(1) Explain your problem, don't simply post "This isn't working". What were you doing when you faced the problem? What have you tried to resolve - did you look for a solution using "Search" ? Has it happened just once or several times?
(2) It's also good to get feedback when a solution is found, return to the original post to explain how it was resolved so that more people can also use the results.
This article looks at what is involved in performing a Project Health Check http://ow.ly/yU7Jt
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Hi, Dennis.
"What I’m suggesting is that we have adequate metrics to determine project health. I don’t think that DIPP/EPP/EMV/FBI offer any more insight than the CPI/SPI/Early-late curves/Productivity curves/Change log."
Okay.
"My intention in responding to Emily’s post, was to elicit a checklist of the items/elements that a project manager should be checking to determine the health (likelihood of success) of his project."
Right. I also saw your response to Patrick Weaver: "Patrick, I didn't find anything useful." That was when I wrote: "Actually, I felt there was good info in both the Emily and Patrick links. I tend to read links to PM articles because I know I am still learning and will continue to learn about PM till the day I die. Sure, lots of articles just rehash stuff I've known for years. But many add new insights, often requiring reading between the lines or ways of looking at things a bit differently."
Clearly, you and I look for knowledge in different ways.
"As to the value of ‘critical path drag’, I’ve never seen it used, so I have no idea."
It probably doesn't exist, then. The notion of knowing which activities are adding how much time to the project duration certainly seems worthless, doesn't it?
"The fact that it is confined to networks with only FS relationships, gives me pause."
Sigh. In short articles, I explain focus on the calculation in FS relationships. But it might be nice if you let Vladimir Liberzon and Bernard Ertl know that their software doesn't work to compute drag with complex dependencies -- they seem to think it does. In my first book Total Project Control (of which a new edition will be out early next year) and in my 2013 PMI Community of Scheduling webinar (as well as in my courses), I explain how to compute drag for all dependencies. But learning certainly requires at least minimal effort, so whatever you do, avoid that.
"With ‘drag cost’, I’m even more dubious because of the use of ROI (which we discussed earlier). In my mind, there is no effective way to determine ROI for a project, especially as it is being constructed."
Dang, you're right. Why do people ever invest in anything -- projects, stocks, bonds, gold, real estate, poker -- when they never have a clue about what the ROI will be? Stupid people...
"(Drag cost) is the amount by which a project’s expected return on investment (ROI) is reduced due to the critical path drag of a specific critical path activity Task (project management) or other specific schedule factor such as a schedule lag or other delaying constraint.[2]
To me, this is a lot of work for very little return."
No doubt, it's a lot easier to just wing it. Dunning-Kruger is an amazing thing...
But at least allow me to recommend to you Daniel Kahneman's book Thinking, Fast and Slow:http://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman-ebook/dp/B00555X8OA/ref=sr_1_1?ie=UTF8&qid=1407945012&sr=8-1&keywords=thinking%2C+fast+and+slow
"Been nice talking to you,"
You, too. Maybe some other reader has followed the discussion and enjoyed it, though...
Fraternally in project management,
Steve the Bajan
Steve;
What I’m suggesting is that we have adequate metrics to determine project health. I don’t think that DIPP/EPP/EMV/FBI offer any more insight than the CPI/SPI/Early-late curves/Productivity curves/Change log. As to project management maturity, we may have agreement. If an owner is not using what we currently have available, new metrics will not have much value.
My intention in responding to Emily’s post, was to elicit a checklist of the items/elements that a project manager should be checking to determine the health (likelihood of success) of his project.
As to the value of ‘critical path drag’, I’ve never seen it used, so I have no idea. The fact that it is confined to networks with only FS relationships, gives me pause.
In network schedules that include start-to-start (SS), finish-to-finish (FF) and start-to-finish (SF) relationships and lags, drag computation can be quite complex, often requiring either the decomposition of critical path activities into their components so as to create all relationships as finish-to-start, or the use of scheduling software that computes critical path drag with complex dependencies.
With ‘drag cost’, I’m even more dubious because of the use of ROI (which we discussed earlier). In my mind, there is no effective way to determine ROI for a project, especially as it is being constructed.
It is the amount by which a project’s expected return on investment (ROI) is reduced due to the critical path drag of a specific critical path activity Task (project management) or other specific schedule factor such as a schedule lag or other delaying constraint.[2]
To me, this is a lot of work for very little return.
If innovations such as critical path drag and drag cost seem worthless, well...
Been nice talking to you,
Hi, Dennis.
"1. If the sponsor/customer wants the contractor to provide maximum value, the contract must be written with the above analysis in mind and have clauses to incentivize better project investment performance.
What would the particular contract clause say?"
Such a contract would not be very different from current fixed price contract plus early delivery incentives or minus late delivery penalties. None of this is unheard of in contracts -- though early delivery incentives are, in my experience, seldom included. There is almost always value to the customer for early delivery, even if just retirement of 99%(!) of the risk of late delivery. And even when such incentives are included, they often represent a very small fraction of the value to the customer and are too small to really incentivize the contractor to work differently from the "deliver by the deadline" petrifaction mode. Suddenly, the contractor has an incentive to look for ways to give the customer more of what the customer deems valuable.
