Resource Limited Project Management

Vladimir Liberzon spider@mail.cnt.ru

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Introduction

We will discuss methodologies and techniques that are necessary for the proper project management when project resources are limited. And to my knowledge they are always limited. Please feel free to ask questions any time during my presentation. We shall learn from each other and more discussions create more understanding.
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Introduction
My name is Vladimir Liberzon. I am a head of the leading Russian project management consulting company that:

Implements project management systems at the different enterprises, Manages projects for our customers, Provides project management training, Develops the most powerful project management software Spider Project.

Topics of Discussion

We will discuss:
Organizing data for the proper project computer simulation and corporate resource management, Resource constrained scheduling and Resource Critical Path, Project Success Criteria, Project Risk Simulation, Success Driven Project Management.
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Organizing data
It is Data Structure that defines the possibilities of simulating the situations occurring in the actual projects. The main elements of a project computer model are project activities, activity dependencies, project resources and their assignments, project calendars, costs, and Work, Resource and Cost Breakdown Structures. We will discuss the main elements of Data Structure that are vital for understanding the specific approaches to project simulation.

Activities
In the majority of well-known PM software packages project activities are characterized by their duration. Besides duration, it is frequently necessary to set the activitys physical volume of work. Activity volume can be measured in meters, tons, etc., planned work hours, percents or any other units.

Activities
Activity volume is often used as an initial activity information instead of duration. If assigned resource productivity is defined in volume units per hour then activity duration may be calculated during project scheduling. Unlike activity duration activity volume does not depend on assigned resources.

Dependencies
Sometimes it is necessary to set more than one link between activities. Besides the positive and negative time lags, it is useful to set volume lags, which is preferable in many cases. The problem with time lags is that if the preceding work has started but is executed slower than it was planned, the time lag may be satisfied earlier than the planned volume of work is fulfilled. The time lags call for special attention and regular adjustments.

Resources

Resources are divided into two classes:

renewable (human resources and mechanisms) and consumable (materials).

In most PM software packages, both are set together, differing only in setting the costs of their use - per work hour or per unit. Thus you can not define that renewable resource spends materials during the work.

Complex Resources
Besides the individual resources one may set resource crews (we call them multiresources) and resource skills (roles). Multi-resources are the settled groups of resources working together (e.g. a team, a crew, a car with a driver, etc.). Multi-resource can be assigned to activity which means assignment of all resources comprising the multi-resource.

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Resource Skills
Resources sharing the same skills comprise Resource Assignment Pools. Resources belonging to the same Pool are interchangeable though individuals in a pool may have different productivities performing the same activities.

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Calendars
The calendars can be set for all activities, resources and time lags. Availability of all these calendars is important for the proper project simulation.

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Assignments
Assigning resources to activities implies the notion of a team - a group of resources working on an activity together. The team can include individual resources, multiresources and pools. If the activitys initial information is work volume, one should set the productivity of at least one of assigned resources, to enable the calculation of the work duration. It should be noted that when the pools are assigned, activity duration can be calculated only in the process of scheduling.

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Assignments
In assigning resource assignment pool, one should either set a total number of pool resources necessary for the execution of activity or their aggregate productivity. Example: a pool consists of the tip lorries (dump trucks) with different carrying capacity. One may set a number of lorries necessary for the execution of this activity or the aggregate productivity (dependent on capacity) of assigned tip lorries.

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Assignments
If more than one team is assigned then resources belonging with the different teams work on an activity independently of each other. One may set the volumes or duration of work for each team, but it is not obligatory. When the volume or duration of assignment are not defined the team will continue working until the work on the activity is completed. Such approach allows to simulate the shift work efficiently. 15

Assignments
Resources can be assigned to activities part time. In this case one shall set percentage of assigned

resources utilization together with resource quantity (not just the total percentage calculated

by multiplying percents and quantities, that leaves the necessary amount of resources unclear - two resource units with 50% utilization are equivalent to one resource unit used to its full capacity).

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Assignments
Another useful option variable resource assignments. Example:

You may define that the number of resources that may be used at some work is between 2 and 4, and their workload should be not less than 40% and not more than 80%. In this case activity will start if two units of assigned resource are available not less than 40% of their time, and the team may be increased if additional resources become available. Finishing other assignments resources may apply more of their time to the specified 17 assignment but not more than 80%.

Assignments
Resources can consume materials in the process of their work, Besides materials can be assigned to activities or resource assignments directly. In some projects it is necessary to simulate not only material consumption but also production of resources and materials on activities and assignments.

