For more slides and tutorials visit www.p6academy.com Source: Collaborate 14

1. REMINDER
Check in on the
COLLABORATE mobile app
Mitigating Cost and Schedule Risk With
Oracle Primavera Risk Analysis
Prepared by:
Eric Torkia, MASc
Executive Partner – Analytics Practice
Technology Partnerz Ltd.
How to get results through better risk
analysis
Session ID#: 15461

2. Technology Partnerz Ltd. provides strategy, business analysis, solution
selection and organizational change management support for the rapid
adoption of predictive analytics tools and practices in a variety of business
functions, sectors and industries.
A little about us.
We support our clients in improving decisions and business outcomes by
providing:
Success in analytics is more than just software and geeks…

3. Who we do it for…

4. Eric Torkia MASc is a senior management consultant/trainer and
business analyst. He has collaborated with some of the worlds
most recognized organizations to ensure the optimal design and
delivery of enterprise systems, analytics as well as new forecasting
and decision making processes. His skills and expertise include:
Meet your presenter: Eric Torkia, MAsc
• Project Risk Analysis, Project Feasibility and Financial Valuations for
projects of over 1+ billion dollars.
• Project Feasibility and Financial Valuations
• Portfolio Optimization
• Supply Chain Modeling and Risk Analysis
• Organizational Change Management consulting, training and instructional
design
• Time Series Forecasting
• Spreadsheet Modeling and VBA automation for simulation, forecasting and
optimization
• Certified Monte Carlo Simulation and Optimization Trainer & Consultant for
Oracle Crystal Ball, Vose ModelRisk, Palisade @Risk, Frontline Solver
SOME NOTABLE CLIENTS

5. How can risk analysis translate into ROI?
■ Averages vs. Range
Estimates
■ Challenges and
opportunities that risk
analysis and simulation
address?
■ How to make better
decisions with risk
information

6. BEWARE OF Averages

7. AVERAGES Conceal Risk
Range estimates address hidden risk

8. -20 345 47 335
Single-Point Estimate
More information, Better decisions
142.5K
Ranges show the full spectrum of possibilities
116.25K
Range informationProbability of occurrence
Or this one?Would you pick this project?

9. Only ranges can describe risk
■ Definition: Ranges define a range of potential occurrences
and are necessary to obtain and communicate more
meaningful and relevant information.
■ Where to start? Range Estimates…
▪ Can and should be derived from historical data
▪ Can be known statistical distributions
▪ Can be estimated by experts using 2 or 3 points (Min, Max and
Most-Likely)
Simulation models for better decisions require ranges as inputs

10. Analytics to improve project process performance
■ More than 50% of projects
fail to meet
EXPECTATIONS!
■ Why are so many projects
challenged?
■ The cost of challenged
projects
■ How can we break the 50%
barrier?
■ Other barrier crashing
opportunities

11. More than 50% of projects fail to meet
EXPECTATIONS!
Sources: http://www.ibm.com/developerworks/rational/library/feb06/marasco/index.html,
http://www.softwaremag.com/L.cfm?Doc=newsletter/2004-01-15/Standish, http://www.softwaremag.com/archive/2001feb/CollaborativeMgt.html
Simulation and Optimization WILL improve project success
Recent Trends from the Chaos Report …
“Initial cost and schedule estimates for major projects have invariably been over-
optimistic. The risk that cost and schedule constraints will not be met and cannot be
determined if cost and schedule estimates are given in terms of single points rather
than distributions.” – Final Report of the USAF Academy Risk Analysis Study Team, August 1971
Trend State

Successful: The project is completed on
time and on budget, with all features
and functions originally specified.

Challenged: The project is completed
and operational, but overbudget, late,
and with fewer features and functions
than initially specified.

Failed: The project is canceled before
completion, or never implemented.

