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Formulating, Building, and Running a Monte Carlo Model (Pertmaster)

AACEi Technical Meeting, Risk Workshop 2 February 16, 2010


JA Gastelum MR Shay
PNNL-SA-70909

Brief Summary of January Presentation


Why implement a project risk assessment process How the Risk Management process works
Overview of process Products from the process Risk elicitation Qualitative and quantitative analysis Example outputs

Integrated Project Cost and Schedule Risk Management Flowchart


Risk Ranking
Establish Technical Baseline
Likelihood
Impact (Months) 0-10% 11-25%
0 3 0 2

Top Risks 76-90%


1 0 2 0

26-75%
1 0 1 28

91-100%
0 1 3 3

>12

2 0 0 4

Identify Risks in Major Work Areas

3-12 0-3 <.5

Assess Likelihood, Consequence & Timing of Risk

Cost Risk Analysis


Forecast: TOTAL CONTINGENCY COST 5,000 Trials
.029

Frequency Chart

5,000 Displayed
147

.022

110.2

.015

73.5

Perform Monte Carlo Simulation

.007 Mean = 21.45 .000 0.00 11.25 22.50 33.75 45.00

36.75

Certainty is 79.88% from -Infinity to 27.15 $M

Schedule Risk Analysis


Rank and Prioritize Risks
Distribution for Initiate KE Phase II/Start Schedule Risk for Operations Startup
1.000
M an=5/4/2005 e

Contingency Cost Profile


Contingency Profile 10.0 Millions of Dollars 8.0 6.0 4.0 2.0 0.0 2005 2006 2007 2008 2009

0.800

Define Mitigation Actions

0.600 0.400 0.200

Develop Contingency Cost & Schedule Risk


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0.000 11/9/2004

Nominal=1 /23/2004 1

4/8/2005
80%

9/5/2005 7/22/2005

2/2/2006
10%

7/3/2006

10%

2/22/2005

Agenda for Workshop 2


Formulating, building, and running a Monte Carlo model (Pertmaster)

Definition of Example Project Risk Identification Basic Structures used by Pertmaster to Model risks Loading Risks and Structures into Pertmaster Running Pertmaster Expected Project Risk Posture Improving Expected Project Risk Posture

The Project Landscaping the back yard


Context: Just moved into new house, Backyard is not landscaped or fenced, Daughter just announced a June 1st wedding at your house. Project: Install Irrigation System, Fence, and Sod in Barren Backyard
Use 5K bonus to fund project Be done long before Wedding

Project Gantt Chart

Project Risk Elicitation


Identify and Characterize Major Risks to the Project as defined.

Identified Risks

How Pertmaster Represents an Identified Risk


Identified risk affects a scheduled activity (risky activity) Need two new activities to model risk
Baseline (:B) activity with same duration as risky activity, assigned as child to risky activity Risk activity that carries distributions from elicitation, also assigned as child to risk activity.

Result is that risky activitys cost and duration increase when risk is realized
Before:

After:

Risk Ready Schedule


Schedule is logically linked
Activities are constrained primarily by other activities, not explicit constraints

LOE activities can stretch with scope


Activity modeled as hammock and linked to supported scope

Activities are cost loaded appropriately


Normal - cost of activity is dependent on duration Spread - cost of activity is independent of duration

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Estimation Uncertainty
Second source of variation in Pertmaster Captures inherent uncertainty in the original estimate (both cost and schedule) Generally significantly smaller than contribution from identified risks

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Getting Risks out of the Register and into Pertmaster


Exploit a feature of Pertmastercopy and paste
Step 1: Validate risks
Do I have all the info I need to model the risk in Pertmaster?

Step 2: Build risk structures


Format data from elicitation, using Pertmaster conventions
From: Ive got a bad back, so if Ive got to trench by hand it could take four to six more days than I had planned. Mike Shay, Project Manager To: Uniform(4;6)

Step 3: Paste into PM

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Running Pertmaster
Static Risk Loaded Plan Iteration with Realized Risks

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Initial Results
Entire Plan : Finish Date
100% 09/Jun/10 95% 04/Jun/10 90% 02/Jun/10 280 85% 01/Jun/10 260 80% 01/Jun/10 240 300

Data Finish Date of : Entire Plan

Duration Sensitivity

Analysis Simulation Latin Hypercube 1000

IRR04:OWNERYARD:IRR-002 - Too many rocks and roots means that tren...

62%

Iterations

Analysis Iterations: 1000


SOD03:OWNERYARD:SOD-002 - Forecast predicts inclement w eather du... 56%

Sensitivity measurement Pearson's product moment Measured Against: Entire Plan

Statistics
75% 01/Jun/10

Minimum:
220 70% 31/May/10 65% 31/May/10 200 60% 30/May/10 180 55% 29/May/10

23/May/10 09/Jun/10 29/May/10 day

FNC03 - Dig holes

28%

Display settings Normal tasks only Show ing 10 highest values

Maximum: Mean: Bar Width:

IRR05 - Install system

26%

Values greater than:

Cumulative Frequency

Highlighters
SOD01:OWNERYARD:SOD-001 - Delivery of SOD is delayed. 24%

Hits

160

50% 28/May/10 45% 28/May/10 40% 28/May/10

Deterministic (25/May/10) 50% 80%

12% 28/May/10 01/Jun/10


IRR01 - Design system 21%

140

120 35% 28/May/10 100 30% 28/May/10 80 25% 28/May/10 FNC04:OWNERYARD:FNC-001 - Post installation takes substantially longe... 60 20% 27/May/10 15% 26/May/10 40 10% 25/May/10 20 5% 25/May/10 0% 23/May/10 24/May/10 29/May/10 03/Jun/10 08/Jun/10 IRR02 - Prepare bill of materials 0% FNC05 - Install fencing 3% 6% IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri... 18%

Distribution (start of interval)

Entire Plan : Cost


100% $5,809 150 95% $5,506 140 90% $5,437

Data Cost of: Entire Plan

Cost Sensitivity

Analysis Simulation Latin Hypercube 1000

IRRIGATION:OWNERYARD:IRR-001 - Irrigation increases qualif ying age fo...