"2. The only way to justify expenditure is through the value it will generate. If one is not monitoring that value, it is very difficult to augment it.
Ignoring insurance and mitigation costs as exceptions to this statement, you have the problem of determining value generation. Many expenditures are parts of packages. What value does a single pump generate? Yet without the pump, all the tanks, pipe, and cabling are of no value. Same holds for the pump without the pipe, ad nauseum."
In value breakdown structure terms, installation of the pump would be regarded as both (1) an enabler and (2) a mandatory activity. as such, its value is equal to the value of the entire project (remember, we're talking value here, not cost) and any acceleration premium/delay costs could therefore be subject to a significant multiplier effect. This is sort of standard economics and is discussed extensively in both my books.
"Your book summary states: “These techniques have the potential to transform program and project management from the current haphazard application of various techniques and metrics to an incisive and integrated approach where programs and projects are managed for the crucial economic and financial implications that are at the essence of every project investment.
Of course, I take exception to haphazard, but welcome anything that will transform project management. As to crucial economic and financial implications, I remain blissfully unaware."
"Your system may have value in evaluating alternatives, but I do not see its relevance to Project Health Checks."
A project is an integrated investment, impacted the variables of the value of the scope, the value/cost of time, the cost of the resources to do the work, and the risk probabilities governing them all. Therefore the ultimate Project Health Check must be based on a measurement integrated across all these variables. Any change in one variable might impact the integrated measurement (either EPP or an index, specifically the DIPP) -- but it might also be offest by a change in another variable. For example, A Health Check that says our CPI is .90 and we will go 10% over budget might not indicate a sick project! It might be worthwhile (provided additional funding is available!) if the result is a critical path acceleration worth 15% of the budget. That is the sort of thing that should be constantly analyzed on any investment -- and very rarely is on projects!
Of course, there are a host of "fuses" that might indicate that something negative is likely to happen soon. Negative float burn indices (FBIs) might be one; a negative CPI-Labor is another (even if the Budget CPI is 1.0); and frankly, a fixed deadline in a project contract is probably a third! I do think that such (and other) Health Checks are of value. As I said in my first post in this thread: "Actually, I felt there was good info in both the Emily and Patrick links. I tend to read links to PM articles because I know I am still learning and will continue to learn about PM till the day I die."
But as Emily writes in the TenSix article to which she links: "(T)he health check sites the project in the organizational context: what processes and systems are in place? How mature is the project management culture? These are important factors because the environment in which the project takes place is critical to the performance of the project." I think that statement is on the money. If an organization is not sufficiently mature to track CPI-Labor or FBIs or EPP or DIPP or resource loading on activities with large drag costs, then it can't use those health checks. But I am trying hard to get projects to start using more mature methods -- and I believe that starts with recognizing that all projects are investments.
"Your book summary states: “These techniques have the potential to transform program and project management from the current haphazard application of various techniques and metrics to an incisive and integrated approach where programs and projects are managed for the crucial economic and financial implications that are at the essence of every project investment.
Of course, I take exception to haphazard, but welcome anything that will transform project management. As to crucial economic and financial implications, I remain blissfully unaware."
Dennis, I've written many thousands of words in this thread alone, trying to answer your questions and explain some of the concepts in my books. I've done so because your questions suggest that you are knowledgeable and intersted. And it wouldn't be so bad except I've also written hundreds of thousands of words and drawn hundreds of diagrams in those books laying out the ideas in what I think is a logical order and one designed to answer many of the questions you raise. If you look at the Reviews page on the book order tab, you will see complimentary statements by several people who are knowledgeable regulars right on this forum: Vladimir Liberzon, Raf Dua, Bernard Ertl, and yes, Emily Foster! Also Dr. Tomoichi Sato, an expert in Risk Management at Tokyo University, and others. But if by now I have not persuaded you that I know what I'm talking about and therefore my books may have something to offer, then don't order and read them. If innovations such as critical path drag and drag cost seem worthless, well...
But if you do read them and still have questions, I will be happy to answer them right here on Planning Planet. That seems fair, doesn't it?
Fraternally in project management,
Steve the Bajan
Steve,
I mistyped. We’re both talking about Expected Monetary Value (EMV). EMV is not part of my ranking system because of the difficulty in evaluating the cost of delays. We generally let the risk register assign the relative rankings, based on probability of occurrence times the estimated cost and the estimated delay in days. It’s a ranking not a value.
Your system relies on determining a value for a lost day. I’m not sure there is a mechanism available to do that. Maybe the next posting?
We are getting away from the original posting. “This article looks at what is involved in performing a Project Health Check http://ow.ly/yU7Jt”
However, staying with this posting, you make a couple statements I don’t fully understand, to wit:
1. If the sponsor/customer wants the contractor to provide maximum value, the contract must be written with the above analysis in mind and have clauses to incentivize better project investment performance.
