module 7 - schedule risk analysis_rev0 (2)

PROJECT CONTROLS DEVELOPMENT PROGRAM

MODULE 7 SCHEDULE RISK ANALYSIS

PCDP Module 7 - Schedule Risk Analysis Rev. 0

MODULE 7 - SCHEDULE RISK ANALYSIS Rev Description Originator Review Approved Date

0 Released for Global Implementation Ed Cimic Project Controls R5 Management Team

Project Controls R5 Management Team

1 Nov 2011

This document has been prepared for the exclusive use of WorleyParsons. Copying this document without the permission of WorleyParsons is not permitted.

SPECIAL ACKNOWLEDGEMENTS:

Mark Spanos,

A pessimist because of intelligence, an optimist because of will

NOTE: Review of Module 1 Introduction to Project Controls is required prior to studying this module.

PROJECT CONTROLS DEVELOPMENT PROGRAM


This Training Module is part 7 of an 8 modular training program designed to provide the participants with an overall introduction to the skills & knowledge required by Project Controls when executing an EPCM / PMC project.

The complete training program consists of the following modules:

Module 1 - Introduction To Project Controls

Module 2 - EPC Schedule Development (including P6 user skills)

Module 3 - Services Management (including InControl V8.0 user skills)

Module 4 - Commercial Performance Management

Module 5 - Introduction to TIC Cost Estimation

Module 6 - TIC Management (including Prediction Plus / InControl V10 user skills)

Module 7 - Schedule Risk Analysis (including Primavera Risk Analysis user skills)

Module 8 - Cost Risk Analysis (including @Risk user skills)

The aim of this document is to provide a hands-on guideline to assist the project controller in obtaining a basic understanding of the Schedule Risk Analysis process.

Upon completion of Module 7, participants will be able to:

Understand the concept of Schedule Risk Analysis Convert an EPC Schedule into a Schedule Risk Analysis Model Understand the Risk Ranging Process Generate Schedule Risk Analysis Reports / Graphs Understand and Interpret Schedule Risk Analysis Reports Utilise the basic functions of Primavera Risk Analysis

Module Content:

1.0 Schedule Risk Analysis? 6

1.1 Uncertainty and Risk in Cost Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.0 Project Risk Management 8

2.1 Risk Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2.2 Risk Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2.3 Qualitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

2.4 Quantitative Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2.5 Risk Response Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2.6 Risk Monitoring & Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.0 Quantitative Schedule Risk 19

3.1 Schedule Risk Analysis: Key Steps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3.2 Basic Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

4.0 Cost Risk Analysis Process 28

4.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

4.2 Can we meet the deadline? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

4.3 Main Execution Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4.4 Contract 1- EPCM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

4.5 Contract 2 - Module Fabrication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Page 4

SCHEDULE RISK ANALYSIS


6.6 Contract 3 - Transport & Installation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

6.7 Contract 4 - Brownfield Modifications / Tie-ins / HUC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

6.8 Contract 5 - Accommodation Vessel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Training Exercises

Exercise 1 - Develop Cost Risk Analysis Model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Exercise 2 - Risk Analysis Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Exercise 3 - Risk Analysis Results & Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

5.0 Glossary of Terms 53

Attachment 1 - Risk Model (042_TRN007_xx.xls)

Page 5


ules more often than not overrun their targets.

Schedule slippages can result in schedule Critical Path changes; Changes in the Critical Path often impact originally planned project execution strategies. And so on

So why does all this happen?

Most of the schedule slippages are usually explained by one of the following factors:

imposed unrealistic targets completeness/correctness of

activities logical sequencing

improper use of constraints inadequate resources loading However, the fundamental rea-son for schedule slippages lies in the very nature of CPM (Critical

Path Method):

Activity durations (and costs) are defined by single estimat-ed values, often viewed as most likely values

As such, activity durations are defined as deterministic, so the uncertainty is not taken into account

CPM technique itself leads to the optimistic result due to as soon as possible approach

Project completion date gets predicted, and regarded as a certain, solid commitment against which a number of project performance targets are established

The fact that activity durations (and associated costs) are only estimates, and therefore uncer-tain, means that they may not go as planned, but may take more or less time to complete.

This is true even for activities repeated many times over a number of projects.

Figure 1 on page 7 illustrates that fact by showing the original (likely) activities durations as bars, along with triangular shapes at the bars right end points representing possible ranges of optimistic and pessi-mistic activity durations.

Supported by experience and measured evidence from pro-jects, this likely variability of ac-tivities durations, enhanced by complexities of their logical rela-tionships, often impacts major milestone(s) or overall schedule.

1.1 CPM (CRITICAL PATH METHOD) & CERTAINTY versus UNCERTAINTY

PCDP Module 2 - EPC Schedule Development described the pro-cesses, techniques and tools used by WorleyParsons to build project schedules.

Not much different than with any other organization engaging in project delivery: project plans and schedules are one of the essential tools of project man-agement.

PMI (Project Management Insti-tute) suggest in their best prac-tices documents that all projects must be managed to their sched-ules.

And yet, despite all knowledge, sophisticated software and en-gagement of experienced Project Delivery teams, project sched-


1 .0 SCHEDULE RISK ANALYSIS

When you reach the top,

keep climbing

~ / ~ Zen proverb

Sometimes this impact may take place as a surprise, be-tween two reporting periods and have dramatic conse-quence, and some other times, a number of small, incremen-tal changes over longer peri-ods may add to a significant impact on project schedule

With the repeated reference to the PCDP Module 2, where aspects of schedule uncertain-ty are brought up in its sections 5.8 Risks and Opportunities and 5.13 Schedule Reserve, this PCDP module 7 is dedicat-ed to the review of probabilistic approaches and related pro-cesses, techniques and tools.

The processes of project risk management will be described in more detail in the subse-quent sections.

Schedule risk analysis comes with answers not possible or

not available in CPM planning/scheduling approach:

Probabilistic View offering Uncertain durations (and

costs) are defined by three-point estimates - optimistic (low or minimum), likely and pessimistic (high or maxi-mum)

Durations (and costs) are expressed as PDFs (Probability Distribution Func-tions)

The range of expected values (dates, costs) are obtained by simulation

Some of the benefits of schedule risk analysis are:

It provides a range of possible completion dates (range of expected costs) along with corresponding probabilities

Provides the extent of possible overruns and required contin-gency reserve

Identifies the areas of greatest risks, inclusive of analysis of near-critical paths

Provides inputs to risks re-sponse plans

And more But before continuing with the more focused and detailed train-ing in quantitative schedule risk analysis, the entire next chapter is dedicated to the broader sub-ject of project risk management, and as such it is shared / repeat-ed in the PCDP Module 8 - Cost Risk Analysis.

Page 7


Figure 1 Activity Duration Uncertainty


Risk management is an essential and integral part of the Wor-leyParsons project delivery pro-cess.

Understanding project risks is key for successful implementa-tion of cost risk analysis.

As per PMI PMBOK Guide 4th Edition (ANSI/PMI 99-001-2008):The objectives of Project Risk Management are to in-crease the probability and impact of positive events and decrease the probability and impact of negative events in the project.

Project Risk Management in-cludes the processes of conduct-ing risk management planning, identification, analysis, response planning, and monitoring and control on a project.

2.1 RISK PLANNING

Planning for risk management is the process that defines how to approach, plan, and execute the risk management activities for a project. It creates a roadmap for the remaining risk management processes.

This process is general and high level in nature and therefore takes place early on the project.

The output of the risk manage-ment planning is the Risk Man-agement Plan (RMP).

The RMP details the risk man-agement activities that will be

undertaken by the project includ-ing the purpose, scope, process, responsibilities and extent of technical risk studies.

Another important part of risk management plan is a descrip-tion of how risks will be catego-rized.

A tool for creating consistent risk categories is the Risk Break-down Structure (RBS).

In the RBS, the categories of risks are decomposed into fur-ther details. An example of RBS showing risk categories is shown in Figure 3.

The risk management plan is plotted out by meeting with all appropriate stakeholders.

This is followed up with a further analysis to determine the appro-priate level of risk and the ap-proach warranted on the project.