73%

Iterations

Analysis
130 85% $5,370 80% $5,313 120 75% $5,255

Sensitivity measurement 1000


FENCE:OWNERYARD:FNC-002 - Financing terms change, substantially inc... 53%

Iterations:

Pearson's product moment Measured Against: Entire Plan

Statistics Minimum: $4,379 $5,809 $5,058 $100


FNC02 - Buy f encing materials 22% SOD02 - Sod delivered 33%

110

Display settings Tasks Displayed: Normal tasks Milestone tasks Monitor tasks

70% $5,214 65% $5,169 60% $5,128

Maximum: Mean: Bar Width:

100

90 55% $5,093

Cumulative Frequency

Highlighters Deterministic ($4,700) 50% 80% 12% $5,064 $5,313


IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri... 6% IRR03 - Buy irrigation system materials 11%

Hammock tasks Show ing 10 highest values Values greater than: 0

Hits

80 50% $5,064 70 45% $5,029 40% $5,000 35% $4,953 50 30% $4,894 40 25% $4,842 20% $4,786 15% $4,734 20 10% $4,675 10 5% $4,612 0% $4,379 $4,500 $5,000 $5,500

60

IRR01 - Design system

0%

30

IRR02 - Prepare bill of materials

0%

SOD01 - Order sod

0%

SOD04 - Landscape complete

0%

Distribution (start of interval)

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Identified Risks

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Results with Mitigations


Entire Plan : Finish Date
350 100% 03/Jun/10 95% 01/Jun/10 90% 01/Jun/10

Data Finish Date of: Entire Plan

Duration Sensitivity

Analysis Simulation Latin Hypercube 1000

SOD03:OWNERYARD:SOD-002 - Forecast predicts inclement w eather du...

68%

Iterations

Analysis
300 85% 01/Jun/10 80% 31/May/10

Sensitivity measurement 1000


IRR05 - Install system 36%

Iterations:

Pearson's product moment Measured Against: Entire Plan

Statistics
75% 31/May/10 FNC03 - Dig holes 34%

Minimum:
250 70% 29/May/10 65% 29/May/10 60% 29/May/10 200 55% 28/May/10

23/May/10 03/Jun/10 28/May/10 day


SOD01:OWNERYARD:SOD-001 - Delivery of SOD is delayed. 29%

Display settings Normal tasks only Show ing 10 highest values Values greater than: 0

Maximum: Mean: Bar Width:

Cumulative Frequency

Highlighters Deterministic (25/May/10) 50% 80% 21% 28/May/10 31/May/10

IRR01 - Design system

24%

Hits

50% 28/May/10 45% 28/May/10 150 40% 28/May/10 35% 28/May/10

IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri...

23%

FNC04:OWNERYARD:FNC-001U - Post installation takes substantially long... 30% 28/May/10 100 25% 27/May/10 IRR04:OWNERYARD:IRR-002M - Too many rocks and roots means that tre... 20% 25/May/10 15% 25/May/10 IRR04:OWNERYARD:IRR-002U - Too many rocks and roots means that tre... 10% 25/May/10 5% 24/May/10 FNC05 - Install fencing 0 23/May/10 25/May/10 27/May/10 29/May/10 31/May/10 02/Jun/10 0% 23/May/10 04/Jun/10 1% 3%

8%

6%

50

Distribution (start of interval)

Entire Plan : Cost


100% $5,651 95% $5,303 160 90% $5,229

Data Cost of: Entire Plan

Cost Sensitivity

Analysis Simulation Latin Hypercube 1000

IRRIGATION:OWNERYARD:IRR-001 - Irrigation increases qualifying age fo...

86%

Iterations

Analysis
85% $5,187 140 80% $5,147

Sensitivity measurement 1000


SOD02 - Sod delivered 34%

Iterations:

Pearson's product moment Measured Against: Entire Plan

Statistics
75% $5,121

Minimum:
120 70% $5,083 65% $5,043 60% $5,012 100 55% $4,967

$4,405 $5,651 $4,916

FNC02 - Buy fencing materials

28%

Display settings Tasks Displayed: Normal tasks

Maximum: Mean: Bar Width:

FENCE:OWNERYARD:FNC-002U - Financing terms change, substantially i...

26%

$100 Show ing 10 highest values

Hammock tasks

Cumulative Frequency

Highlighters Deterministic ($4,700) 50% 80% 24% $4,910 $5,147

IRR03 - Buy irrigation system materials

20%

Values greater than:

Hits

50% $4,910 80 45% $4,851 40% $4,807 35% $4,769

IRR05 - Install system

5%

60

IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri... 30% $4,735 25% $4,704 40 20% $4,676 15% $4,643 20 IRR01 - Design system 10% $4,611 5% $4,553 IRR02 - Prepare bill of materials 0 $4,600 $4,800 $5,000 $5,200 $5,400 $5,600 0% $4,405 FNC05 - Install fencing

4%

3%

0%

0%

Distribution (start of interval)

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Summary of Workshop 2
Defined an Example Project Identified Risks Discussed Basic Structures used by Pertmaster to Model risks Examined Risks and Structures Loaded into Pertmaster Ran Pertmaster Examined the Expected Project Risk Posture Examined the Improved Expected Project Risk Posture

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Questions/Discussions

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