What would the particular contract clause say?
2. The only way to justify expenditure is through the value it will generate. If one is not monitoring that value, it is very difficult to augment it.
Ignoring insurance and mitigation costs as exceptions to this statement, you have the problem of determining value generation. Many expenditures are parts of packages. What value does a single pump generate? Yet without the pump, all the tanks, pipe, and cabling are of no value. Same holds for the pump without the pipe, ad nauseum.
Your book summary states: “These techniques have the potential to transform program and project management from the current haphazard application of various techniques and metrics to an incisive and integrated approach where programs and projects are managed for the crucial economic and financial implications that are at the essence of every project investment.
Of course, I take exception to haphazard, but welcome anything that will transform project management. As to crucial economic and financial implications, I remain blissfully unaware.
Your system may have value in evaluating alternatives, but I do not see its relevance to Project Health Checks.
Hi, Dennis. Please excuse my slowness in getting back to you on this – I’ve been very busy finalizing things with my publisher for my book that’s coming out next month.
Your understanding of the concepts I discussed is very clear (and no, I am not surprised!). But there are a few points I think I should try to explain further:
“You are right, I mis-read. Expected Value (E) is ubiquitous. EVM is a more precise term than E. My cursory reading, says that EVM is used to rank risks.”
EVM is earned value management. The term I use is EMV (which is in, for example, the PMBOK Guide) and is the risk-adjusted value for which a project is undertaken. I use it in preference to NPV or ROI because:
“In my world (OPRA), this ranking is done via the Risk Register. The ranking includes Time (Schedule), together with Probability and Cost, and is qualitative. We seldom know the exact cost of a risk, or any of the other factors. We rely on the relative cost – highly subjective (as is most risk evaluation).”
As you know, the cost of a risk is always an estimate. That’s why most projects need to invest more in risk management processes. The better job we do, the better we can both mitigate and estimate the impact of risks. And then we need to incorporate those impacts into our decision-making. I spent years playing chess, backgammon, Risk, tennis and table tennis with Dan Harrington, WSOP No-Limit Hold’em Champion and four-time final table player. One thing I took away: in all investments and gambling games, whoever identifies and quantifies risks better will walk away the winner. It is amazing to me that more risk analysis takes place on every hand at the World Series of Poker than on the average multimillion dollar project!
“Is EVM the expected value of Risks? I assume we have converted any delays to dollars.”
EMV, not EVM, but otherwise right on the money! The value/cost of the impact of time, earlier or later than a target date, on the project EMV is not being quantified and used to make scope/schedule/resource/risk decisions except on a tiny subset of projects, mostly nuclear plant and oil & gas refineries which therefore do the BEST job of scheduling of any industry.
“EPP is the EMV of the scope minus the budget (expected cost, which is also an estimate). The variables which impact the EMV are (1) the precise details of the scope if completed on a specific target date; (2) the value/cost of time based on earlier/later delivery of the scope; and (3) all modified by risk, both internal and external to the project. That monetizes two sides of the traditional triangle: scope and time. The third side is the cost of resource usage, already monetized, that allows one to calculate the EPP.”
Perfect!
“Note: The value of a day is seldom known outside of the impact of liquidated damages/bonus, which may not be the actual value of a day of production.”
Right. There actually can be hugely greater value of a day to a customer/investor on, for example, an enabler project: imagine a causeway to an island which must be built in order to start work on a giant luxury complex. The costs of any delays (and LDs) on that causeway are peanuts compared to the fact that all the revenue-generating construction – hotels, golf courses, marinas, etc. – will be delayed on a one-for-one basis. And insofar as the value/cost of time is mis-estimated, bad scheduling and resourcing decisions will be made, usually with a great over-emphasis on the cost of resources.
“Not sure I understand $Time. I’m interpreting this as scope change, where scope change could include identified risks (monetized).”
Scope change, plus or minus, should be managed through the value breakdown structure. $Time should be managed through that wonderful old technique, critical path analysis, except with the enhancements of critical path drag, drag cost and true cost. True cost is the sum of resource costs and drag cost, and if an optional activity has less value in the VBS than its true cost, then it should either be jettisoned or executed differently.
http://en.wikipedia.org/wiki/Critical_path_drag
http://en.wikipedia.org/wiki/Drag_cost
http://en.wikipedia.org/wiki/Value_breakdown_structure
“Monetizing risks would be an interesting challenge. It's subjectivity would undermine its usefulness.”
Again, this just makes good risk management more important and valuable. Part of the problem is that project teams often don’t understand what risks they need to be analyzing. Estimation of the value/cost of time leads directly to drag cost analysis, and that in turn leads to better resource justification and better ROI.
“$Cost, I’m interpreting as expended costs (spent). My interpretation of EPP is TIC +/-Change -Expended. If this is correct, then we agree.”