The RMP is either referred to or included in the Project Execution Plan (PEP) as required. For more information, please refer to the EMS Task Sheet PAP-9002.

2.2 RISK IDENTIFICA-TION

Risk identification is a formalized process that identifies which risks could impact the project and to understand the nature of these risks.

Risk identification builds the risk

register, which is a list of all risks, their causes, and any pos-sible responses to those risks that can be identified at this point in the project. (Please refer to WorleyParsons Risk Manage-ment Software Ver. 4.05, its risk register template and guideline)

Typically, identifying the risks is the first step in the Cost Risk Analysis process. There are various tools available for the risk identification process:

Documentation Reviews

A documentation review is struc-tured review of project documen-tation, including cost estimate and schedule basis, assump-tions, prior project files, and oth-er information.

The documentation is reviewed for completeness, correctness, and consistency.

Information Gathering Techniques

There are numerous techniques for gathering information to cre-ate the risk register.

2.0 PROJECT RISK MANAGEMENT

My education was interrupted

only by my schooling.

~/~ Winston Churchill


The techniques most commonly applied in the context of risk are:

Brainstorming Delphi Technique Expert Interviews Root Cause Analysis Checklist Analysis

Checklist analysis uses a Risk Breakdown Structure (RBS) to check off items and ensure that all significant risks or categories are being evaluated.

Although it may not be exhaus-tive, this tool provides structure to the Risk Identification process.

Assumption Analysis

Assumptions should not only be documented, they should also be analysed and challenged if nec-essary.

Diagramming Techniques

Ishikawa diagrams, also called cause-and-effect diagrams and fishbone diagrams, are another way to show how potential caus-es can lead to risks.

Another diagramming method used to identify risks is Influence Diagram. This diagram shows how one set of factors may influ-ence another.

For instance, late arrival of mate-rial may not be a significant risk by itself, but it may influence other factors, such as triggering overtime work or causing quality problems later on in the project due to inadequate time to properly perform the work.

Figure 3 Example Risk Breakdown Structure (RBS)

I have a num-ber of alterna-tives, and each one gives me

something different.

~ / ~ Glenn Hoddle


Finally, flow charts are useful in identifying risks. Flow charts are graphical representation of com-plex process flows.

They are especially helpful when used to sketch something very complex into an understandable diagram.

SWOT Analysis

Strengths, Weaknesses, Oppor-tunities and Threats (SWOT) analysis is another practical tool used to identify potential risks and group them into four chart quadrants representing strengths (S), weaknesses (W), opportuni-ties (O), and threats (T).

Strengths and weaknesses are usually of internal nature, while opportunities and threats present themselves as external risks to project.

SWOT analysis can give another perspective on risks that will often help identify the most sig-nificant project risk factors.

WorleyParsons provides a brain-storming prompt list to aid in the identification of Threats and Op-portunities which may arise. Please refer to the EMS CRP-0013 Risk Brainstorming Prompt List for additional details.

2.3 QUALITATIVE RISK ANALYSIS

Qualitative risk analysis process helps to rank and prioritize the

risks so that the right emphasis is put on the right risks.

It helps to ensure that time and resources are spent in the ap-propriate risk areas.

Qualitative risk analysis is a risk probability and impact assess-ment process.

It takes each risk from the risk register and analyses its proba-

bility of occurring and impact to the project.

Risk Event = Risk Probability x Impact (Value)

Probability = Frequency of Rel-evant Event / Total Number of Possible Events

Impact = Value of Loss / Gain

Figure 4 SWOT Analysis Chart

Between two evils, I always

choose the one I never

tried before ~/~

Mae West


By using the probability and impact matrix (PIM), a prioritiza-tion and ranking can be created, which is updated on the risk register.

Each risk in the risk register is evaluated for its likelihood of occurring (probability) and its potential impact on the project. Each of these two values are given a ranking:

Risk Probability Scale falls be-tween 0.0 no probability, and 1.0 certainty.

Risks Impact Scale can be de-scriptive, i.e. very low, low, me-dium, high, very high; or numeric 0.1/0.3/0.5/0.7/0.9

The risk probability and impact are multiplied together to get a risk score.

This resulting score is used to set priorities and relative risk ranking. WorleyParsons pro-vides guidelines for Likelihood and Consequence scales in risk assessments. (For more, please

refer EMS document CRP-0012)

Teams are advised to review the categories and determine a scale that is relevant to their project.

Sometimes something

worth doing is worth

overdoing. ~/~

David Letterman


Risk Analysis is no

more about risk than

astronomy is about

telescopes. ~/~

Edsger W. Dijkstra

Figure 5 Sample Risk Register


The main output from the Quali-tative Risk Analysis is an updat-ed Risk Register. The next step is to add more details to the register including the following:

Relative ranking or priority of project risks

The urgency of the risks The categorization of the risks The Risk treatment plan, and Any trends that were noticed

in performing the qualitative risk analysis.

An example of the risk register is shown in Fig 5 on page 14.

2.4 QUANTITATIVE RISK ANALYSIS

Performing Quantitative Risk Analysis generally follows the risk identification and qualitative risk analysis.

It is the process of numerically analysing the effect of identified risks on project objectives

It is performed on risks that have been prioritized by the Qualita-tive Risk Analysis process as potentially and substantially impacting the projects compet-ing demands.

Quantitative Risk Analysis anal-yses the effect of those risk

events and assigns a numerical rating to those risks individually or evaluates the aggregate ef-fect of all risks affecting the pro-ject.

It also presents a quantitative approach to making decisions in the presence of uncertainty.

There are various tools and methods available for quantita-tive risk analysis process:

Data Gathering & Representa-tion techniques (Interviewing)

Interviewing uses a structured interview to ask experts about the likelihood and impact of identified risks.

After interviewing several ex-perts, for instance, the project manager might create pessimis-tic, optimistic, and realistic val-ues associated with each risk.

Sensitivity Analysis

Sensitivity analysis is used to determine which risks have the most potential impact and the

degree of overall project sensitiv-ity to any of the evaluated risks while all other variables are kept constant.

Its the simplest form of risk anal-ysis, which helps to determine which risks have the most poten-tial impact on the project.

It examines the extent to which the uncertainty of each project element affects the objective examined, when all other uncer-tain elements are held at their baseline values.

The advantage of this method is that it gives a range of possible outcomes in which critical varia-bles are easily compared in a sensitivity diagram.

The weakness of this method is that variables are treated individ-ually, limiting the extent to which combinations of variables can be assessed, and a sensitivity dia-gram gives no indication of antic-ipated probability of occurrence.


Probability Analysis

Probability analysis overcomes the limitations of sensitivity analy-sis by specifying a probability distribution for each variable.

Probability distributions are math-ematical representations that show the probability of an event occurring.

The probability is usually ex-pressed as a table or graph. Consider flipping a coin as an example.

There would be two possible outcomes from this event: head or tail.

Now imagine flipping this coin six times. Doing this, the probability of the coin landing on heads a given number of times can be analysed.

Probability distributions are very useful for analysing risks.

They consider situations where any or all of risk variables can be changed at the same time, allow-ing the project manager to take a good look at the probability of an event occurring and to make a rational decision about how to approach the risk.

The most typical probability distri-butions used in quantitative risk analysis are:

Triangular, if Optimistic (Min), Pessimistic (Max) and Most Likely scenarios are used.

Normal or Log Normal, if mean and standard deviation are used.

Other common distribution types include: trigen, uniform, beta, pert, etc.

The disadvantage of using the probability analysis method is that defining the probability of occurrence for any specific varia-ble may be difficult, as every project is different.

Expected Monetary Value Analysis (EMV)

Expected monetary value analy-sis takes uncertain events and assigns a most likely monetary value.

It is a statistical concept that calculates the average outcome of future scenarios.

Opportunities are expressed as positive and threats are ex-pressed as negative values.

EMV is calculated by multiplying the outcomes values and proba-bilities, and adding them togeth-er.

EMV is typically calculated by using decision tree analysis.