12. Without taking into account risks and probabilities, it is
impossible to :
■ Identify truly Critical Tasks and Resources
■ Set appropriate funding and budget levels from the
beginning
■ Understand the factors that drive potential delivery dates to
better manage risk
Why are so many projects challenged?
Plan for budget AND schedule risk using simulation

13. ■ Costly rework
■ Slow down project execution
■ Makes managing scope
creep very difficult
■ Higher project failure rates
■ Diminished returns and
benefits
■ Negative impact on the
project team’s credibility
the cost of challenged projects
Addressing risk saves money and builds credibility
The 50% Barrier
for challenged projects

14. •Cost Assessments
•Time-to-Replacement
•Failure Modes
Estimation
•Resource Costs
•Labor
•Critical Path Analysis
•Identify Resource
Constraints
Project Plan(s) •Consolidated Project
Financials
•NPV & IRR Analysis
•Go/No Decisions
•Success Criteria
•Real Options
Capital
Projects
•Execution Scenarios
•Consolidated view of all
projects
•Resource Constrained
Strategies
•Optimization
Portfolio Plan
How can we break the 50% barrier?
Operational Tactical Strategic
BUILD PLANNING
Operational Tactical Strategic
EXECUTE PLANNING
By leveraging risk analysis opportunities in both the planning & execution processes

15. Other barrier crashing opportunities
■ Project Feasibility
■ Project Selection
■ Bid Analysis
■ Project Scheduling
■ Resource Planning
■ Risk Identification
■ Project Financing
■ …
■ Critical Path Optimization
■ Benefits and Valuations
■ Asset Management &
Replacement Strategies
■ R&D and Software
Development Projects
And many, many more…

16. Simulation – where the rubber hits the road
■ Introduction to the
concepts of Monte-Carlo
Simulation
■ How does simulation fit in
with the business?
■ Enhancing the modeling
process with simulation
and optimization
■ Case and Example
Simulation

17. ■ Quantify the effects of variation in your current “as-is”
scenario
■ Predict a scenario’s probability of occurrence
■ Identify critical input variables that drive uncertainty or
variability in your project plan
■ Determine an optimum and robust solution for your new “to-
be” planning scenarios
What do simulation analytics do?
X 3
2
1

18. PRA’s Monte-Carlo approach
Primavera Risk Analysis is a tool that facilitates simulation, sensitivity, statistical and
analysis of complex project plans from most leading Project Management Systems.
Distributions are applied to
costs, time, and resources in
Primavera Risk Analysis
Inputs
Outputs
Data
Finish Date of:
Entire Plan
Analysis
Simulation: Latin Hypercube
Iterations: 1000
Convergence at mean
Mean Plan Finish Date:
Converged in 200 iterations
(variation < 1% over 100 iterations)
Mean Total Plan Cost:
Converged in 200 iterations
(variation < 1% over 100 iterations)
Statistics
Minimum: 04 Oct 02
Maximum: 29 Oct 02
Mean: 15 Oct 02
Std Deviation: 4.037
Bar Width: day
Highlighters
50% 16 Oct 02
Deterministic 3%
50% 16 Oct 02
80% 18 Oct 02
04 Oct 02 09 Oct 02 14 Oct 02 19 Oct 02 24 Oct 02 29 Oct 02
Distribution (start of interval)
0
20
40
60
80
100
120
140
Hits
0% 04 Oct 02
5% 09 Oct 02
10% 10 Oct 02
15% 11 Oct 02
20% 11 Oct 02
25% 14 Oct 02
30% 14 Oct 02
35% 14 Oct 02
40% 15 Oct 02
45% 15 Oct 02
50% 16 Oct 02
55% 16 Oct 02
60% 16 Oct 02
65% 17 Oct 02
70% 17 Oct 02
75% 17 Oct 02
80% 18 Oct 02
85% 18 Oct 02
90% 21 Oct 02
95% 22 Oct 02
100% 29 Oct 02
CumulativeFrequency
House Construction
Entire Plan : Finish Date
18%
22%
22%
22%
22%
26%
30%
33%
39%
49%0120 - ROOF FINISH
0100 - ROOF TRUSSES
0080 - BRICKWORK
0160 - Wall B
0220 - SNAGGING
0200 - DECORATE
0190 - FINISH PLUMBING
0090 - INSTALL WINDOWS
0150 - Wall A
0170 - Wall C
House Construction
Duration Sensitivity: Entire Plan - All tasks
05 Oct 02 07 Oct 02 09 Oct 02 11 Oct 02 13 Oct 02 15 Oct 02 17 Oct 02 19 Oct 02 21 Oct 02 23 Oct 02 25 Oct 02 27 Oct 02 29 Oct 02
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CumulativeProbability
Distribution Analyzer
House Construction - Entire Plan - Finish Date
A Project Plan