At the beginning of the project, it’s the budget. At the end, it’s the actual cost. In between, it should be the Cost ETC, which factors out sunk costs.
“My interpretation of EPP is TIC +/-Change -Expended. If this is correct, then we agree.”
It sounds the same, but I’m not sure?
“Is EPP needed? Is it useful, does it add value to the evaluation?”
Yes! EPP is essential to justify a change in cost/resource usage that favorably impacts a change in scope and/or project acceleration that is worth more.
“DIPP = ($EMV ± $acceleration/delay) ÷ $Cost ETC
DIPP = [Forecast +/-value of a day X number of days lost/gained]/Costs ToGo(ETC?). This is an interesting calculation, not one that I fully understand. I see value in calculating the cost of days gained/lost. Useful in evaluating alternatives. My caution is that this value is rarely known outside of liquidated damages/ bonus that may have threshold values – neither won nor lost until a number of days lapse.”
Take off the headset of the contractor and put on the headset of the customer. Suddenly, this is what you want, except you don’t have the ability to manage in the details and the trade-offs. That is called the Principal-Agent Problem, well-known in economics and contracts. Contracts are, for the most part, horribly written, introducing great moral hazard. If the sponsor/customer wants the contractor to provide maximum value, the contract must be written with the above analysis in mind and have clauses to incentivize better project investment performance. And if a contractor understands the implications of the above, s/he may be in a position to negotiate greater payment/incentives through more of a win/win contract. As things currently stand, great value on all sides is being lost.
“If this metric has widespread application, I am unaware of it. Nor do I see ”…monitor(ing)the project's value as an investment” of much value.”
The only way to justify expenditure is through the value it will generate. If one is not monitoring that value, it is very difficult to augment it.
“Whereas, “… planning and tracking risk retirement is important” could have some usefulness, though I’m not sure of the actual mechanism to plan and track.”
My first article on the DIPP was published in Project Management Journal way back in 1992! (In an article later re-published by PMI in the book Essentials of Project Control.) I’ve been pushing this rock (along with even more obviously valuable techniques like critical path drag and the VBS) ever since. My new book Managing Projects as Investments: Earned Value to Business Value is my most recent push. Pick up a copy – it’s got a lot more in there than I could possibly write in this forum. It’s currently available for pre-order at a discounted price:
http://www.crcpress.com/product/isbn/9781482212709
Fraternally in project management,
Sisyphus the Bajan
Steve:
You are right, I mis-read. Expected Value (E) is ubiquitous. EVM is a more precise term than E. My cursory reading, says that EVM is used to rank risks. In my world (OPRA), this ranking is done via the Risk Register. The ranking includes Time (Schedule), together with Probability and Cost, and is qualitative. We seldom know the exact cost of a risk, or any of the other factors. We rely on the relative cost – highly subjective (as is most risk evaluation). Is EVM the expected value of Risks? I assume we have converted any delays to dollars.
Now to the formulae.
EPP is the EMV of the scope minus the budget (expected cost, which is also an estimate). The variables which impact the EMV are (1) the precise details of the scope if completed on a specific target date; (2) the value/cost of time based on earlier/later delivery of the scope; and (3) all modified by risk, both internal and external to the project. That monetizes two sides of the traditional triangle: scope and time. The third side is the cost of resource usage, already monetized, that allows one to calculate the EPP. Note: The value of a day is seldom known outside of the impact of liquidated damages/bonus, which may not be the actual value of a day of production.
EPP = $Scope ± $Time - $Cost for resource usage (all risk-modified).
I’m interpreting $Scope = Scope = TIC. Both Scope (true for $Scope?) and TIC vary with project definition. With luck, the TIC includes enough contingency and allowances to stay within the authorization amount.
Not sure I understand $Time. I’m interpreting this as scope change, where scope change could include identified risks (monetized). Monetizing risks would be an interesting challenge. It's subjectivity would undermine its usefulness.
$Cost, I’m interpreting as expended costs (spent).
My interpretation of EPP is TIC +/-Change -Expended. If this is correct, then we agree. This is ‘standard’ forecasting, budget +/-changes. Using Expended gives you Costs To-Go (Is this the same as ETC?). Nice, but not essential. Measuring TIC +/-Changes against Authorization is a useful metric for Management – Is the project fully funded? Is EPP needed? Is it useful, does it add value to the evaluation?
DIPP = ($EMV ± $acceleration/delay) ÷ $Cost ETC
Assuming that (1) EMV will remain constant (with the exception of planned risk retirement points); (2) the project will finish on the target date, with no acceleration or delay; and (3) the Cost ETC will shrink as the complement of the PV (BCWS) baseline, allows us to create a baseline DIPP as an index of expected project profit against which to measure. During project execution, we then track EMV, schedule and Cost ETC to generate the Actual DIPP. The DIPP Progress Index (DPI) = Actual DIPP ÷ Planned DIPP at any given point. That's how we can monitor the project's value as an investment and why planning and tracking risk retirement is important. (font change mine)
DIPP = [Forecast +/-value of a day X number of days lost/gained]/Costs ToGo(ETC?). This is an interesting calculation, not one that I fully understand. I see value in calculating the cost of days gained/lost. Useful in evaluating alternatives. My caution is that this value is rarely known outside of liquidated damages/ bonus that may have threshold values – neither won nor lost until a number of days lapse.