Decision Tree Analysis

Decision trees describe a deci-sion under consideration and the implications of choosing one or another of the available alterna-tives. It incorporates probabilities of risks and the costs or rewards of each logical path of events and future decisions.

When someone says hes going to

put all his cards on the table, always look up his

sleeves ~ / ~

Lord Leslie Hore-Belisha


Solving the decision tree indi-cates which decision yields the greatest expected value to the decision maker when all the un-certain implications, costs, re-wards, and subsequent decisions are quantified.

Modelling and Simulation

Modelling and simulation meth-ods are approaches that trans-late the uncertainties into their potential impact on project objec-tives.

There are almost as many types of simulation as there are pro-jects; however, one technique used for schedule and cost risk analysis is Monte Carlo simula-tion.

Cost risk modelling and Monte Carlo simulation using @Risk software is the preferred method used by WorleyParsons. Sched-

ule risk modelling and Monte Carlo simulation using Pri-mavera Risk Analysis Expert (formerly Pertmaster) is the pre-ferred method used by Wor-leyParsons.

2.5 RISK RESPONSE PLANNING

Earlier, in the process of Plan Risk Management, we created a general approach to risk ( the risk management plan).

Then, in risk identification pro-cess, we created a list of risks and started our risk register.

Then we qualitatively and quanti-tatively analysed the risks, and now we are ready to create a detailed plan for managing the risks.

This is exactly what Risk Re-sponse Planning does; it creates a plan for how each risk will be handled. The resulting plan is actionable, meaning that it as-signs specific tasks and responsi-bilities to specific team members.

Remember that risk can be a positive (opportunity) or negative (threat) event.

Figure 6 Sample Decision Tree

EMV of the Chance Node $ 41.5M

EMV of the Decision $ 49 Build or Upgrade?

Build New Plant

Upgrade Existing Plant

Strong Demand

Weak Demand

Strong Demand

Weak Demand

False - $ 120

True - $ 50

EMV of the Chance Node $ 49.0M

65% $200

35% $ 90

65% $120

35% $ 60

$80M

-$30M

$70M

$10M

If builders built buildings

the way programmers

wrote programs,

then the first woodpecker

that came along would

destroy civilization.

~/~ Murphy's Laws of

Technology


If an expert says it cant be done, get

another expert

~ / ~ David Ben-

Gurion

Therefore, careful consideration must be given to each risk, whether the impact of that risk is positive or negative.

Avoidance

Avoidance is changing project plan to eliminate risk, to isolate the project objectives form the risks impact, or to relax the ob-jective that is in jeopardy.

Examples of this method are extending the schedule, reducing scope to avoid high-risk activi-ties, adopting familiar approach instead of innovative one, and avoiding an unfamiliar subcon-tractor.

Transference

Transferring a risk is shifting the negative impact of a threat, along with the ownership of the re-sponse, to a third party.

Contractual agreements, warran-ties, and insurance are common ways to transfer risks.

Mitigation

Mitigating a risk is the reduction in the probability and/ or impact of an adverse risk event to an acceptable threshold.

For instance, if you were con-cerned about the risk of winter weather damage to a construc-tion project, a mitigation plan can

be to construct the building out-side of the winter season.

As stressed earlier, risks can be positive or negative, and where positive risks are concerned, the project manager wants to take steps to make them more likely.

The following are specific strate-gies taken to capitalize on the positive risks.

Exploit

Exploit means eliminating the uncertainty associated with an upside risk by making the oppor-tunity definitely happen.

For instance, if a positive risk of finishing the project early is iden-tified, then adding more talented resources to ensure that the project is completed early would be an example of exploiting the risk.

Share

In order to share a positive risk, the project seeks to improve their chance of risk occurring by work-ing with another party.

For example, if a contractor iden-tifies a positive risk of getting a large order, they may determine that sharing that positive risk by partnering with another contrac-tor would be an acceptable strat-egy.

Enhance

Enhancing is modifying the size of an opportunity by increasing probability and/or positive im-pacts, and by identifying and maximizing key drivers of these positive-impact risks.

Enhancing a positive risk first requires understanding the un-derlying causes of the risk.

By working to influence the un-derlying risk triggers, you can increase the likelihood of the risk occurring.

For example, an airline might add flights to a popular route during holidays to enhance traffic and profitability during heavy travel times.


Theres no secret about success. Did

you ever meet a successful man that didn't tell you all about

it?

~ / ~ Kim Hubbard

Acceptance

Acceptance is often a reasonable strategy for dealing with risk, whether positive or negative.

When accepting a risk you are simply acknowledging that the best strategy may not be to avoid, transfer, mitigate, share, or enhance.

Instead, the best strategy may be simply to accept it and continue with the project.

There are two kinds of ac-ceptance strategies:

Passive Acceptance: requires no action, leaving project team to deal with the threats or opportu-nities as they occur.

Active Acceptance: establishing a contingency reserve, including amounts of time, money, or re-sources to handle known, or sometimes potential, unknown threats or opportunities.

Acceptance may be the best strategy if the cost or impact of the other strategies is too great.

Contingent Response Strategy

A contingent response strategy is one where the project team may make one decision related to risk, but make that decision con-tingent upon certain conditions.

It is a response designed for use only if certain events occur, or predefined conditions take place.

For example, a project team may decide to mitigate a technology risk by hiring an outside firm with expertise in that technology, but that decision might be contingent upon the outside firm meeting intermediate milestones related to that risk.

The Risk Response Planning is recorded in the Risk Register. The risk register which is devel-oped in risk identification is fur-ther updated during qualitative and quantitative risk analysis.

In Risk Response Planning pro-cess, appropriate responses are chosen, agreed-upon, and in-cluded in the risk register.

Components of the risk register at this point can include:

Identified risks, their descrip-tions, their causes (eg. RBS element), and how they may affect project objectives.

Risk owners and assigned responsibilities

Outputs from the qualitative and quantitative risk analysis, including prioritized risks and probabilistic analysis of the project.

Agreed-upon response strate-gies.

Specific actions to implement the chosen response strategy.

Symptoms and warning signs of risks occurrence.

Budget (or schedule) activities required to implement the cho-sen responses.

Contingency reserves de-signed to provide for stake-holders risk tolerances.

Contingency plans and triggers that call for their execution.

Fallback plans for use as a reaction to a risk that has oc-curred, and the primary re-sponse proves to be inade-quate.

Residual risks that are ex-pected to remain after planned responses have been taken, as well as those that have been deliberately accepted.

Secondary risks that arise as a direct outcome of implementing a risk response.

Contingency reserves that are calculated based on the quanti-tative cost risk analysis.


If opportunity doesnt knock, build a door

~ / ~ Milton Berle

2.6 RISK MONITORING & CONTROL

Plans have to be re-assessed and re-evaluated.

Where risk is concerned, weve done quite a bit of planning, iden-tifying, analysing, and predicting, but the process of Risk Monitor-ing & Control takes a look back to evaluate how all of that plan-ning is lining up with reality.

Monitor and control risks is a process that is performed almost continually throughout the pro-ject.

Risk Assessment

As you perform a project, your information about risks changes. You should assess this infor-mation as often as necessary in order to make sure that the risk needs of the project are current and accurate.

Risk Audits

Risk audits are focused on over-all risk management. In other words, they are more about the top-down process that are about the individual risks.

Periodic risk audits evaluate how the risk management plan and the risk response plan are work-ing as the project progresses and

also whether or not the risks that were identified and prioritized are actually occurring.

Variance and Trend Analysis

Variance analysis focuses on the difference between what was planned and what was executed.

Trend analysis shows how per-formance is trending.

The reason trend analysis is important is that a one-time snapshot of cost may not cause concern, but a trend showing worsening cost performance may indicate that things are steadily worsening and may indicate that a problem is imminent.

Technical Performance Measurement

Performance can take on many flavors. In the risk context, tech-nical performance measurement focuses on functionality, looking

at how the project has met its goals for delivering the scope over time.

Reserve Analysis

The project reserve can apply to schedule or cost.

Periodically, the projects re-serve, whether cost or time, should be evaluated to ensure that it is sufficient to address the amount of risk the project ex-pects to encounter.