19. • Using traditional
forecasting methods to
establish a base case
using historical data
• What-If Analysis on
Extreme Cases
Time Series
Forecasting
Typical project planning process
Traditional
analysis
stops here!
AB
CD
E
TOOLS
ACTIVITIES
PROCESS
• Meetings with SMEs &
Stakeholders
• Define problem and
Model objectives
• Obtain planning logic
• Establish sources for
historical data
• Based on the feedback
and material provided
in the previous step,
develop a preliminary
model
What-If Analysis
Define
Project
Objectives
Develop a
project plan
Base case
projections

20. Risk enabled planning process
Define
Assumptions
& Forecasts
Dynamic
Monte-Carlo
Simulation
Planning
Optimization
Update
Analysis and
Build Reports
TOOLS
ACTIVITIES
PROCESS
Primavera Risk Analysis
• Meetings with SMEs &
Stakeholders to build a
model
• Document business
assumptions/rules +
build assumptions using
historical data
• ID model drivers and
influences
• Assess model behavior,
risk and volatility
• Model Validation
• Refine project strategy
using risk information
• Assess additional time
and budget scenarios
• Generate/Update
analysis
• Build risk reports
18%
22%
22%
22%
22%
26%
30%
33%
39%
49%0120 - ROOF FINISH
0100 - ROOF TRUSSES
0080 - BRICKWORK
0160 - Wall B
0220 - SNAGGING
0200 - DECORATE
0190 - FINISH PLUMBING
0090 - INSTALL WINDOWS
0150 - Wall A
0170 - Wall C
House Construction
Duration Sensitivity: Entire Plan - All tasks
Data
Finish Date of:
Entire Plan
Analysis
Simulation: Latin Hypercube
Iterations: 1000
Convergence at mean
Mean Plan Finish Date:
Converged in 200 iterations
(variation < 1% over 100 iterations)
Mean Total Plan Cost:
Converged in 200 iterations
(variation < 1% over 100 iterations)
Statistics
Minimum: 04 Oct 02
Maximum: 29 Oct 02
Mean: 15 Oct 02
Std Deviation: 4.037
Bar Width: day
Highlighters
50% 16 Oct 02
Deterministic 3%
50% 16 Oct 02
80% 18 Oct 02
04 Oct 02 09 Oct 02 14 Oct 02 19 Oct 02 24 Oct 02 29 Oct 02
Distribution (start of interval)
0
20
40
60
80
100
120
140
Hits
0% 04 Oct 02
5% 09 Oct 02
10% 10 Oct 02
15% 11 Oct 02
20% 11 Oct 02
25% 14 Oct 02
30% 14 Oct 02
35% 14 Oct 02
40% 15 Oct 02
45% 15 Oct 02
50% 16 Oct 02
55% 16 Oct 02
60% 16 Oct 02
65% 17 Oct 02
70% 17 Oct 02
75% 17 Oct 02
80% 18 Oct 02
85% 18 Oct 02
90% 21 Oct 02
95% 22 Oct 02
100% 29 Oct 02
CumulativeFrequency
House Construction
Entire Plan : Finish Date
Risk Strategy

21. Adding variance in your project
Estimation
Project
Plan(s)
Capital
Budget
Portfolio
Plan
Mgmt. Questions
• Does my scheduling plan
work?
• How long will my project
take?
• What are the biggest
drivers I should be planning
for?
• What is real critical tasks?
Recommended Best Practice
in the PMBOK

22. Estimating cost / budgets with risk
Management
Questions
• How much should I
budget for contingency?
• Which work package is
the riskiest?
• Will this impact my
planning?
Estimation
Project
Plan(s)
Capital
Budget
Portfolio
Plan

23. Probabilistic cash flows
Mgmt. Questions
• What is the impact of my
project budget on IRR?
• How likely is it that I will
beat 15% IRR Hurdle Rate
• What are the biggest
drivers I should be planning
for?
• How will NPV look over
time?
Estimation
Project
Plan(s)
Capital
Budget
Portfolio
Plan
+ &

24. Project Portfolio Modeling
Mgmt. Questions
• What Project Portfolio will
give me the highest NPV
• What is the riskiest / high
returns portfolio?
• What is the safest
portfolio?
Estimation
Project
Plan(s)
Capital
Budget
Portfolio
Plan
Project Portfolio Management
+ &

25. Contact US
550 Sherbrooke St. W., West Tower, Suite 1650
Montreal, Qc., Canada
H3A 1B9
888-879-8440 / 514-278-2221
(Sales & Customer Support)
www.technologypartnerz.com

26. Please complete the session
evaluation
We appreciate your feedback and insight
You may complete the session evaluation either
on paper or online via the mobile app