If this metric has widespread application, I am unaware of it. Nor do I see ”…monitor(ing)the project's value as an investment” of much value. Whereas, “… planning and tracking risk retirement is important” could have some usefulness, though I’m not sure of the actual mechanism to plan and track.
I apologize for mis-reading your earlier submittal. I will try to be more careful.
Hi, Dennis.
As I wrote earlier, we may have to agree to disagree. But a couple of minor items:
"Your metrics - EPP and DIPP rely on a value I've never seen - Earned Monetary Value (EMV)."
The term is actually "Expected Monetary Value (EMV)". It is a standard economics and risk management term. You will find it in both the Glossary and the Index of the Fifth Edition of the PMBOK Guide (TM).
"Who, in Oil and Gas, use this?"
Lots of people, especially, I'd bet, in the oil & gas Investment and Risk Management areas. As I said, it is a standard rather than esoteric tool of value analysis. However, while the analysis is often performed for projects, it is rarely used to inform the people who can most use it at the tactical level: the project team, to increase the EMV by controlling (as much as possible) the variable of project duration. This omission is true pretty much throughout project management, even where such analysis is being performed -- new product development, commercial construction and, yes, oil and gas exploration. (I use the term "project EMV" where some would use "NPV" -- because (1) if the necessary analysis is done, the two are the same; (2) in my experience, people often don't understand the necessity of thorough risk analysis in generating NPV; and (3) the use of the term "expected" indicates a waiting period which is almost always the case with a project's or program's value.)
The DIPP you will find as early as the Sep 1992 issue of Project Management Journal. It was then re-printed in Essentials of Project Control in 1999. It is also in my first book Total Project Control, the first edition of which was published in 1999.
If your question is serious, Dr. Tomoichi Sato, head of Risk Management at Japan Gas Company and on the faculty at Tokyo University, both uses and has expanded the concept. A PDF of one of his papers is here:
http://www2.odn.ne.jp/scheduling/RVAnalysis/ProMAC2006%20Sato.pdf
And his blog discussing other of the Total Project Control techniques and metrics, such as critical path drag and drag cost, is here:
http://brevis.exblog.jp/20044525/
Dr. Sato's English is very good, and I am sure that if someone like yourself in the oil & gas industries wanted to contact him to discuss how he is using these techniques, he'd be very obliging.
"We inhabit different worlds."
In project management, I try to inhabit all worlds. Over the past 27 years, I have worked with nukes, oil & gas, construction, defense, aerospace, IT, IS, software, medical devices, pharma, transportation, manufacturing, etc. This has allowed me often to discover techniques that are used in only one industry but would be very valuable in others: ABCP analyis from construction, for example, or the value/cost of time, which informs project teams in nukes and refineries but not in other applications.
And being of a curious nature, I try not to dismiss new things that I hear and I try to learn.
"Note: I'd be surprised if Defense is more 'dynamic' than O&G, just more chaotic."
To be fair, Defense projects tend to be at the bleeding edge of technology much more than in other industries and this has a "chaotic" impact. That said, I certainly agree that nukes and oil & gas are doing the best jobs of project scheduling anywhere, mainly, I believe, because of the awareness of the huge value/cost of time.
Fraeternally in project management,
Steve the Bajan
Steve:
We inhabit different worlds. Your metrics - EPP and DIPP rely on a value I've never seen - Earned Monetary Value (EMV). Who, in Oil and Gas, use this?
Note: I'd be surprised if Defense is more 'dynamic' than O&G, just more chaotic.
Hi, Dennis. Thanks so much for taking the time to reply. If you don't mind, I'm going to jump around your response a bit to try to make my reply coherent.
"ROI is difficult to determine because the project does not have access to the value of the final product, a gallon/barrel of whatever."
Right. That's why I use the terms "expected project profit (EPP)" and "expected monetary value (EMV)" rather than either ROI or NPV, to stress the fact that the value of the project (as well as its cost, of course) is very much an estimate that must be risk-modified. In some cases, the actual ROI may not be known for many years after the project is complete. However, the whole reason we do any project is because weexpect a certain value out of it that exceeds (1) its cost and (2) the value of any equivalent investment we could make with the same resources. Thus EPP is arguably THE most important of all project metrics.
EPP is the EMV of the scope minus the budget (expected cost, which is also an estimate). The variables which impact the EMV are (1) the precise details of the scope if completed on a specific target date; (2) the value/cost of time based on earlier/later delivery of the scope; and (3) all modified by risk, both internal and external to the project. That monetizes two sides of the traditional triangle: scope and time. The third side is the cost of resource usage, already monetized, that allows one to calculate the EPP.