Status Meetings

This particular technique is not necessarily suggesting that spe-cially called status meetings related to risk are called.

Instead, it is suggesting to create a project culture where bringing up items related to risk is always acceptable and risk is discussed regularly.

3.1 SCHEDULE RISK ANALYSIS: KEY STEPS

In Section 1 we briefly addressed the subject of CPM (Critical Path Method) and its deterministic nature in relation to uncertainty and probabilistic approach.

It is important to understand that the schedule risk analysis does not replace the CPM but it takes it beyond its reach.

The CPM remains the key build-ing block in the whole process, as the quality of the CPM sched-ule is directly related to the quali-ty of risk analysis outputs.

In other words, the results of the schedule risk analysis (and the same applies to cost risk analysis for cost estimates), do not change the project schedule (or cost estimate) but may directly or

indirectly help to improve them based on the informed decisions made in conjunction with these results.

In practice, we also see more of risk adjusted schedules, but more as a result of informed decisions made...

The major steps in schedule risk analysis are:

CPM Schedule Development

Develop a quality CPM sched-ule that reflects the project scope and execution strategy

The schedule should show the important project structure and clearly define parallel paths and their meeting points

In the case of large number of activities, focus on those on critical and near critical paths

first, then expand if necessary use of risk banding or QRTs (Quick Risk Templates) may be an option for large numbers of activities

Avoid open ends in the sched-ule logic, they compromise the schedule integrity

Date constraints should be removed, or minimal

Risk Inputs and Activity Dura-tion Ranges

Risk inputs into the model can be performed in a number of ways, depending on which tool is cho-sen for it: Primavera P6 or Pri-mavera Risk Analysis (previously known as Pertmaster), and using one or combination of techniques explained in Section 2:

Page 19


Nothing is so good as it

seems beforehand

~ / ~ George Eliot

3 .0 QUANTITATIVE SCHEDULE RISK ANALYSIS


Assess the activity duration ranges as three point esti-mates: optimistic, likely and pessimistic

Keep in mind that in the CPM schedule, original activity dura-tions may not be the most likely ones.

Choose / Determine appropri-ate PDFs (Probability Distribu-tion Function)

Simulation, Reporting, Deci-sion Making

Simulation is performed using the Primavera Risk Analysis (Pertmaster), a Monte Carlo Method based schedule and cost analytics tool.

The results of simulation provide the answers to a number of criti-cal questions like:

Are the major milestones dates and project completion date feasible or achievable

How likely those dates are, therefore whether the overall project duration is the most likely one or not

How much time or how many days of contingency might be needed to bring the completion date(s) to an acceptable risk tolerance levels.

Schedule Risk Analysis and Flow Diagram

The following flowchart illustrates the major steps and processes involved:

Review Project Sched-ule and Aspects of each Project Stage

Develop Schedule Risk Model in Primavera P6 or in Primavera Risk

Analysis

Conduct Risk Ranging Session

Run Simulation

Generate Analysis Graphs

Prepare Schedule Risk Analysis Report

Schedule Basis Document

Critical & Near-Critical Paths, Logic, Constraints, Calendars,

Key Schedule Drivers

Risk Inputs Layout

Appropriate Participants

Risks Register

Choice of PDFs

Monte Carlo Simulation using Primavera Risk Analysis

Probability Distribution

Sensitivities, Index Tornado Graphs, P10 / P90 Windows and Mean Dates

Detailed narrative of Schedule Development

Rationale behind Key Schedule Drivers

Conclusion / Recommendation

Risk Analysis Outputs and Graphs

The truth is like sunlight, people used

to think it was good for

you ~ /~

Nancy Gribble


3.2. BASIC PRINCIPLES

Single Logical Path Schedule

To demonstrate the basic princi-ples of what was described on previous pages, we will start with the simple schedule shown in Figure 3.2.1 - Single Logical Path Schedule.

The activities in the CPM sched-ule are sequential, with all FS (finish-to-start) relationships, (with the exception of project finish milestone having FF, finish-to-finish relationship).

The activity durations are fixed and because of no overlap be-tween them, the total project duration is the sum of all activity durations.

The CPM also predicts the finish date. But how likely is the pre-dicted project finish date?

As the Figure 3.2.2 shows, the introduction of schedule probabil-istic view, where activities dura-tions are not certain but can take any value between defined mini-

mum and maximum, a number of project finish dates are obviously possible.

Figure 3.2.3 shows an example of a triangular PDF for one activity minimum, likely and maximum (Activity A1010 - Design Line #1).

Figure 3.2.1 - Deterministic Single Logical Path Schedule

Figure 3.2.2 - Probabilistic Single Logical Path Schedule

Figure 3.2.3 - Triangle PDF (for A1010)


Figure 3.2.4 shows the result of simulation with the range of pos-sible project finish dates.

Given the defined risk inputs (Figure 3.2.2), the risk outputs show that the original (deterministic) project finish is unlikely - only 15% (P15).

A number of days of contingency would be needed to bring the project completion date to P50 or higher.

Parallel Logical Paths Schedule

Most of our project schedules are not as simple as the one used on

the previous page.

Typical scenario is that there are many more activities, with more complex logical relationships, with multiple logical paths, etc.

To prove that the more complex schedules are more risky, we expand the single logical path schedule to two parallel logical paths schedule.

Also, the second logical path added is identical to the first one. (See Figure 3.2.5 on page 23).

The activity durations, length of both paths and project finish date are the same.

It is also assumed that the uncer-tainties around both paths activi-ties are the same.

Performing the simulation based on these risk inputs generates the output report with the range of different expected project fin-ish dates.

More importantly, the output shows that the deterministic pro-ject finish is now only 2% likely, a product of two independent logi-cal paths probability of 15% each(15% X 15% = 2.25% or P2!).

Figure 3.2.4 - Single Path Range of Project Finish Dates

Being on a tightrope is

living, everything else

is waiting ~/~

Karl Wallenda


The comparison of results shows that:

Two-paths schedule is more risky because each logical path may delay the project

The risk is increased at the logical paths converging points

(that can be said for any inter-im project milestone where two or more logical paths merge)

Two-paths schedule is more risky at the optimistic and mean ranges of dates than at the pessimistic ranges of dates

As the range of expected finish dates is different, in this scenario we would need to add more time (days) in contingency to bring the project finish to P50 or more.

This is illustrated by Fig. 3.2.6

Figure 3.2.5 - Probabilistic Parallel Logical Paths Schedule

Figure 3.2.6 - Parallel PathsRange of Project Finish Dates


Criticality Index

The CPM schedule critical path analysis is useful for a number of reasons:

It represents the longest logi-cal path determining the earli-est project finish date

Because of that, the delay on the critical path delays the project

It is usually the path that re-quires most attention

Figure 3.2.7 shows a slightly modified schedule from the previ-ous page example, only one activity has changed as follows:

A0120 - Supply, Prefab & In-stall Line #1 is now 45 instead of 50 days

The logic for Piping Line #1 has different inputs for mini-mum and maximum ranges

The shorter likely duration promoted the second logical path to be critical. (Logic Path Piping Line #2)

If we were to follow the CPM schedule, the logical course of

action would be to focus man-agement attention to the activi-ties on the critical path Pipeline #2.

However, the results of risk anal-ysis show that we should focus on the logical path that is near the critical path because it is more risky - See Figure 3.2.8.

Therefore, the CPM approach can potentially miss the risks by focusing on the critical path ac-tivities instead on those that are more uncertain and risky

Criticality Index represents the percentage of iterations for each activity that was on a critical path during the simulation.

Criticality index of 100% means that regardless of how the task durations varied, the critical path always included that activity.

Activities with the high criticality index are more likely to cause delay on projects.

Criticality Index is typically plot-ted in the form of Tornado Dia-gram.

Probabilistic Branching

When the schedule was created the most likely path and activities have been created.

Unlike with CPM approach, the schedule risk modeling allows for probabilistic branching in situa-tions when it is not clear what the outcome of an activity may be.

The successor activities may be on different logical paths (branches), depending on the probability of the predecessor outcomes.

