Schedule risk in project management is the possibility that an activity or an entire project takes longer than initially planned. This often results in late completion and increased project cost. Schedule risk is frequently ignored during project planning and is only considered just before the project is presented for approval, leaving the project with little time to plan for risk mitigation actions or schedule contingency.
This article discusses the shortcomings of schedule risk identification in early planning phases, specifically in mining capital projects. Basic planning principles and schedule development methods for including risk during planning are discussed, as well as setting up the schedule for a Quantitative Risk Assessment (QRA) to determine schedule and cost contingencies.
Why is it important to provide for schedule risk?
The early stages of Front-end Planning (FEP) are performed to define a project and to reduce a project’s risk exposure. Optimal use of FEP will improve the predictability of the project and increase the likelihood of success. The primary focus of FEP for some project teams is to reduce project cost, while less emphasis is placed on de-risking the project schedule. This is shortsighted, as time overruns almost always lead to cost overruns.
Following are five methods I have found useful to increase schedule risk awareness during FEP phases and to prepare a realistic project schedule.
Method 1: Document risk drivers when developing your schedule
When developing a schedule during FEP, planners are often pressed for time to complete the schedule. Planners should guard against creating low integrity schedules just to meet deadlines. Identifying risk drivers while developing the schedule enables the team to plan for those risks and mitigate, or even eliminate them, before they can occur. Make use of columns in your scheduling software (risk cause, risk description, risk effect, probability, frequency of occurrence, impact, and response actions) to indicate the risks applicable to each line item. This information will be invaluable when conducting a QRA as the risks are already highlighted.
Method 2: Avoid overly optimistic durations
Scheduling unrealistically optimistic durations during FEP have no benefit during execution, neither to the project nor to the business. It reduces the likelihood of delivering the project within the communicated time and budget and degrades the confidence stakeholders have in the project team. Be realistic when estimating durations and make use of actual durations from similar previous projects and experience of team members.
Method 3: Conduct an independent schedule review
Independent project schedule reviews can be performed on both the project management and technical deliverables during FEP. Schedule reviews do, however, require review of all the planning information such as the scope of work and basis of schedule. Although this will not eliminate risks entirely, it will reduce uncertainty and improve the overall risk profile of the project.
Method 4: Apply the theory of constraints and critical chain scheduling
After determining the critical path of the project, evaluate the resource availability for activities in the schedule. This may result in a resource constrained project schedule and critical path which may require some alterations.
The alterations can then be done by applying the critical chain method when scheduling a single project. When resources work on multiple concurrent projects, consider theory of constraints (TOC). In an article `Project management applications of the theory of constraints beyond critical chain scheduling` by Herman Steyn he lists 5 steps to approach TOC:
- Identify the constraint(s) of the system;
- Decide how to exploit the constraint(s);
- Subordinate non-constraints to the decision(s) on exploiting the constraint(s);
- Elevate the constraint(s) (in other words: take steps to “widen the bottleneck”); and
- By returning to Step 1 above, determine whether the new constraint has been uncovered, rendering the constraint under consideration a non-constrain or less critical.
Method 5: Conduct quantitative risk assessment (QRA)
To conduct a schedule QRA, the impact of risk on the project is expressed numerically in terms of additional or reduced durations. Schedule contingency is calculated for both the entire project and the individual networks in the schedule. This assists with managing schedule contingency for the project and for individual contracts in the schedule. To calculate contingency through probability distribution methods or any other reputable method, contingency can be justified, which increases the probability of delivering the project in the expected time.
Werner G Meyer, author of ‘Quantifying risk, measuring the invisible’, writes more about Quantitative Risk Assessments.