EPP = $Scope ± $Time - $Cost for resource usage (all risk-modified).
In my opinion, no project metric is more important. The fact that external factors can alter any of the variables simply means that they need to be carefully monitored. The team should be constantly looking for decisions which will increase the EPP. The sponsor should provide incentives for such quests, while maintaining approval/veto of any change. Decisions which increase the EPP, provided we are not cash-strapped, are almost always good ones.
Float burn index (FBI) is simply a path’s actual float burn rate divided by its permissible float burn rate (usually permissible if it doesn’t lead to chewing up more of either the total float or the free float, depending on what’s more important). If, as you say, a schedule is not particularly dynamic, FBI monitoring is less important. But it’s a pretty easy metric to implement, and for some of the aerospace/defense contractors with whom I’ve worked whose programs and subcontracts are VERY dynamic, it provides a valuable early warning system when a noncritical path is slipping too fast.
“Not familiar with DIPP.”
In the 1992 September Project Management Journal article "When the DIPP Dips: A P&L Index for Project Decisions" (and reprinted by PMI in 1999 in Trailer and Pinto's book Essentials of Project Control), the DIPP was an index to determine when a troubled project should be aborted and when it should continue to be funded. It includes variables such as salvage value, opportunity costs and project termination costs that do not, as you say, have to be monitored on an ongoing basis but only when considering terminating the project.
However, by the time I wrote my 1999 book Total Project Control, I realized that a simple version of the DIPP is an index of the expected project profit.
DIPP = ($EMV ± $acceleration/delay) ÷ $Cost ETC
Assuming that (1) EMV will remain constant (with the exception of planned risk retirement points); (2) the project will finish on the target date, with no acceleration or delay; and (3) the Cost ETC will shrink as the complement of the PV (BCWS) baseline, allows us to create a baseline DIPP as an index of expected project profit against which to measure. During project execution, we then track EMV, schedule and Cost ETC to generate the Actual DIPP. The DIPP Progress Index (DPI) = Actual DIPP ÷ Planned DIPP at any given point. That's how we can monitor the project's value as an investment and why planning and tracking risk retirement is important.
"I don’t see off-project management reviewing any project generated data more than once a month."
The beauty of good progress metrics is that they support a management-by-exception approach. Weekly or biweekly metric reports show if everything is copacetic. If they aren't, because the DPI is dropping or because one paths FBI shows it's burning through its float far too fast, I'd want to know that and take action ASAP if it's my money/career at stake.
"Lost value. Not a decision the project makes. If the market collapses, the project may be abandoned."
There can be changes in the market other than complete market collapse. Monitoring the market and the EMV of the project's planned scope can spur changes that may increase investment value and/or avoid abandonment. Under any circumstances, if the value of the project investment changes, that may spur a change to our plan. (I am reminded of an old John Maynard Keynes quote: "When the facts change, I change my mind. What do you do, sir?" Hopefully, we all try to change our investment plans when market conditions warrant.)
“In the right hands, the cost forecast report may generate useful insights/warnings.”
Exactly! And in the right hands, monitoring the expected monetary value can generate insights/warnings that are at least as useful.
"Paragraph 5. Not sure I understand the rest of this.
Congratulations on the book"
Thanks, Dennis. Obviously, in a short post on a message board I can't begin to cover the concepts in the book. A large portion of those concepts deal with techniques for actually implementing and using, in the trenches, metrics and techniques like EPP and EMV and the DIPP and the DPI. Some of these are critical path drag, drag cost and the cost of leveling with unresolved bottlenecks (the CLUB).
I realize that the overall approach and many of these metrics are new. And any time that you introduce something new, you'd better be willing to explain it. It took several years after my first book came out for things like critical path drag and the value breakdown structure to start having any impact – but now they are. Dennis, you're clearly very knowledgeable – I hope you'll be curious enough to read the book instead of dismissing it. I think you'll find it intriguing.
Fraternally in project management,
Steve the Bajan
Steve;
Where to begin? Starting with the first paragraph. I may have to do this in stages.
Paragraph 1. Metrics. I think your bi-weekly (assume twice a month) is overkill. Two new metrics for me – EPP and FBI, not sure they are necessary. Projects (EPC Process – Oil and Gas) are not that dynamic. I think the necessary insight can be gleaned from a well-crafted resource loaded schedule (necessary for EV) updated weekly. I don’t see off-project management reviewing any project generated data more than once a month.
Paragraph 2. Risk. Again, overkill. A risk analysis should be performed after major update, re-baselining (sp.), and/or re-issue. This would include passing from one phase to another (Stage Gate). At which point, the risk register would be revisited and adjusted – new risks added, expired risks removed and re-assessed.
ROI is difficult to determine because the project does not have access to the value of the final product, a gallon/barrel of whatever. If you mean the difference between project budget (includes corporate contingency) and the TIC, then the monthly cost variance report would provide that. In the right hands, the cost forecast report may generate useful insights/warnings.
Not familiar with DIPP.
