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TO O L S A N D T EC H N I Q U E S

Schedule Management for Complex


Projects
W. Scott Nainis
Two quantitative measurement methods, earned schedule and event chain,
are emerging as useful ways to accurately predict progress and prepare for
contingencies in very large projects.

B
y their definition, projects are time-limited endeavors ing task durations.2 The tendency is to overlook significant risks
that depend critically on an accurate schedule, so activ- that can affect schedule and cost and thus the project plan fails
ity timing and scheduling must be central to all phases to account for the delays that these risks cause when they mate-
of project management. A project must have some way rialize.
to reliably and quickly predict deadlines—from initiation to com- In selecting an appropriate scheduling method, a program
pletion. And some deadlines can’t be missed without severe legal management office (PMO) or project manager must understand
and political consequences. the issues to be addressed, as well as the features each approach
Even without pressing legalities and politics, schedule delays offers. For any method, the goal is both to manage project sched-
can plague a project with cost overruns, low morale, dissatisfied uling and to reduce the negative effects of delay and other forms
customers and stakeholders, and eroded market share. In some of project risk. The literature is rife with insights from project
cases, delays can shut a project down. Indeed, a sizeable fraction management theorists and practitioners, and the Project Man-
of all projects are never completed, particularly complex software agement Institute has been and continues to be on the forefront
implementation projects.1 of those—particularly in its efforts to increase the focus on better
With this pressure to complete on time and just because schedule management.3
they’re human, project teams can be overly optimistic in estimat- Among the classes of methods recently receiving new inter-
est are quantitative measurements and techniques, which could
help in the search for the root cause of project failure. Two meth-
Inside Track ods in particular could make schedule control and risk manage-
ment more effective in large, complex projects. Earned schedule
• Earned value analysis can be an effective way to track projects,
is a different way of using measures from the familiar earned
as long as everyone understands that the results—the dollar
measures—are not an accurate predictor of schedule. value management (EVM) method. The event chain method is a
more insightful way to identify and manage the myriad sources
• There is no way to tell if the project is ahead or behind schedule of risk that can upset a project schedule and to plan a suitable
overall by comparing the actual and budgeted costs of work per-
formed—one of the main drawbacks in relying solely on earned response.
value.

• An event chain ensures that risk management and project man-


agement are conducted in unison because it helps the team
Earned schedule
identify and address both unanticipated and anticipated risk. Because earned schedule uses measures from earned value
• An event chain can make Monte Carlo simulation results more analysis, defining those measures gives some insight into why
realistic by accounting for interventions that might shorten the they do not always work as envisioned and how earned schedule
project. Traditional planning can overlook these kinds of events. can improve their predictive power.