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Cost
Usually it is not enough just to define activity and resource costs. It is necessary to know project expenses and revenues, what will be spent on wages, on machinery and equipment, on taxes, etc. Sometimes it is necessary to allow for multiple currencies. So there is a need to define and assign cost components. Besides setting the cost of an hour of renewable resource work and the cost of material unit, it is necessary to be able to set the cost directly for 19 activities and assignments.

Cost
People may be paid not only for the hours spent on the task but also by the quantity of work they have done. It means that labor resource cost that is usually defined by the cost of work hour is not enough. Frequently it is necessary to set costs for resource assignments (fixed or per unit of volume). Cost of assignment is one example of setting contract costs for the project.

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Centers
Setting costs for the components of the project expenses, materials and resources you may need to get different reports on the groups of cost components, materials and resources. That is why it is necessary to define Cost, Material and Resource Breakdown Structures or Centers. Material center can include any group of materials. Resource center can include any group of resources. Cost center includes selected cost components. 21

Multiple Breakdown Structures

It is also very useful to have an opportunity to get project reports that aggregate project data different ways. Usually we use at least three Work Breakdown Structures in our projects: based on project deliverables, project processes and responsibilities. The use of multiple breakdown structures allows not only to obtain different project reports as seen from the different standpoints, but also to provide that the project model is truly comprehensive.

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Multiple Breakdown Structures

The use of resource breakdown structures is especially important in multi-project management. In this case the matrix organizational structure determines the necessity of obtaining the reports on both Project and Functional Resource Breakdown Structures.

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Project Archives
Another feature that is necessary for the proper project control is an ability to store project history. The planners should be able to store project versions and to analyze the progress in project execution, comparing current project schedule not only with the baseline but with any other previous version too. This possibility enables to assess the progress in project execution for the last week, last month, last year, compared to the baseline, etc.

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Project Reference Books

Corporate project management has to be based on the corporate standards. These standards shall include not only processes and documents that should be used in all projects but also estimates of the typical activity and assignment parameters.

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Project Reference Books

Reference books that should be created should include at least:

Activity cost and material requirements per activity volume unit, Assignment cost and material requirements per activity volume unit, Assignment productivity, Assignment work load.

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Fragnet Library
Another necessary thing to create a library of typical project fragnets. Project fragnets usually describe typical processes and technologies that are used more than once. Creating project computer models using the corporate library of typical fragnets will help to avoid inconsistencies and assures that the project model follows corporate standards.

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Fragnet Library
A library of typical fragments is a very important tool for the development of corporate culture and management standards. An interesting side effect of the use of typical fragnets library is the technology of work breakdown structure development not top-down, as usual, but bottom-up. In such structure typical fragments serve as work packages. Since we commonly use several Work breakdown structures top-down and bottom-up technologies are used in parallel, complementing 28 each other.

Resource constrained scheduling and Resource Critical Path

The problems solved with the help of project management software usually include:
Project scheduling without the limitations of resources taken into the consideration, Project resource constrained scheduling (resource leveling), Determination of critical path and time float for project activities, Determination of the project requirements for finance, materials and equipment for any time 29 period,

Resource constrained scheduling and Resource Critical Path

Determination of renewable resources utilization in time, Risk analysis and development of the project schedule and other project characteristics allowing for the risks, Project performance measuring, Project performance analysis and forecasting main project parameters.
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Resource constrained scheduling and Resource Critical Path

The problem of project schedule development without allowing for resource constraints has a correct mathematical solution (critical path method), which would be the same for all PM packages, provided that initial data are identical. All other problems are solved using different approaches and yielding different results.

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Resource constrained scheduling

Resource constrained schedules produced by different PM software are different. The software that calculates shorter resource constrained schedules may save a fortune to its users. Spider Project is based on advanced heuristics that consistently obtains shorter resource constrained schedules than using other PM software packages.

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Resource constrained scheduling

The schedule stability is no less important, especially at the project execution phase. Thats why Spider Project features an additional option - the support of the earlier project version schedule (the order of activity execution is the same as in selected earlier project schedule).

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Resource Critical Path

Traditional notion of Critical Path works only in case of unlimited resources availability. Let us consider a simple project consisting of five activities, presented at the next slide. Activities 2 and 5 are performed by the same resource

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Resource Critical Path

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Resource Critical Path

At the next slide you will see the results of resource constrained scheduling (leveling). Please pay attention to activities that became critical (red on the diagram). Now delaying each of the activities 1, 2 and 5 will delay the project finish date. And though these activities are not linked we call them Resource Critical and their sequence comprise Resource Critical Path.