Figure 3.2.9 shows that two logical paths are possible after the lines are declared ready for testing:

Pass the test (70% chance) and go to commissioning, or

Fail the test, for which 30% chance of occurrence is given, which would then require lines to be fixed and re-tested, thus delaying the system commis-sioning.

Look twice before you

leap ~/~

Charlotte Bronte

Figure 3.2.7 - CPM Technique Can Hide Risks


For every iteration of the simula-tion one action is chosen ran-domly using the assigned proba-bility and the other outcomes are ignored.

The results of risk analysis, as in Figure 3.2.10, show that:

Frequency distribution results (histogram) get a shape of distinct humps that represent

branched probabilities

Cumulative probability distribu-tion gets a shoulder shape at the branching probabilities

Conditional Branching

Similar to probabilistic branching, the conditional branching models special project conditions and their consequences.

It is helpful in what-if scenarios where triggers like missed dates or excessive costs reach beyond preset thresholds. The outcomes and logical paths beyond these triggers are then different than originally planned.

And the trouble is, if

you dont risk anything, you

risk even more

~/~ Erica Jong

Figure 3.2.8 - Criticality Index

Figure 3.2.9 - Probabilistic Branching


Figure 3.2.10 - Probabilistic Branching Result

Correlation

In broad statistical terms, correla-tion represents a relationship between two or more random variables

Correlation can be positive or negative, and is expressed as a range between 1 (perfect in-creasing correlation) and 1 (perfect decreasing correlation).

Correlation value of 0 (zero) indi-cates that variables are uncorre-lated.

Using correlation in schedule risk modeling is useful and recom-mended, as it prevents unrealis-tic situations during the simula-tion.

The random sampling gets driven in a sensible way to reflect the degree of correlation between variables.

For example, if the foundation size increases, the excavation requirement will likely increase which in turn will proportionally increase the time required for back filling and compacting.

In this case of positive correla-tion, a single iteration random sampling will choose the values from the variables PDFs reflect-ing the degree of correlation.

PDF Selection

Probability Distribution Functions (PDFs) were already mentioned earlier.

In this sub-section just a few additional details are added.

It is clear that PDFs are used to model the range of activity possi-ble durations (or costs).

There is a number of available PDFs to be chosen, each meant to provide the best representa-tion of possible values and corre-sponding probabilities for a varia-ble, in this case activity duration.

Using the example of two PDFs, used quite often, we want to demonstrate the importance of choosing the appropriate PDF for activities risk inputs modeling:


Triangular distribution is com-monly used due to its simple set of parameters that make it easy to relate to real life situationsFigure 17

The expected value is calculated as a simple arithmetic mean of minimum, likely and maximum values.

Triangular PDF is regarded as a conservative distribution.

BetaPert distribution uses the same set of parameters as Trian-gle PDF, and it also models many activity durations wellFigure 18.

Using BetaPert PFD suggests greater confidence in the most

likely duration and its extremes tail off more quickly.

The expected value is calculated using PERT formula.

Figures 17 and 18 show the dif-ferences in expected values for the same uncertainty ranges with two different PDFs applied.

Figure 17Triangular PDF

Figure 18BetaPert PDF

When you work alone, all your annoying

habits are gone

~ / ~ Marrill Markoe

4 .0 EXERCISES - SCHEDULE RISK ANALYSIS


Previous sections covered the project risk management in gen-eral and also focused on key aspects of the schedule quantita-tive risk analysis.

Applying the techniques and tools available brings us to the actual simulation, running the reports, interpretation of results and final decision making.

Some of these may involve going back to the model inputs or other parameters in order to modify them, and through this iterative process we expect to arrive at the outcomes that will best sup-port project objectives.

The importance of the risk regis-ter is outlined in Chapter 2 along with the available WorleyParsons in house developed tool and/or other external tools.

Primavera Risk Analysis (Primavera Risk Expert) also offers the same in a convenient and powerful way.

Risk register, risk scoring matrix, risk tolerance criteria, are all integrated within the model, so that linking the risks with the schedule activities becomes an easy task.

This functionality allows the risk analysis facilitator and team, to build risk impacted schedule, refine it, re-run it, and analyze results, both pre and post-mitigation.

A number of additional features are available in Primavera Risk Analysis including the cost risk management capability, probabil-istic cash-flows, etc., but these will not be the subject of discus-

sion in this module.

Module 8 is dedicated to Cost Risk Analysis, along with the examples of modeling using the @Risk as the tool of choice.

As the whole process of sched-ule risk analysis and simulation using Primavera Risk Analysis will be demonstrated in the com-ing chapters and training exercis-es, we will not repeat that pro-cess here.

Instead, we will start with the (re)introduction of our Tatanka pro-ject facts, as in other PCDP modules, and take it though the schedule risk modeling, simula-tion and interpretation of results in step-by-step increments.


Power - Cheyenne Power

Midstream - Sioux Terminal

Upstream - Apache A Platform

TATANKA GAS TO POWER DEVELOPMENT

4.1 BACKGROUND

Creer Oil Company (CROC) is the operator of the Tatanka Gas to Power development located in South East Asia. The development is based on the Apache gas fields.

Gas is delivered from the Apache A Platform via a 377 km marine pipeline to the Sioux Terminal for processing prior to onward transmission to the Cheyenne Power station.

Production commenced from the Apache Platform in Decem-ber 2002. Original design

throughput was 356 MMscfd.

In response to sustained high-er demand, a compression module shall be designed to handle an increase in pro-cessing capacity from 356 MMscfd to 530 MMscfd.

A provision was made in the original platform design for the addition of a compression module to boost gas pressure to the required pipeline pres-sure.

It was envisaged that compres-sion would not be required until 2012, when the reservoir pres-

sure was predicted to fall below that required for design export gas flow rate.

The start up date for the com-pression facilities is currently targeted for 26 Aug 2012.

The FEED for the compression project commenced on 19 Sep 2010, and is scheduled to com-plete on 25 Dec 2010.

The execution-phase is sched-uled to commence on Jan 1, 2011


4.2 CAN WE MEET THE DEADLINE?

WorleyParsons has been award-ed the FEED (consisting of Eval-uate and Define phases) with the option to take responsibility for the EPCM (execute) work-phase for Apache Compression Module.

As part of the due diligence, the question that is often asked is can the schedule deadlines be met? Are the dates realistic? Are there major concerns?

As discussed in PCDP Module 2, the EPC schedule was prepared as part of the modular training program.

Therefore, reference within this document is made to the EPC Schedule prepared in Module 2.

Schedule delays cause problems for the project owners and con-tractors.

Delay claims for equitable adjust-ments can amount to millions of dollars. Experience tells that

projects often overrun their schedules.

The level of uncertainty is the highest during the start of the project and gets progressively better as the project continues.

This is applicable during each of the project phases.

The level of uncertainty decreas-es as one moves from Evaluate phase (FEED) to Execute phase (Detailed Engineering) .

The schedule clearly identifies the activities that need to be performed. It has the timeline required along with its activites logical relationships . It might be resource loaded to complete the task at hand.

All this is based on the known scope and best available infor-mation at the time of a project plan / schedule being developed.

The method by which the plan-ner could have obtained these inputs from, could be as follows:

Expert Judgement: The planner and the stakeholders might pro-vide their expert judgement with respect to the durations and resources required to complete the task.

Analogous Estimating: In other cases the duration could be based on a the actual duration expended on a previous similar project activity.

Parametric Estimating: The activity durations are estimated quantitatively based on dividing total work by the productivity rate and the number of resources being employed.

As these activities are all esti-mated durations; there is still uncertainty in achieving the dates.

As activities are also logically linked we find that some inputs from preceding activities might have greater impact in pushing out certain succeeding activities.


This uncertainty arises because planners do not have perfect information about future events and because assumptions that underpin a schedule may not be accurate or well understood.

For example, technical infor-mation, which often forms the basis of the schedule, is at times, uncertain, undefined, or unknown when EPC schedules are pre-pared.