PROGRAM MANAGEMENT OFFICE 31


Understanding earned value 90
Actual Cost of Work Performed
EVM4 states that the degree of project completion is measur- 80 Budgeted Cost of Work Scheduled
able in terms of activities completed and milestones attained if 70 Budgeted Cost of Work Performed
SV = -23
60
• each completed activity or achieved milestone is measurable in
Percentage 50
physical units, such as cubic yards of concrete poured, lines of of Planned
Cost 40
code written and debugged, or pages of instructions written, and
30
20
• those designing project activities have built in enough planning SPI = 0.68
10
and definition to accommodate the measurement.
0
0 2 4 6 8 10 12 14
Weeks
Thus, according to EVM the extent to which the project is
complete is the extent to which the activities and work related to Figure 1. Sample results from earned value analysis. In this hypothetical example,
those activities are complete. Earned value is the dollar amount the project appears to be finishing much closer to its budgeted work schedule,
after converting the physical units of all the activities completed but according to the schedule variance (SV) and schedule performance index
(SPI), the project is way off schedule at week 10. SV is the difference between
and the resources spent on them to dollars so that all units are
the budgeted cost of work performed and work scheduled (BCWP—BCWS),
compatible. which should be close to 0, but is −23. At week 10, according to BCWS, the
Earned value analysis can be an effective way to track proj- project should be at 71 percent of the planned cost, but according to BCWP, it is
ects, as long as everyone understands that the results—the at only 48 percent. Thus SV=48−71 at this point. Likewise, the SPI is the ratio of
BCWP to BCWS, which should be close to 1.0, but is 0.68. Both indices, SV and
dollar measures—are not an accurate predictor of schedule. Un-
SPI indicate that the project is considerably behind schedule at week 10.
fortunately, organizations don’t always realize that, particularly
those that tie earned value directly to project progress payments
and project milestones and completion objectives. Projects rarely
stay completely on track, so something beyond the earned value • Schedule variance is the difference between the cost of work per-
index is needed to emphasize that a project may have fallen seri- formed and the cost of work scheduled, or BCWP—BCWS. If the
ously behind schedule. The sidebar, “Why Earned Value Manage- difference is zero, the project is on schedule; if positive, the project
ment Can Be Misleading” explains why relying solely on EVM can is ahead of schedule; and if negative, the project is behind.
be counterproductive.
Figure 1 shows the three dimensions of earned value analysis. • The schedule performance index is the ratio of BCWP to BCWS.
The budgeted cost of work scheduled (BCWS) is the agreed-on The smaller the ratio, the more the project is deemed behind
plan of earned value over the project’s life. In a perfectly run schedule. Likewise, the larger the ratio, the more the project is
project (read “ideal world”), BCWS would equal the dollar amount deemed ahead of schedule.
spent to complete the work, and at the project’s end, the earned
value would equal the project’s budgeted cost.
In reality, few projects run perfectly. Thus, the actual cost of
work performed (ACWP) must be part of the earned value pic-
A more accurate application
ture. ACWP is the dollar amount of the resources spent on work Walter Lipke was the first to notice the anomalies associated
actually performed to that point. The actual work can be above with earned value measures in scheduling.5 In Figure 1, BCWP
or below the scheduled work at any measurable point in the proj- starts to diverge from BCWS, around week 3 or 4. Until that
ect, with results being in earned value units (dollar amounts). point the EVM-based schedule indices are close to their ideal
But the cost of work performed must be measured against values (SV=0 and SPI=1.0) If the earned value (as measured by
budgeted cost, which introduces a third curve: the budgeted cost BCWP) actually catches up, the EVM schedule indices look good,
of work performed (BCWP)—the dollar amount of earned value but the true schedule is not good at all. The scenario in Figure 1
associated with the work performed to date. Again, BCWP could might have been something like this. The project was scheduled
be higher or lower than ACWP at any point in the project, but for completion in 10 weeks, but at the end of 10 weeks, only 4
there is no way to tell if the project is ahead or behind schedule weeks of planned work are completed. A “new and better” team
overall by comparing ACWP to BCWP. This is a significant draw- is brought in and the 6 weeks of remaining work is completed in
back in relying solely on earned value. 4 weeks. Thus, the project is completed at the end of week 14.
To get that overall view, the team must compare BCWP and At that point BCWP equals BCWS, which means that SV=0 and
BCWS. If they are equal, the project is generally on schedule. SPI=1.0. Using these measures alone, the project appears to be
EVM defines two schedule indices: right on schedule, but is in actuality 4 weeks late. Thus, by the

32 A N O B L I S P U B L I C AT I O N
ect schedule using the same degree of project completion that
90
Actual Cost of Work Performed earned value analysis indicates for that point. Time-based sched-
80 Budgeted Cost of Work Scheduled ule variance, SV(t), is
70 Budgeted Cost of Work Performed