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Resource Critical Path

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MS Project Example
At the next slide you may find MS Project resource constrained schedule for the same project. Please pay attention to the total slack figures and which activities were considered as critical. Unfortunately resource constrained floats are not calculated not only by MS Project but by other popular PM software as well.

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MS Project Example

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Resource Critical Path

In many projects it is necessary to simulate financing and production, and calculate project schedules taking into account all limitations (availability of renewable resources, material supply and financing schedules). True critical path should account for all schedule constraints including resource and financial limitations.

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Resource Critical Path

We call it Resource Critical Path (RCP) to distinguish it from the traditional interpretation of the critical path definition. The calculation of RCP is similar to the calculation of the traditional critical path with the exception that both early and late dates (and corresponding activity floats) are calculated during forward and backward resource (and material, and cost) leveling.

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Resource Constrained Floats

Activity resource constrained floats have one large advantage over the total floats calculated by most PM software. This advantage is feasibility. Activity resource constrained float shows the period for which activity execution may be postponed within the current schedule with the set of resources available in this project.

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Resource Critical Path and Critical Chain

It appears that by adding financial and supply constraints to the Critical Chain definition as well as the way of the Critical Chain calculation, we will obtain something very similar to RCP. Thus the proven technology of project management based on RCP that is described further may be of particular interest for the Critical Chain theory supporters.

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Project Success Criteria

If project success criteria are set as finishing project in time and under budget then proper decision making will be complicated. Project managers will not be able to estimate the effect of their decisions to spend more money but to finish the project earlier. If some project is business oriented then this project has to have business criteria of its success or failure.

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Project Success Criteria

One of potential options to set the profit that should be expected at some point in time basing on the forecast of the profit that will be obtained after the project will deliver its results. Such success criterion will permit to weight time and money making managerial decisions.

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Project Success Criteria

At the next slide you may see the project schedule that is calculated without allowing for project financing and supply restrictions. There are periods when project has no money to proceed and necessary materials are absent. But if project manager will find money and materials then total profit to some imposed date will be close to $225,000.

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Project Success Criteria

If to calculate project resource, financing and supply constrained schedule than total profit will become more than $16,000 less. Maybe it will be reasonable to borrow $41,000 for ten days or to find some other solution? To be able to weight options and to choose the best it is necessary to simulate not only expenses.

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Risk Simulation
Our experience of project planning shows that the probability of successful implementation of deterministic project schedules and budgets is very low. Therefore project planning technology should always include risk simulation to produce reliable results. Risk simulation may be based on Monte Carlo simulation or use three scenarios approach that will be described further.

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Risk Simulation
Monte Carlo simulation is very time consuming and not practical for the large projects. Current practice of its implementation mostly do not consider correlation between activity duration and cost estimates that exists if activities are performed by the same resources, do not consider risk events that may change a set of project activities.

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Risk Simulation
Even if everything is properly simulated the number of necessary iterations is too high for receiving reliable results in the reasonable time. A project planner may be happy with the probability estimates that has plus or minus 10% accuracy but only if the error will be stable. If it may change from one calculation to another then these estimates can not be used as performance management tool.

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Risk Simulation three scenarios approach

A project planner obtains three estimates (optimistic, most probable and pessimistic) for all initial project data (duration, volumes, productivity, calendars, costs, etc.). Risk events are selected and ranked using the usual approach to risk qualitative analysis. Usually we recommend to include risk events with the probability exceeding 90% in the optimistic scenario, exceeding 50% in the most probable scenario, and all selected risks in the pessimistic scenario.

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Risk Simulation three scenarios approach

These data are used to calculate optimistic, most probable and pessimistic project schedules and budgets. The most probable and pessimistic project scenarios may contain additional activities and costs due to corresponding risk events and may employ additional resources and different calendars than the optimistic project scenario.

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Risk Simulation three scenarios approach

As the result project planner obtains three expected finish dates, costs and material consumptions for all major milestone. They are used to rebuild probability curves for the dates, costs and material requirements. Defining desired probabilities of meeting project targets a project planner obtains desired finish dates, costs and material requirements for any project deliverable.

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Risk Simulation setting targets

There is a preferable interval for setting project targets that is defined by market competition. Lets consider an example: Some company delivers projects that bring her $10,000 profit per project if the project is successful. Unsuccessful project means $10,000 lost.

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Risk Simulation setting targets

Lets create a table with the following data: P - Probability of project success M - Mean profit from the single project N - Number of expected customers T - Expected total profit

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Risk Simulation setting targets

P 100 90 80 70 M 10000 8000 6000 4000 N 3 5 8 12 T 30000 40000 48000 48000

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2000

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40000
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Risk Simulation setting targets

For this company it is reasonable to propose project targets that will be met with the probability that is between 70% and 80%. These data form basis for the negotiations that may result in establishing other target dates, costs, material consumption.