New system development may involve further uncertainty due to unproven or advanced technolo-gies, and optimistic program assumptions can lead to extend-ed development or the need to substitute alternative technolo-gies.

Future economic conditions (availability of skilled resources) are another example of uncer-tainty that planners face.

The accuracy of the activity dura-

tions are improved if one takes into account the risk involved and then baseline the schedule.

Schedule risk analysis is the process of associating a degree of confidence with each schedule duration estimate.

The combination of defining probability distributions for vari-ous scheduled task durations and establishing network rela-tionships among the tasks allow one to forecast the probability of meeting the targeted key mile-stone dates.

The key objectives of conducting a schedule risk analysis are to:

Determine the probability or chance of completing the project on time

Identify the probabilistic com-pletion date of the project ra-ther than the deterministic

date (as determined in the EPC Schedule)

Determine the confidence level (measured in %) of com-pleting the project by a specific date

Determine what the true Criti-cal Path of the project is

Identify what Activities are most likely to cause a delay to the overall project completion date

The aim of this PCDP Training Module is to provide hands-on guideline to assist a project con-troller in developing and conduct-ing a schedule risk analysis on the previously developed EPC schedule for the Tatanka project.


4.3 MAIN EXECUTION CONTRACTS

In an effort to meet aggressive target completion dates, CROC has decided to execute the pro-ject using a combination of the following execution contracts:

Single EPCM Contractor (WorleyParsons)

Single Module Fabrication Contract

Single Transport & Installation Contract

Single Brown Field Modifica-tion / Tie-In / HUC Contractor

Single Accommodation Vessel Contract

The contract strategy is based on all Procurement to be done by EPCM contractor and free-issued to the respective contractors.

4.4 CONTRACT 1 - EPCM

WorleyParsons has been award-ed the EPCM Contract and as such, responsible to deliver this project on time and on budget.

The EPCM contract covers ser-vices for Engineering, Procure-ment & Construction Manage-ment & Support, and includes the following scope of work:

Detail Design of Module Detail Design of Brownfield

and Tie-in works

Follow-on engineering, Con-struction support

Procurement services of all equipment and material (issue RFQs, Technical & Commer-cial Bid Evaluations, Award Recommendations to CROC and prepare P.O on behalf of CROC)

Vendor inspection and expe-diting for materials and equip-ment (ROS-dates and VDR).

Provision of full EPC Manage-ment (fabrication, installation and commissioning

The contract will be on a reim-bursable basis.

Due to the fast-track nature of the project, the Execution Phase (EPCM) will commence directly after Completion of the Feed Phase.

In order to achieve the target project schedule-dates, the intent is to award the EPCM contract to WorleyParsons (Roll-over).

Subsequently, there is no re-quirement for ITB package prep-aration for the EPCM contract.

4.5 CONTRACT 2 MODULE FABRICATION

This contract will be for the fabri-cation of the Apache Compres-sion module.

This contract is intended to be placed on a fixed price lump-sum basis, with the alternative option for a unit rate contract, depend-ing upon timing for contract award.

The IFB-Package will be devel-oped by WorleyParsons as one of their deliverables.

The module fabrication contract shall be awarded 4 weeks prior to mobilisation of the fabrication contractor.

A further 6 weeks was allowed for mobilisation and site-preparations prior to commence-ment of the fabrication works.

CROC KEY MILESTONE DATES

The contracting strategy above has been developed to support the following key milestone dates:

PO Award Compressor/Turbine Package 17 Oct 2010 Start EPCM 2 Jan 2011 ETA Compressor/Turbine Package 14 Jan 2012 Module Load-out 10 Jun 2012 Module Installation 25 Jun 2012 Start Up 26 Aug 2012


4.6 CONTRACT 3 TRANSPORT & INSTALLATION

A separate contract for the transport and installation of the compression module.

The contract would be a fixed price lump-sum with risk associ-ated with weather to be mutually agreed.

The IFB Package will be devel-oped by WorleyParsons as one of their deliverables.

The Transport & Installation con-tract shall be awarded early in the Execution-phase to lock-in the heavy lift vessel and to allow the installation contractor to have the necessary input into the de-sign.

4 weeks was allowed for mobili-sation prior to Module Load-out date.

4.7 CONTRACT 4 - BROWN FIELD MODIFICATIONS / TIE-INS / HUC

Contract for all offshore Module Installation Pre-works, Brown Field Modifications, Shutdown Tie-in works, and Hook-up &

Commissioning works.

The contract will be awarded on Cost+ reimbursable basis with an agreed budget-cap per work-package.

The IFB Package will be devel-oped by WorleyParsons contrac-tor as one of their deliverables.

The BF/HUC contract shall be awarded 4 weeks prior to mobili-sation of the BF/HUC contractor.

6 weeks was allowed for mobili-sation and site-preparations prior to commencement of the BF/HUC works.

4.8 CONTRACT 5 - ACCOMMODATION VESSEL

A contract for the Accommoda-tion barge to be utilized for the Maintenance/Tie-in Shutdown through to Final Hand-over.

Contract will be based on Day-rates for bare vessel plus addi-tional charge per person. The available barges will be re-viewed during the FEED, and award should be early in the EPCM to ensure availability.

4 weeks was allowed for mobili-sation prior to commencement of Maintenance/Tie-in Shutdown.

Page 33


The initial task of a project con-trols planner is to identify what the key schedule drivers of the project are and use these to de-velop a schedule risk model which can be used as the basis for schedule risk analysis.

In other words, what aspects of the project will have the biggest impact on the overall success (or failure) of the projects comple-tion.

Areas of the project that will need to be considered are:

Detail Engineering

Request For Quotation Deliv-erables to support Procure-ment Phase

Technical Evaluations to meet Major Equipment award dates

Technical Evaluations to meet Sub-Contract award dates

AFC Deliverables to support Fabrication Phase

Procurement

Request For Quotation to meet Major Equipment award dates

Expediting of Equipment deliv-ery to site

Expediting of Vendor Data to support Engineering AFC De-liverables

Construction / Fabrication

Delivery Major Equipment and Bulk Material

Maximising of Onshore Pre-commissioning Works

Transport & Installation

Availability of Heavy Lift Ves-sel

Load-Out Milestone Date Hook-Up and Commissioning: Identification and priority of

Commissioning Systems handover

Expediting of Mechanical Completion dates

In a live project environment, the key schedule drivers for each of the projects stages will be determined by undertaking a group discussion with the follow-ing project participates (both from CROC and WorleyPar-sons):

Project Manager Project Controls Manager and/

or Project Planner

Engineering Manager Procurement / Contracts Man-

ager

Construction Manager Commissioning Manager

Based upon these discussions, for which earlier risk manage-ment processes and steps have been used as inputs (i.e. risk register, risk ranking, etc.), the schedule risk model can be de-veloped

EXERCISE 1: DEVELOP SCHEDULE RISK ANALYSIS MODEL

The exercise here is to develop the schedule risk-model in Pri-mavera Risk Analysis.

Preparatory Work

Once logged onto Primavera Risk Analysis, selection can be made as:

File / Open, if the project schedule from Module 2 has already been imported and saved as .plan in PRA for-mat schedule from Module 2., or

File / Primavera, with a cou-ple of key options: Open Pri-mavera Project (via link to P6 Databaseadmin only) or Open Primavera XER file.

1. If Open Primavera import selection is made, then the first step will be the Schedule Validation, resulting in an Im-port Log and Schedule Check Report. Please review both log warnings and report.

2. Use Menu Item Plan / Plan Information / General tab to define plan titles and company details, and Dates tab to de-fine: Start: 12-Sep-2010 (as per the EPC Project Schedule) Time Now (Data Date): 02-Jan-2011

Page 34


1

2


3. Use Menu Item Plan / Plan Options / Date tab to define date format and related preferences.

4. Use Menu Item Plan / Plan Options / Time tab to de-fine working time, as well as Plan / Calendars to define working week: Each week is 7 days (as with the EPC Schedule, the Schedule Risk Model will be using a 7 day calendar)

5. Once all the above steps are completed, please save the file as a Primavera Risk Analysis Plan: File name: 042_TRN007_XX{Particpants initials}

5

3

4


Schedule Risk Model - Layout and formatting

Prior to the Project Services En-gineer developing the Schedule Risk Model, certain formatting needs to be completed as de-scribed below:

6. Select Menu Item Format / Timescale to define how the timescale is to be displayed (please choose the Dates on-ly), timescale format and other available options.