60 SV(t) = ES − AT,
ES = 7.33 weeks
Percentage 50
of Planned and the time-based schedule performance index, SPI(t) is
Cost 40
SPI(t) = ES/AT
30
20
The longer a project takes, the more ES will lag AT: SV(t) will
10
AT = 10 become negative, and SPI(t) will drop below 1.0. Conversely, if a
0 project progresses faster than planned, SVt will become positive,
0 2 4 6 8 10 12 14
Weeks and the SPI(t) will exceed 1.0.
(a)
Earned schedule has several benefits over a schedule based on
ES = All of Weeks 1 through 7 plus a portion of Week 8 the traditional application of earned value analysis. With earned
BCWP at the actual time (10 weeks) exceeds BCWS for week 7, but is less than schedule, the two schedule indices perform as they should. As
BCWS for Week 8, so credit ES with at least 7 weeks and some part of week 8.
the schedule gets further behind, the indices degrade and stay
ES =7 + [BCWP(AT)-BCWS(7)]/[BCWS(8)-BCWS(7)] degraded even as the project nears completion. SV(t) is a mea-
To determine how much of week 8, use this ratio. The numerator is the difference
between BCWP at the actual time (week 10) and BCWS at week 7. The denominator sure of time, and SPI(t) is a ratio of actual times, which means it
is the difference between BCWS for week 8 (the next full week after week 7) and directly measures the percentage of schedule delay or of comple-
week 7. tion ahead of schedule. Even near completion, SV(t) remains
ES = 7 + (48-45)/(54-45) negative and SPI(t) remains less than 1.0.
According to Figure 2a, BCWP at week 10 is 48, BCWS at week 7 is 45, BCWS at In Figure 2, for example, ES is 7.33 when AT is 10 (at week
week 8 is 54, and BCWS at week 7 is 45.
= 7 + 3/9
10), so SV(t) is 2.67, indicating the project is behind by nearly
= 7.33 three weeks. At 0.733, SPI(t) is significantly below 1.0. Unless the
(b) project ups its progress, it will complete with a negative SV value
and an SPI value less than 1.0—both indicators that the project
Figure 2. Calculating earned schedule. (a) The same curves as in Figure 1, but will be late.
with actual time (AT) and earned schedule (ES). (b) The formula for calculating Clearly, unfounded optimism in scheduling projects can be-
ES when AT is 10 weeks. Earned schedule lets a team enhance the predictive come a problem, since unforeseen risks can delay the project
power of earned value management. The prediction here is closer to the actual in unpredictable ways. Having sound and accurate monitoring
gap between the budgeted cost of work scheduled and the cost of work actually
performed. (Figures based on W. Lipke, “Schedule is Different,” The Measurable measures, such as earned schedule, can help the team know
News, Figure 4, 2003; http://www.earnedschedule.com/Docs/Schedule%20 when a project is starting to lag its schedule, and they can begin
is%20Different.pdf.) to address the problem right away.

time a project has reached the midway point in its execution,


schedule indices based on earned value might be significantly Event chain method
inaccurate.6 Using earned schedule to detect delays lets a project team
Lipke proposes earned schedule as a way to use EVM informa- detect problems as early as possible, but it is no substitute for
tion to see a more realistic picture of the overall project schedule. having contingency plans in place to respond to the delays. Such
Figure 2a shows the same curves as in Figure 1 but with two plans are the result of careful attention to risk planning and
new measures: AT (actual time) and ES (earned schedule). Ten management, using the steps in the sidebar “Risk and Project
weeks into the project (AT=10), the cost of work scheduled is Management” on p. 36. The event chain method is a power-
higher than the cost of work performed. Earned schedule is a ful tool for identifying and responding to both anticipated and
way to see that more clearly. As Figure 2a shows, project plan- unanticipated risks—a task that can be daunting in a complex
ners use familiar measures from earned value analysis. Figure project.7
2b explains how the formula works.
For the project in Figures 1 and 2, earned schedule gives a Event chains and project management
schedule credit of 7.33 weeks for the first 10 weeks of the proj- The event chain method has evolved from decades of refine-
ect because the value of BCWP at 10 weeks is greater than the ments in project management software. Software can now track
value of BCWS at week 7. In other words, earned schedule is an project details across many dimensions and check and maintain
estimate of the progress actually made by that point in the proj- thousands of constraints and project relationships. In addi-

PROGRAM MANAGEMENT OFFICE 33


tion to its tracking ability, project management software has Event 1
become increasingly more capable of considering alternative Requirements
Changed
scenarios, which empowers users to consider a wide range of
Excited
what-if scenarios. The event chain method offers guidance and Ground State
support along these lines, and it is consistent with the practices State
Activity 1
in the Project Management Institute’s Project Management Book Event Chain
Event 2
of Knowledge,8 including the use of Gantt charts, Monte Carlo Resources
analysis,9 and contingency planning. Risk planning can incorpo- Reallocated

rate these practices under the aegis of the event chain method.
Excited
Indeed, the event chain can often overcome flaws, such as the Ground State
conservative schedules that result from a Monte Carlo analysis, State
Activity 2 Event 3
which often fails to consider risk interventions that could short-
en the project. Consequently, vendors are starting to incorporate Additional
Resources
event chain methods in project management and control pack- Applied
ages in an attempt to provide greater insight and value to project
Ground
managers who want to understand and proactively respond to Ground State
State
project risks.
Activity 3