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Success Probabilities
In this case it is necessary to calculate the probabilities of meeting required project targets. If they are reasonable then they may be accepted. Probabilities to meet approved project targets we call Success Probabilities.

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Baseline
Target dates do not belong to any schedule. Usually they are between most probable and pessimistic dates. A set of target dates and costs (analogue of milestone schedule) is the real project baseline. But baseline schedule does not exist! A schedule that should be used for setting tasks for project implementers is optimistic.

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Critical Schedule
Project planner obtains not only the set of target dates but also a critical schedule a project schedule calculated backward from target dates. Usually this schedule is based on most probable estimates of activity durations and the difference between current and critical dates shows current schedule contingency reserves (buffers). At the next slide critical schedule is shown in blue.

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Buffers
There are time, cost and material buffers that show contingency reserves not only for a project as a whole (analogue of Critical Chain project buffer) but also for any activity in the optimistic project schedule. Time buffer for activity is defined as the difference between activity starts (finishes) in the current and critical schedules. During project execution it is necessary to estimate if these buffers are properly utilized.

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Success Probability Trends

The best way to measure project performance is to estimate what is going on with the project success probabilities. If they rise it means that contingency reserves are spent slower than expected, if they drop it means that project performance is not as good as it was planned and corrective actions are needed. In any case if the project meets project targets then corresponding success probabilities will reach 100% before project finish.

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Success Probability Trends

Success probabilities may change due to: Performance results Scope changes Cost changes Risk changes Resource changes Thus success probability trends reflect not only project performance results but also what is going on around the project.

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Success Probability Trends

We consider success probability trends as the really integrated project performance measurement tool. Success probability trends may be used as the only information about project performance at the top management level this information is sufficient for performance estimation and decision making. We call the described methodology Success Driven Project Management.

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Success Probability Trends

If project performance is estimated by success probability trends then project managers are encouraged to resolve uncertainties ASAP
This can increase success probabilities even with activity finish delays & cost overruns.

Postponing problem activities leads to negative trends in success probabilities. This attribute of success probability trends is especially useful in new product development project management.

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Success Probability Trends

It is useful to set not one but several targets for the same project parameter. In this case success probability trends will show to what interval of final results project is going. In any case there are always several sets of target data for each project. Lets discuss it using project budget as an example.

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Project Budgets
The first project budget is the optimistic budget that is set as a target for the project team. The second one is the budget of the project management team that includes approved contingency reserves. The third budget includes management reserves and may be called executive budget. And at last the project may have contract cost that includes profit.

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Project Budgets
Optimistic budget has zero success probability. As for others it is useful to know what is going on with the probabilities to meet project management team budget, executive budget and contract cost.

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Critical Chain
You may notice that the approaches to the project management discussed today are similar to those that are used in Critical Chain Project Management. I do not see the difference between Resource Critical Path and Critical Chain except I have never met the description of the Critical Chain calculation.

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Critical Chain

Both the SDPM and the Critical Chain theories recommend project managers to use optimistic estimates of the project data to set the tasks for the project manpower and to control contingency and management reserves. SDPM also offers a technique for calculating necessary contingency reserves, while CCPM suggests to use qualitative estimates.

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Critical Chain

Unlike Critical Chain theory SDPM approach states that: RCP can change during the project execution, multitasking is sometimes necessary, and critical (drum) resources can be different at the different stages of the project life cycle.

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Critical Path
RCP and classical Critical Path are the same if project resources are unlimited. If project resources are limited then the classical Critical Path is useless and total floats calculated without considering resource limitations are not feasible. Really critical activities belong to Resource Critical Path and resource constrained floats show real activity time reserves.

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Conclusions

Resource Limited Project Management requires implementing special techniques that include:
Organizing data in a way that supports proper resource work simulation and application of corporate norms and standards. Creating a set of reference-books and a fragnets library that are obligatory for creating project computer models.
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Conclusions
Calculating Resource Critical Path and resource constrained floats. Risk assessment and simulation. Defining target dates and costs (and corresponding contingency reserves) that may be achieved with reasonable probability. Recalculating the current probabilities of meeting project targets during project execution and analyzing success probability trends. Applying corrective actions if these trends are negative. 78

Thank you
Thank you for your participation. I am looking forward to your feedback and comments. My E-mail: spider@mail.cnt.ru

Vladimir Liberzon
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