7. Select Menu Item Format / Columns the default col-umns on a left hand side of a bar chart are as shown in the Screenshot No. 7.

Menu Item Format offers a num-ber of additional formatting options, like Lines, Gantt Chart, Individual Task Styles, etc.

6

7


8. In order to develop a Sched-ule Risk Model containing the most relevant information, it is required to setup the Bar chart Columns with the fol-lowing fields, as a minimum. Additional fields are recom-mended, like Risk InputDuration Function, Risk In-putDuration Correlation, Risk InputProbabilistic Branch, and so on...

Each column is selected from the Format / Columns lists (Grouped Fields or Alphabet-ic Fields) and placed prefera-bly on the right side of the bar chart..

The table above identifies the sequence and naming of some of the columns.

9. Select Menu Item Format / Bars and also Format / Gantt Chart and follow some of the basic instructions, as a

formatting options, i.e. modify as follows:

Float: Hide all floatthis will hide float bars from on-screen displays and schedule print-

outs, if preferred that way

Uncheck Show Task Down-timePeriods of inactivity will not be displayed on on-screen displays and schedule print-outs

Field Top

Heading Bottom Heading

Text Alignment

Column Width

Left Columns

1 Name Activity ID Left 8

2 Description Activity Description Left 45

3 Remaining Duration Rem. Duration Right 8

4 Early Start Early Start Centre 10

5 Early Finish Early Finish Centre 10

Right Columns

6 Risk input Duration Minimum Minimum Duration Right 9

7 Risk input Duration Most Likely Most Likely Right 6

8 Risk input Duration Maximum Maximum Duration Right 9

8

9


Once the Project Services Engi-neer has completed the format-ting of the Schedule Risk Model, the risk inputs layout may look like the one shown above.

The next step is to start populat-ing activities risk(s) data.

Schedule Risk Model - Popu-lating Activities

For training purposes, the partici-pant will determine a summary of Activities from the overall EPC Schedule that represent the key

schedule drivers for the project. A suggested activity listing is shown on page 40.

With the exception of Activity IDs 1-17-GEN-13 (Start Milestone) and 6-05-PED-00 (Finish Mile-stone), all other Activities have a Normal Activity Type (as indi-cated in the General tab of the Task Details window please see page 41)

As indicated in Chapter 5, CROC has certain key Milestone Dates

that are required to be met. Of this list, the following mile-stones were included as constraints in the list of identi-fied schedule drivers.

Note 1: Activity ID 1-17-GEN-13 Start EPCM is constrained as a Must Start On date of 02/Jan/11 Note 2: Activity ID 6-05-PED-00 ETA Compressor & Turbine Package is constrained as a Must Start On date of 16/Oct/10


Predecessor Activity Activity Rem. Early Early

ID Description Dur. Start Finish

(Days) Activity Type Lag ID 1-17-GEN-13 Start EPCM (Note 1) 0 02/Jan/11* n/a

1-03-EDA-00 Module Detailed Design 266 2-Jan-11 24-Sep-11 1-17-GEN-13 SS

1-03-EDB-00 Brown Field Mods Detailed Design 266.00 2-Jan-11 24-Sep-11 1-17-GEN-13 SS

6-05-PED-00 ETA Compressor & Turbine Package (Note 1) 456 16-Oct-10 14-Jan-12 n/a

6-05-PBA-00 RFQ, TBE, PO, ETA Piping, E & I Bulks 281 9-Apr-11 14-Jan-12 1-17-GEN-13 SS 97

6-05-PSA-00 RFQ, TBE, PO, ETA Primary Struct. Steel 294 28-Nov-10 17-Sep-11 n/a

6-05-PEA-00 RFQ, TBE, PO, ETA Suction Scrubber 379 12-Feb-11 25-Feb-12 1-17-GEN-13 SS 41

2-17-MFD-00 Contract Award / Mobilise Module Fabrication 197 23-Jan-11 7-Aug-11 1-17-GEN-13 SS 21

3-17-IND-00 Contract Award / Mobilise Transport & Installation 345 5-Jun-11 14-May-12 1-17-GEN-13 SS 154

4-17-BFM-00 Contract Award / Mobilise BF/Tie-Ins/HUC 197 13-Mar-11 25-Sep-11 1-17-GEN-13 SS 70

5-17-ACV-00 Contract Award / Mobilise Accommodation Vessel 239 24-Apr-11 18-Dec-11 1-17-GEN-13 SS 112

2-06-MFD-20 Pre-Fab / Erection Primary & Secondary Steel 217 18-Sep-11 21-Apr-12 3-17-MFD-00 FS

6-05-PSA-00 FS

2-06-MFD-28 Mechanical Equipment Installation 21 26-Feb-12 17-Mar-12 6-05-PEB-00 FS 0

2-06-MFD-24 Piping Pre-Fabrication / Erection 154 6-Nov-11 7-Apr-12 6-05-PBA-00 SS 211

2-06-MFD-30 Elect. / Inst. Equipment & Bulks Installation 112 1-Jan-12 21-Apr-12 2-06-MFD-20 FF

2-06-MFD-28 SS 14

2-07-MFD-20 Onshore Pre-Commissioning 105 13-Feb-12 27-May-12 2-06-MFD-30 FF

1-03-EDA-00 FS

1-03-EDB-00 FS

6-05-PBA-00 FS

6-05-PED-00 FS 29

2-08-MFD-22 Load Out & Sea fastening 14 28-May-12 10-Jun-12 2-07-MFD-20 FS

2-06-MFD-28 FS

2-06-MFD-24 FS

2-06-MFD-30 FS

4-06-BFM-20 Tie-In Pre-Works & Major Hot Works 84 6-Nov-11 28-Jan-12 6-05-PBA-00 SS 211

3-17-BFM-00 FS

3-17-ACV-00 FS -42

4-13-BFM-24 Module Pre-Works 140 29-Jan-12 10-Jun-12 4-06-BFM-20 FS

3-09-IND-20 Module Transportation and Installation 21 11-Jun-12 1-Jul-12 3-17-IND-00 FF

4-13-BFM-24 FS

4-15-HUC-20 HUC Compression Module / Start-Up Works 56 2-Jul-12 26-Aug-12 3-09-IND-20 FS

1-17-GEN-24 Start Up / Hand-Over (Note 1) 0 26-Aug-12 4-15-HUC-20 FS

2-08-MFD-22 FS

List of identified Schedule Drivers


Similar to the functionality of Primavera P6, Primavera Risk Analysis is relatively straightfor-ward to populate with Activity Details:

10. Select Menu Item Insert / New Task, if a new task needs to be inserted.

With the Task Details General tab selected, enter in the data as follows:

Name: Activity ID from page 40 list of schedule drivers Description: Activity Description from page 40 list Remaining Duration: Remaining Duration from page 40 list. Calendar: 7 Day

10

Tasks Details window is dis-played at the bottom section of the screen. I

f not, the Task Details can be viewed in two ways: A. Menu Item View / Task Details toggle item, or B. while on activity line, by right click and selection of Task Details.


11. With the Task Details Links tab selected, enter in the Pre-decessors data as follows:

Name: Activity ID from page 40 list (note, all Driving pre-decessors will be indicated in red)

Type: Relationship Type from table on page 40

Lag: Lag from page 40 list

All Successor links will be popu-lated automatically for each Activi-ty based on its link to other Activi-ties

As with the EPC Schedule Devel-opment, whereby activity coding was used to organize and group the schedule activities, the sched-ule risk model activities may also be grouped.

Primavera Risk utilises Summary Activities for grouping purposes.

12 Add the following Summary Activities using the Menu Item Plan / Organize. No logic is applied to these Ac-tivities

13. Once these Summary Activi-ties have been added, in turn, select the Activities associated with each Summary Activity (see page 43) and click on the Demote button from the main toolbar (short-cut, Ctrl+Alt+right arrow).

