1 PROJECT CONTROL & RISK n Purpose of Control n Control Process n Cost/Schedule/Technical Control n Introduction to Earned Value n Project Changes and Change Control n Importance of Managing Risk

2 Purpose of Control n To make the actual meet the plan n The Process n 1. Key performance areas n 2. Set standards n 3. Measure performance n 4. Compare n 5. Fix

3 A Question of Balance n Too little control? n Too much control? $ Amount of Control C Control C Mistakes

4 What Forms do these “Standards” Take? n Cost n Schedule n Performance

5 A Control Example n You’re two months into a three month project. You’ve spent 90% of your budget. Defend yourself.

6 Three Important Terms n BCWS: The plan, integrating schedule and budget n BCWP: What you planned to spend for work actually done n ACWP: Actual dollars spent at a point in time, for the work actually done

7 More Terms n BAC: Original budget at completion n TAC: Original time at completion n ECAC: Estimated cost at completion n ETAC: Estimated time at completion

8 Four Relationships n Cost Variance = BCWP - ACWP n Schedule Variance = BCWP - BCWS n ECAC = ACWP X BAC BCWP n ETAC = BCWS X TAC BCWP

9 Changes and Change Control n The last step of the control process: FIX n Two Types: Business and Technical Changes

10 Business Changes (aka CCPs) n Business related n Driven by such things as: n Spec relief n Deliverables changes n Funding shifts n Schedule changes n Acts of God n Subcontractor changes

11 Technical Changes (aka ECPs) n Technological issues, such as: n New technologies n Laws of physics n Competitor response n Threat changes n Changes in user requirements (real or political)

12 Change Control n Changes cost $, usually big $ n So they need control n PM responsibility n Signed baselines n High levels of authority n Some tools: n Zero sum/DTC/caps

13 PROJECT RISK MANAGEMENT n Risk defined n A brief history n Types of project risk n The PMBOK sequence n Tools

14 RISK DEFINED n The likelihood (probability) and the impact of an undesirable event “Fear of harm ought to be proportional not only to the gravity of the harm, but also to the probability of the event.” (Antoine Arnauld, 1665) n Both matter n Examples

15 A BRIEF HISTORY n The management of risk forms the boundary between the old world and modern times n Old world n Fates and gods n Short time horizons n Man’s role: accept, maybe react

16 SO WHAT CHANGED? n Rise of rational man n Man can plan and influence the future n Development of math, probability, forecasting n Multiply XII times VIII n Rise of zero and Arabic numerals n Rise of trade, business, shipping n Longer time horizons n Large commercial ventures mean more at stake

17 THE CRITICAL QUESTIONS n To what extent does the past foretell the future? n Can we extrapolate from the past to predict a future event? “Nature has established patterns originating in the return of events, but only for the most part.” (von Leibnitz to Bernoulli, who then developed the Law of Large Numbers, 1703)

18 TYPES OF PROJECT RISK People Time Political Financial Technical A Question: Is “Risk Reduction” really possible?

19 THE PMBOK RISK MANAGEMENT SEQUENCE n Risk identification n Risk quantification n Risk response development n Risk response control

20 TOOLS FOR RISK MANAGEMENT (more or less in order) n Expert opinion n Simulation n Historical Analysis/ “Lessons Learned” n “Risk Reduction” n Contracting/Procurement Strategy n CPFF, FFP, “Make or Buy,” Sole Source, etc. n Insurance, bonding n Multiple paths n Management attention (e.g., “Top 10” Lists) n Workarounds