Understanding an event chain Figure 3. A three-event chain. Even this simple example illustrates how an event,
Figure 3 shows a simple event chain with three events. in this case, a requirements change, can affect the project. Events also have
The chain starts with an event—in this case, a requirements states. When each event raises an activity box (solid arrows), the activity the
event affects or prompts changes its state from ground to excited. The dashed
change—that can materially affect one or more project activi-
arrows denote whether an event is a sender or receiver. Understanding the chain
ties. An event can be any outcome that affects project execution. that events and responses form can help risk planners anticipate events that can
Some events, such as completing a project activity early or un- cause schedule delays.
der budget, can be fortunate. Many others could lead to costly
delays. When an event threatens to delay a project or reduce its
success, a response is mandatory. In Figure 3, the response is Event 2 becomes a sender event for Event 3, which is to apply
to reallocate resources. Such event outcomes and responses can more resources to Activity 3 because Activity 3 has started late
form chains of events that in combination determine the proj- from the delay in completing Activity 2. The extra resources
ect’s overall outcome. Reallocation, for example, means pulling spent on Activity 3 could come from another task, which might
resources from another part of the project, which can affect the prompt yet another event.
schedule of deliverables in that area. Even this simple example shows the response complexity of a
Some events might impact only one activity within a project. single event; in practice, event chains are far more involved.
Other events, such as a fire in the facility, could impact many
people and activities. A project team can build event chains that Implementation steps
account for these project impacts and allow for planning mitiga- Some practitioners of the event chain method recommend us-
tion measures, such as backing up project files off site. ing it to examine and plan for risks in an interactive structure
The events in any event chain have certain states, defined that involves two project teams or one project team and at least
from quantum mechanics terminology. When an event occurs, one new member who did not create the original plans. The idea
the activities it affects change their status from a ground state to is to have the new team or member review events with a fresh
an excited state. The excited state includes some form of implica- perspective, using their experience about what can go wrong
tion for their cost, duration, or quality. Each affected event is a with a project and when and their insight into the probability
subscribing event, and when a subscribing event affects multiple that such an event will occur in this project.
projects, it is a multicasting event.
Events that cause other events in response are called sender Step 1. The project team uses the results of a work break-
events, and those that occur in response to a sender event are down structure analysis to develop project plans and activities,
called receiver events. In Figure 3, Event 1 is a change to Activity laying out the expected resources and durations for all project
1’s requirements. The project team responds by devoting more activities.
resources to Activity 1. Event 2, the receiver event for Event 1,
shifts resources away from Activity 2 to successfully modify and Step 2. A second team (or new team member) reviews the
complete Activity 1. Thus, the result of Event 2 is that Activity original project team’s plans and schedules and introduces risk
2 will have fewer resources and will finish later than planned. elements to activities, identifying negative effects and when they

34 A N O B L I S P U B L I C AT I O N
Why Earned Value Management Can Be Misleading
Many large-scale projects use earned value management (EVM) to Months
track and monitor project progress, comparing the analytical results 0 5 10 15 20 25 30
-0
to the planned schedule and budget. In the federal government, -5
for example, current Office of Management and Budget guidelines -10
mandate the use of earned value analysis under A-11 for IT Project -15
Management and Reporting.1 EVM’s proponents believe in its predictive -20
power, maintaining that when a project is only 15 percent completed, Schedule
Variance -25
they can use EVM metrics to project the outcome in cost with at least -30
85 percent accuracy.2 -35
-40
But a closer look reveals at least one Achilles heel in schedule -45
prediction. As the main article describes, EVM’s schedule indices— -50
schedule variance (SV) and schedule performance index (SPI)—are
Figure B. Values of schedule variance (SV) for the project in Figure A. For a project to be on
developed from financial earned value measures; their values do not schedule, SV should equal zero, but that occurs only at the project’s start and end. The SV
explicitly incorporate important schedule effects. value is the budgeted cost of work performed minus the budgeted cost of work scheduled.

