Do you remember the first time you missed a project deadline? I do. I recall the embarrassment for me and my team. I promised myself I would take proactive steps to mitigate this outcome for future projects.
Why do projects take longer than expected? Often times, risks occur and project managers lack adequate schedule reserves.
Once burned, many project managers start a bad habit – padding their project schedules. If a project is estimated at 120 days, the project manager may add a 10% pad, an additional 12 days. The project manager estimates the project duration to be 132 days.
Padding is a quick and dirty method. It provides reserves, but let’s look at a better way to estimate reserves.
Evaluating Project Schedules
The ABC Project Team completed a Work Breakdown Structure (WBS) and performed a bottom-up estimate. The team estimated the project will require 188 days. The team also identified 30 risks in the qualitative risk analysis. Of the 30 risks, the team identified six risks that had the greatest potential for affecting the schedule.
Analyzing the Highest Risks
The team rated these six risks quantitatively as follows:
- Risk A. There is a 30% probability that the training time will require an additional 10 days.
- Risk B. There is a 40% probability of adding an additional quality assurance member and decrease the testing time by 20 days.
- Risk C. There is a 50% probability that the software vendor will implement a required upgrade that will require an additional 20 days.
- Risk D. There is 30% probability of the stakeholders asking for additional software features that will require an additional 30 days.
- Risk E. There is a 25% probability that the design will be able to leverage another set of code that will reduce the coding time by 20 days.
- Risk F. There is a 70% probability the stress testing will result in the need for an additional database work that will require an additional 40 days.
Notice that Risks B and E are opportunities.
How to Use Simple Math to Estimate Reserves
Let’s use the Expected Monetary Value (EMV) to calculate the contingency reserves which account for the unknown amount of rework. For those of you who may hate math, it does not get any easier than this. EMV = Probability x Impact.
|Risk||Probability||Impact (Days)||EMV (Days)|
The project manager will add a total of 37 days of contingency reserves to the schedule for “known unknowns”. If desired, the project manager may also add management reserves intended to address “unknown unknowns”.
A Simple Secret to Addressing Schedule Risks
When utilizing the quantitative risk analysis, pay particular attention to the high-risk tasks on the critical path, the longest duration path through a network diagram that determines the shortest time to complete the project. The project manager who manages these risks properly can significantly improve their chance of success.
For your next project, consider using the Expected Monetary Value to improve the estimate of your contingency reserves. Unlike padding, now you will be able to explain why you are adding the buffers. Put your team in the best position for a win!
Question: What other tips would you offer to help project managers estimate contingency reserves?
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