

Activity

Description

Left

45

3

Remaining Duration

Rem.

Duration

Right

8

4

Early Start

Early

Start

Centre

10

5

Early Finish

Early

Finish

Centre

10

Minimum

Duration

Right

9

Most

Likely

Right

6

Maximum

Duration

Right

9

Right Columns 6

Risk input – Duration Minimum

7

Risk input – Duration Most Likely

8

Risk input – Duration Maximum

8. In order to develop a Schedule Risk Model containing the most relevant information, it is required to setup the Bar chart Columns with the following fields, as a minimum. Additional fields are recommended, like Risk Input— Duration Function, Risk Input—Duration Correlation, Risk Input—Probabilistic Branch, and so on... Each column is selected from the Format / Columns lists (Grouped Fields or Alphabetic Fields) and placed preferably on the right side of the bar chart.. The table above identifies the sequence and naming of some of the columns. 9. Select Menu Item Format / Bars and also Format / Gantt Chart and follow some of the basic instructions, as a

Page 38

formatting options, i.e. modify as follows:

 Float: Hide all float—this will hide float bars from on-screen displays and schedule print-

outs, if preferred that way

 Uncheck Show Task Downtime—Periods of inactivity will not be displayed on on-screen displays and schedule printouts

9


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


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

0

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

0

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)

0

Page 40

2-Jul-12

26-Aug-12

14

29

211

-42


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: 7 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


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).

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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


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

0

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


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


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)

0

26-Aug-12

Page 43


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

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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


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


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


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

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Below is a step-by-step guide to populating the above distribution of values into the Schedule Risk Model:

1

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: 2. 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.

2

Once the Schedule has been printed out and the ‘Monte Carlo’ simulation can be run. Save the Schedule Risk Model .

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Running the simulation

3

Below is a step-by-step guide to running the simulation on the Schedule Risk Model: 3. Select Risk, Run Risk Analysis from the main toolbar (or press F10). Click Analyse 4. 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.

4

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

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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

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: 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


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. 5. 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.

5

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6. Duration Sensitivity ‘Tornado’ Graph

6

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.

7. Criticality ‘Tornado’ Graph Criticality (expressed in %) is a measure of how often a particular activity was on the Critical Path during the analysis.

7

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

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.

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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.


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 1 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 2 (page 52) An example has been populated as a starting point:

Table 1—Analysis Results Exercise Question

Answer

Source

1. What is the Deterministic Completion Date of the Project and the probability of the date being achieved?

2. Identify the P50 (50% Probability) and P90 (90% Probability) Completion Dates for the Project

3. Identify the top three (3) ranking activities which will have the most likely influence on the Project’s overall duration and/or Completion Date.

4. Identify the top three (3) ranking activities which will have the most likely influence on increasing the Project’s overall duration.

5. Identify the activities spent the most time on the Critical Path during the analysis and describe how this affects the overall Project.

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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

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5 . 0 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

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Module 7 - Schedule Risk Analysis_Rev0 (2)

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