Originally Scheduled Project End Point


250 1.2
Actual Cost of Work Performed
Budgeted Cost of Work Scheduled 1.0
200
Budgeted Cost of Work Performed
.8
150
Thousands Schedule
of Dollars Performance .6
100 Index
.4

50 .2

0 .0
0 5 10 15 20 25 30 0 5 10 15 20 25 30
Months Months
Figure A. Three earned value analysis measures—in actual dollars—for an 18-month Figure C. Value of the schedule performance index (SPI) for the project in Figure A. For
project that completes in month 25. Although the budgeted cost of work performed ends a project to be on schedule, SPI should equal 1.0, but that occurs only at the project’s
with the budgeted cost of work scheduled at month 25, from month 7 on, the project is start and end. SPI is the ratio of budgeted cost of work performed to budgeted cost of
clearly severely delayed. work scheduled.

Figure A depicts the three earned value analysis dimensions and the projects do, relying solely on SV and SPI values can fail to provide
values expected for a hypothetical 18-month project that completes 7 project managers with useful guidance to control the schedule and
months late. Figures B and C depict the SV and SPI values, respectively. initiate a timely project course correction if necessary.

By month 18, SV is down to -45.0, indicating that the project is far References
behind schedule. However, by the project’s end, SV is zero, indicating 1. Circular No. A-11, Part 7, Planning, Budgeting, Acquisition, and Management of Capital Assets,
that the project ended on schedule, when in reality, it had a 39 percent Section 300, Executive Office of the President, Office of Management and Budget, July 2007; http://
www.whitehouse.gov/omb/circulars/a11/current_year/s300.pdf.
overall delay. Likewise, in month 14, the SPI bottoms at 0.73, but at the 2. D.S. Christensen, “Determining an Accurate Estimate at Completion,” National Contract Management
project’s end, it is 1.0. Thus, when a project goes off schedule, as most Journal, 1993; http://www.suu.edu/faculty/christensend/evms/eacncmj.pdf.

might occur. The second team can also suggest potential out- them as required, modifying the event chain as events unfold.
comes that are faster or cheaper than those planned. Both teams Completed activities are documented.
then develop a set of response events to mitigate or avoid the
effects. The direct tie-in to risk management occurs during Step 2.
By anticipating the possible events and outcomes within project
Step 3. Both teams review the event chain structure and in- activities, project managers can account for contingencies and
formation developed to date, working out a joint approach. evaluate responses before the contingencies occur. As the proj-
ect proceeds, the team can remove early activities and related
Step 4. The first project team continues to monitor project ex- contingencies from the analysis and future activities. If an unan-
ecution, implementing planned event responses or deviating from ticipated event occurs, the team can enter it into the event chain

PROGRAM MANAGEMENT OFFICE 35


and develop responses, reanalyzing the project from that point crease, as practitioners learn to represent typical risk scenarios
forward. and build a knowledge base of event templates and statistical
Project managers are already using software and procedures parameters to drive the approach.
to implement the event chain method10 and existing project man-

