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What Should We Do with Unknowns in Schedule Risk Analysis?

 

FEATURED PAPER

By David Hulett

California, USA

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Introduction

Schedule risk analysis explores how unknowns applied to the project schedules may derive a distribution of possible completion dates. Unknowns include:

  • Known unknowns for which we know the cause but do not know whether the risk will occur and /or, if it occurs, its impact on activity durations. Interestingly risks with 100% probability of occurring, though usually called “issues,” are included if their impact is unknown.
  • Unknown unknowns are those risks that are not known today but we may reliably expect that they will occur in the future.       It is not clear that these risks are “unknowable” because they have been experienced in many projects over time. People are often myopic about the risks they want to discuss, so near-term risks are the focus of attention during interviews or workshops. Whether other risks could be known or not with further inquiry, or whether benchmarking to historical data can help is an area of interest.
  • “Unknown knowns” may be a new class of unknowns to some people. We know these risks exist and often know their parameters (probability and impact).       The management does not want to discuss them in a public forum such as a risk workshop since they are sensitive or pessimistic, may conflict with public pronouncements or pledges to the Board of Directors or the customer, causing harm and even cancellation of the project. We find out about these risks because they are revealed during confidential interviews. These risks are not in the Risk Register but are agreed to by subsequent interviewees. On inspection some of these risks turn out to be the most important risks of all.

This paper describes the types of unknowns and the methods used to incorporate the unknowns to drive the Monte Carlo simulation of the schedule. Methods include: (1) using the 3-point estimate to represent inherent variability, estimating error and estimating bias, (2) expanding the 3-point range for “far future” (in the context of the project) activities for unknown unknowns, and (3) using the risk interview to uncover unknown knowns, and. A simple case study shows, through use of Monte Carlo simulation, examples of the methods and of their impact on final answers.

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To read entire paper (click here)



About the Author

pmwj37-Aug2015-Hulett-PHOTODavid T. Hulett, Ph.D., FAACE

Hulett & Associates, LLC

California, USA

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David Hulett
is recognized as a leader in project cost and schedule risk analysis and project scheduling. He has conducted many risk analyses focusing on quantifying the risks and their implications for project cost and schedule estimating and mitigation, and many schedule assessments. He is a Fellow of AACE International.

Clients of Hulett & Associates, LLC represent many industries and are in the US, Canada, Europe, South America, South-East Asia and the Middle East.

Dr. Hulett is well-known as a leader in the Project Management Institute (PMI) for project risk standards, including leading the risk management chapter in the Guide to the Project Management Body of Knowledge (PMBOK® Guide) and the Practice Standard for Project Risk Management. He is the author of Recommended Practice 57R-09 published in 2011 by the Association for the Advancement of Cost Engineering (AACE) International on Integrated Cost and Schedule Risk Analysis and 85R-14 Use of Decision Trees in Decision Making.

Dr. Hulett has published Practical Schedule Risk Analysis (Gower, 2009) for which he was recognized by the PMI College of Scheduling for “contributions to the scheduling profession” in 2010 and Integrated Cost- Schedule Risk Analysis (Gower, 2011).

Dr. Hulett has held strategic planning positions at TOSCO, an oil shale company, and at TRW in aerospace and defense. In the Federal government, Dr. Hulett managed offices in the Federal Energy Agency (FEA), the Department of Energy (DOE) and the Office of Management and Budget (OMB). He was also an economist with the Federal Reserve Board of Governors. Dr. Hulett was an Instructor in the Economics Department at Harvard University. His Ph.D. in Economics is from Stanford University and his B.A. is from the Special Program for Public and International Affairs (Woodrow Wilson School) at Princeton University.

David Hulett can be contacted at [email protected]