Paragraph 3. Lost value. Not a decision the project makes. If the market collapses, the project may be abandoned. Example: LNG gasification projects when the price of gas tanked.
Paragraph 4. Website. Irrelevant, in my view.
Paragraph 5. Not sure I understand the rest of this.
Congratulations on the book.
Hi, Dennis.
On some points, we agree. On others, we may have to agree to disagree.
"For me, the Project Health Check would be analogous to the Annual Physical, only performed in conjunction with the Stage Gate Process. It would be conducted before moving to the next phase."
I certainly agree that a thorough health check should be performed at every stage gate -- but I also feel that certain aspects of the projects health should be monitored on an almost-continous basis -- certainly no less frequent than bi-weekly. Much of this info consists of the PM gathering progress info from activity leaders, subcontractors, etc., and distilling it into relatively simple metrics and reports: current expected project profit (EPP), for instance, EV, and float burn index, and then providing reports up the chain of command. All such data, and the analysis, should also be shared with the project team, to give them a sense of progress.
"These elements might be plan/schedule, estimate/budget, threats/opportunities (risk), personnel, change, client/stakeholders, permits and regulations, community relations, political/environmental forces, ect."
I bolded the items above that I think should be part of the ongoing regular reporting cycle. The other items might belong, as you say, in a formal phase gate review, but their impacts will fall mainly in the threat/opportunities area, which I bolded. As such, any that are maturing or retiring risk factors during the current or next reporting phase should be included in the report along with impact on schedule, cost, scope/quality and/or expected project value/DIPP.
"Sample questions might be:
1. Did we achieve our time objective?
2. Did we achieve our cost objective?
3. Any unforeseen threats or opportunities?
4. So on and so on."
These are certainly good. But the main thing you overlook (as do most project managers), but that is the entire reason for the entire project investment, is the expected project profit or ROI. Surely it should be planned and tracked on projects as with any other investment? Nothing is more important than this. Scope, schedule, cost and risk are important precisely because of their impact on the project investment. The DIPP and the DIPP progress index are ways of monitoring this (and in a way are the ultimate "health check index" -- if the expected project profit that takes quantified risk into account is good, that's the main thing!). The DIPP = ($expected monetary value (EMV) + or - acceleration premium or delay cost) divided by cost ETC. The DPI is actual DIPP divided by planned DIPP and shows where the project is in investment terms compared to where it was planned to be.
"The objective is to assess where we are and whether we can still achieve the project."
I don't quite know what this means. If we can complete the planned product, but its value has collapsed from $10M to $2M, either because of market/external factors or because of the impact of delay, is that still achieving the project and should we continue? How about if the cost ETC is down to $1M? The actual DIPP was specifically designed to answer such questions.
"It is conceivable that the Health Check could be performed by someone off project, but that would imply that the PM does not understand his project or cannot be relied upon to report the truth."
Alas, such situations are all too common! In the US we recently had a debacle in the development of a website called Healthcare.gov that was directly attributable to this, to an arbitrary and emphasized deadline, to a "shoot-the-messenger" environment and to senior managers/sponsors who didn't know their elbows from a hole in the ground about project tracking and control. But that is all too common a problem whether in government or in private industry.
"My quest was a listing of the elements or items that might appear on such a checklist."
I don't know if this will help, but here is a list of progressing data items I used in a university enginnering course i taught a few years ago: (New data re actuals in bold -- the rest should be previously gathered data. Please excuse the formating -- its from a Powerpoint presentation.)
DIPP and DPI (PROJECT INVESTMENT VALUE INFO)
•Acceleration/delay value off current planned delivery date.• Current Actual DIPP.• Baseline (original plan) DIPP as scheduled as of this date.• DIPP Progress Index (DPI) (1 divided by 2).• DIPP and DPI at last progress report.• Earned value S-curve data1.PV (BCWS) to this date.2.EV (BCWP) to this date.3.AC (ACWP) to this date.4.ALAP PV to this date.5.ALAP EV to this date.SCHEDULE
• Original working schedule (summary) w/CP and data date shown.• Current working schedule (summary) w/CP, data date and variance shown.• Original baseline schedule.• Amount of original baseline schedule reserve.• Schedule reserve at last progress report.• Current amount of schedule reserve.• Scheduled activities (milestones) on CP not started or completed on schedule.• Items with largest drag till next progress period report.• Earned Value Schedule Data:1. SPI (EV /PV).2. Total duration based on SPI.3. Schedule overrun/underrunbased on SPI.4. ALAP SPI.5. Total duration based on ALAP SPI.6. Schedule overrun based on ALAP SPI. COST• Planned resource usage (work hours AND cost) to this point.
• Actual resource usage (work hours and cost) to this point.