B
agement software is likely to incorporate similar features in the oth earned schedule and the event chain method are poised
near future. The complexity of event chains will probably in- to be practical tools in helping project managers generate
more accurate schedules. The earned schedule metric is
straightforward to adopt for those already acquainted with EVM.
Risk and Project Management Although the event chain method takes more effort to imple-
ment and practice, it is an important tool for projects that want
Each program management office (PMO) or project manager is challenged to to manage a broad spectrum of risks and to plan contingencies
manage risk over the project’s life. Project risk is the possibility that unfavor- more effectively.
able future events could severely impact the project team’s ability to achieve When used together, earned schedule and the event chain
the project’s cost, schedule, and technical performance objectives. method offer significant value. The same data structure and
Risk management is all about reducing the probability that problems will ma- information supports both sets of calculations, so earned value
terialize and mitigating or eliminating the effects if the problem does occur. and earned schedule measures can be part of the database for
When practiced systematically, risk management can provide a disciplined project management that uses the event chain method. If an
environment for the PMO to focus on the project’s goals and to reexamine
event occurs during project execution, the team must assess its
earlier decisions in light of new information or changing conditions. Risk
management can mean the difference between project success and project impact in light of the activities started but not completed and
failure. those not started. Thus, earned schedule is a valuable input to
the event chain method.
Risk management usually requires performing the eight steps in Table A.
As the table implies, risk management and project management must be in
It seems likely that project management software will increase
unison. Likewise, any risk management method must be tempered with judg- its support of earned value analysis, earned schedule, and the
ment and common sense. event chain method. Once project managers are more comfort-
able with planning for complex projects using risk-focused
Table A. Major steps in project risk management.
and integrated project management tools, state-of-the-practice
Risk Management Step Description knowledge will increase rapidly. Prudent project management
Look at all project activities and come to for complex projects will soon mandate the use of these tools in
Understand the
understand the likely risks; learn from ex- its quest to prepare for a range of contingencies and to improve
Environment
perience.
project schedule management. ■
Study the project risks to understand how
they can negatively affect project outcomes.
Identify Threats
Risk comes from many sources—both
to Project Success
internal and external. It can be operational,
financial, or technical.
References
1. C. Mangione, “Software Project Failure: The Reasons, The Costs,” CIO Update, 3 Jan. 2003; http://www.
Subjectively assess the likelihood of risk out- cioupdate.com/print.php/1563701.
Estimate Risk comes. Use statistical techniques to estimate 2. B. Flyvbjerg, “From Nobel Prize to Project Management: Getting Risks Right,” Project Management
Occurrence Probability if possible, but not all risks lend themselves Journal, Aug. 2006; http://flyvbjerg.plan.aau.dk/Publications2006/Nobel-PMJ2006.pdf.
to such techniques. 3. About PMI: About Us, Project Management Institute, Dec. 2007; http://www.pmi.org/aboutus/Pages/
About-PMI.aspx.
Study how risk events can negatively (or 4. Q. Fleming and J. Koppelmann, Earned Value Project Management, 3rd ed., Project Management
Assess Risk Impacts positively) impact the project’s results, Institute, Feb. 2006.
schedule, quality, and required resources. 5. W. Lipke, “Schedule is Different,” The Measurable News, 2003; http://www.earnedschedule.com/Docs/
Schedule%20is%20Different.pdf.
Determine what risk to address and when. 6. W. Lipke, “Connecting Earned Value to the Schedule,” The Measurable News, 2004; http://www.
Prioritize Risks Consider risk likelihood, degree of impact, earnedschedule.com/Docs/Connecting%20EV%20to%20the%20Schedule.pdf.
and response options. 7. L. Virine and M. Trumper, Schedule Network Analysis Using Event Chain Methodology, 2007; http://
www.projectdecisions.org/paper/Paper_EventChainMeethodology.pdf.
Develop risk responses and action plans
Define Action Plan 8. A Guide to the Project Management Body of Knowledge, Project Management Institute, 3rd ed., 2004;
to avoid or mitigate risks (possibly using http://www.pmi.org/Marketplace/Pages/ProductDetail.aspx?GMProduct=00100035801.
for Mitigation and
the event chain method, as the main article 9. S.D. Button, “Project Duration Prediction Using a Monte Carlo Simulation of the Periodic Output of
Response
describes). the Project Resources,” Journal on Monte Carlo Methods and Applications, Sept. 2003; http://www.
springerlink.com/content/111425/?p=6d25a1d522fb4cbf83db8b84d2f82248&pi=0.
Measure how risks have affected the project 10. Event Chain Methodology Overview, Intaver Institute, Inc., 2007; http://www.intaver.com/index-5.html.
Assess Effectiveness to date and adjust risk planning accordingly.
and Correct Course Determine if risk planning and mitigation
have made a noticeable difference. W. Scott Nainis is a senior principal at Noblis, where his interests include
telecommunications systems analysis and planning, business process reengineering,
Describe what everyone learned during and project management. He received a PhD in systems engineering from Case Western
Document Lessons project activities to indicate how well risk Reserve University. Contact him at snainis@noblis.org.
Learned management strategies worked and what
could be improved.

36 A N O B L I S P U B L I C AT I O N