• Non-analytical resource use/cost EAC and ETC.• Items with largest DRAG Cost till next report.Earned value cost data:• CPI (EV / AC).• Critical ratio CPI (CR-CPI = SPI * CPI)• Cost EAC based on CPI (BAC/CPI).• Cost ETC based on CPI (BAC/CPI - AC).• Cost EAC based on CR-CPI (BAC/CR-CPI).• Cost ETC based on CR-CPI (BAC/CR-CPI - AC).• To Complete Performance Index.• Original baseline cost reserve.• Cost reserve at last progress report. • Current cost reserve. RISK/OPPORTUNITY• Risk/opportunity issues that matured since last progress report, and their results.• Risk/opportunity issues due before next progress report.• New risk/opportunity issues identified since last progress report, their schedule/cost implications and management plan. SCOPE/TECHNICAL/OTHER ISSUES/ECPs and ECOs SINCE LAST PROGRESS MEETING• What they are, how they’re being handled, what are their scope/cost/schedule implications.•What are the ECOs, how they’re being handled, what are their scope/cost/schedule implications. RECOVERY PLAN (if necessary)
Steve/Emily:
For me, the Project Health Check would be analogous to the Annual Physical, only performed in conjunction with the Stage Gate Process. It would be conducted before moving to the next phase. Where the Doctor evaluates vital signs and symptoms, the PM would review an inventory/analysis of various project elements.
These elements might be plan/schedule, estimate/budget, threats/opportunities (risk), personnel, change, client/stakeholders, permits and regulations, community relations, political/environmental forces, ect. I imagine a form similar to the PDRI where certain questions are answered and ranked. A minimum score has to be achieved before moving on to the next phase.
The questions would be of the form YES or NO. If no, then Why not?, Remedy, Result, Recommendation (proceed/abort/amend).
Sample questions might be:
1. Did we achieve our time objective?
2. Did we achieve our cost objective?
3. Any unforeseen threats or opportunities?
4. So on and so on.
The objective is to assess where we are and whether we can still achieve the project. It is conceivable that the Health Check could be performed by someone off project, but that would imply that the PM does not understand his project or cannot be relied upon to report the truth.
My quest was a listing of the elements or items that might appear on such a checklist.
Actually, I felt there was good info in both the Emily and Patrick links. I tend to read links to PM articles because I know I am still learning and will continue to learn about PM till the day I die. Sure, lots of articles just rehash stuff I've known for years. But many add new insights, often requiring reading between the lines or ways of looking at things a bit differently.
From Emily's TenSix link:
"We start by identifying and agreeing the business goals – what do you want to get out of this health check? That’s important because it confirms that everyone is on the same page and ensures that the person doing the health check is focusing on the things that matter to you."
And then:
"How mature is the project management culture? These are important factors because the environment in which the project takes place is critical to the performance of the project."
These two points together show:
From Patrick's link to MosaicProject's white paper:
"Effective project reviews help the organisation’s management understand what’s really going on within each project. Routine oversight and reporting processes (typically involving a PMO) deal with project information ‘as-is’ on a weekly or monthly basis; an effective review looks deeper into the project to understand ‘why’ and importantly ‘what might be’ to highlight emerging opportunities, identify emerging risks and in conjunction with the project team, recommend appropriate actions."
This is a hugely valuable insight! As a project proceeds, more and more valuable information is unearthed. "What might be" analysis can turn up opporutities that it would have been impossible to discover at the start or the project! This should mean that the project goals should evolve as the project advances, and that the clauses of the contract should sometimes be amended, by mutual agreement, to provide greater value to both customer and contractor. A contractor's PM who understands this and knows how to do it is worth their weight in gold. Alas, most PMs neither understand this nor do it.
Dennis, I'll throw out one little nugget of info in terms of a checklist: at every progress meeting, the critical path drags of the five or ten (or twenty) tasks with the most drag should be listed, along with their drag costs and their resource loads. Any time there is a big drag cost item which has a low resource load (50% loading, for instance), I want to know why. Is it that the task is not resource elastic, so that adding resources would not help shorten its duration and drag? That might be a good reason. But it's also a bit unusual -- and most other reasons are inadequate!
Fraternally in project management,
Steve the Bajan
Hi Dennis,
What you are referring to we call our consulting tools. These are tools our consultatns use when we engage with customers and come complete with a methodology, guides, templates, etc. There are different types of Health Checks that we get asked to perform, some are as described in the article others are specifically tool based e.g. Primavera P6. Nevertheless, these tools are for implementors who are trained in using them and obviously contain our IP, so sharing them is not possbile.
I'm not sure this helps you, but I thought I'd try and explain this a little.
Have a great weekend.
Emily
Patrick, I didn't find anything useful. I would think there is a checklist somewhere that lists the items/issues that should be reviewed to determine the health of your project.
Patrick, I didn't find anything useful. I would think there is a checklist somewhere that lists the items/issues that should be reviewed to determine the health of your project.
Hi Dennis, Try this link for a start: http://www.mosaicprojects.com.au/WhitePapers/WP1080_Project_Reviews.pdf
Emily: More detail might be appropriate. A checklist? Or is it possible to have generic checklist?
Email: PPadmin@planningplanet.com
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