Select all Activities below Summary Activity GN000 Tatanka Gas Develop-ment and repeat the pro-cess.

Once the Project Services Engi-neer has populated the Schedule Risk Model with activity risks

input data and has added the Summary Activities, the Sched-ule Risk Model is ready for the risk ranging exercise to be con-ducted (see page 44).

Save the Schedule Risk Model

11

Activity

ID

Activity Description

GN000 Tatanka Gas Development

EP000 Procurement & Contracts

EC000 Construction / Fabrication

ET000 Transport & Installation / HUC

12


Activity Activity Rem. Early Early

ID Description Dur. Start Finish

(Days) GN000 Tatanka Gas Development 603 2-Jan-11 26-Aug-12

1-17-GEN-13 Start EPCM 0 02/Jan/11*

1-03-EDA-00 Module Detailed Design 266 2-Jan-11 24-Sep-11

1-03-EDB-00 Brown Field Mods Detailed Design 266 2-Jan-11 24-Sep-11

EP000 Procurement & Contracts 577 16-Oct-10 14-May-12

6-05-PED-00 ETA Compressor & Turbine Package 456 16-Oct-10 14-Jan-12

6-05-PBA-00 RFQ, TBE, PO, ETA Piping, E & I Bulks 281 9-Apr-11 14-Jan-12

6-05-PSA-00 RFQ, TBE, PO, ETA Primary Struct. Steel 294 28-Nov-10 17-Sep-11

6-05-PEA-00 RFQ, TBE, PO, ETA Suction Scrubber 379 12-Feb-11 25-Feb-12

2-17-MFD-00 Contract Award / Mobilise Module Fabrication 197 23-Jan-11 7-Aug-11

3-17-IND-00 Contract Award / Mobilise Transport & Installation 345 5-Jun-11 14-May-12

4-17-BFM-00 Contract Award / Mobilise BF/Tie-Ins/HUC 197 13-Mar-11 25-Sep-11

5-17-ACV-00 Contract Award / Mobilise Accommodation Vessel 239 24-Apr-11 18-Dec-11

EC000 Construction / Fabrication 267 18-Sep-11 10-Jun-12

2-06-MFD-20 Pre-Fab / Erection Primary & Secondary Steel 217 18-Sep-11 21-Apr-12

2-06-MFD-28 Mechanical Equipment Installation 21 26-Feb-12 17-Mar-12

2-06-MFD-24 Piping Pre-Fabrication / Erection 154 6-Nov-11 7-Apr-12

2-06-MFD-30 Elect. / Inst. Equipment & Bulks Installation 112 1-Jan-12 21-Apr-12

2-07-MFD-20 Onshore Pre-Commissioning 105 13-Feb-12 27-May-12

2-08-MFD-22 Load Out & Sea fastening 14 28-May-12 10-Jun-12

4-06-BFM-20 Tie-In Pre-Works & Major Hot Works 84 6-Nov-11 28-Jan-12

4-13-BFM-24 Module Pre-Works 134 29-Jan-12 10-Jun-12

ET000 Transport & Installation / HUC 77 11-Jun-12 26-Aug-12

3-09-IND-20 Module Transportation and Installation 21 11-Jun-12 1-Jul-12

4-15-HUC-20 HUC Compression Module / Start-Up Works 56 2-Jul-12 26-Aug-12

1-17-GEN-24 Start Up / Hand-Over (Note 1) 0 26-Aug-12


EXERCISE 2: SCHEDULE RISK ANALYSIS PROCESS

Risk Ranging Workshop

In a live project environment, a formal schedule risk ranging Workshop will be conducted based on the model that has been developed.

The purpose of the workshop will be for the representatives from both CROC and WorleyParsons to discuss and collectively agree upon the appropriate level of risk associated with each of the iden-tified key schedule drivers.

Therefore it would be advisable to issue the Schedule Risk Model to the participants prior to the Workshop taking place in order for a review of the Model to be made.

Conducting the Risk Ranging Workshop

In order for the Workshop to be as constructive as possible, it is important that appropriate par-ticipants are involved.

As with determining the key Schedule Drivers, representative from both from CROC and Wor-leyParsons will be involved:

Project Manager Project Services Manager and/

or Project Planning Engineer

Engineering Manager Procurement / Contracts Man-

ager

Construction Manager Commissioning Manager In addition, a Risk Analysis Facil-itator (preferably not part of the Project Team) will guide the par-ticipants through the Workshop

process to ensure focus is main-tained and the Workshop is con-ducted as effectively as possible.

It is also important to note that the abovementioned participants should have:

The authority to make key decisions and are able to ap-prove any required actions

Detailed knowledge and expe-rience of both the Technical and Commercial aspects of each phase of the Project

Knowledge of the specific approvals and permit require-ments of the authority where the Works are to be carried out, i.e. government, safety inspectors, etc

Applying the Triangular Distri-bution

As described in Chapter 3, the principle of schedule risk ranging is to select a probability distribu-tion function (duration function) to each of the identified key schedule drivers activities, i.e Minimum (Optimistic), Most Like-ly (Realistic) and Maximum (Pessimistic) durations.

In order to make an objective evaluation of the distribution of the duration values, it is im-portant first to define what pro-ject risk actually is.

Chapter 5.0 of this module offers some key definitions of the risk management terms. Project risk can be defined as: An uncer-tain event or condition that, if it occurs, has a positive or negative effect on projects objectives.

Therefore factors that will need to be considered include:

Project Management:

Project Duration / Project Schedule

Scope Definition and Estimate Project Organisational Model

and Implementation

Engineering and Design:

Design Criteria / Quality Technology to be utilised Interface between Procure-

ment and Construction

Procurement and Contracts:

Market Conditions Tender Evaluation and Pur-

chase Order Cycle

Client Approval Cycles Vendor Performance

(especially in periods of high demand)

Manufacturing Process


Construction and Fabrication:

Geographical Location (and corresponding Weather Win-dow)

Site Safety / Access

Site Supervision and Labour skill level

Contractor Performance Design Changes during Con-

struction

Transport and Installation:

Heavy Lift Vessel availability Marine Spread(s) Weather Conditions

Activity ID

Activity Description

Minimum Duration (Days)

Most Likely (Days)

Maximum Duration (Days)

1-17-GEN-13 Start EPCM n/a n/a n/a

1-03-EDA-00 Module Detailed Design 252 266 280

6-05-PED-00 ETA Compressor & Turbine Package 442 456 477

6-05-PBA-00 RFQ, TBE, PO, ETA Piping, E & I Bulks 274 281 309

6-05-PSA-00 RFQ, TBE, PO, ETA Primary Struct. Steel 288 294 351

6-05-PEA-00 RFQ, TBE, PO, ETA Suction Scrubber 372 379 407

2-17-MFD-00 Contract Award / Mobilise Module Fabrication 183 197 330

3-17-IND-00 Contract Award / Mobilise Transport & Installation 337 345 379

4-17-BFM-00 Contract Award / Mobilise Brownfields/Tie-Ins/HUC 190 197 253

5-17-ACV-00 Contract Award / Mobilise Accommodation Vessel 232 239 295

2-06-MFD-20 Pre-Fab / Erection Primary & Secondary Steel 210 217 238

2-06-MFD-28 Mechanical Equipment Installation 18 21 34

2-06-MFD-24 Piping Pre-Fabrication / Erection 147 154 175

2-06-MFD-30 Elect. / Inst. Equipment & Bulks Installation 105 112 126

2-07-MFD-20 Onshore Pre-Commissioning 98 105 112

2-08-MFD-22 Load Out & Seafastening 14 14 17

4-06-BFM-20 Tie-In Pre-Works & Major Hot Works 77 84 98

4-13-BFM-24 Module Pre-Works 126 134 154

3-09-IND-20 Module Transportation and Installation 21 21 28

4-15-HUC-20 HUC Compression Module / Start-Up Works 49 56 70

1-17-GEN-24 Start Up / Hand-Over n/a n/a n/a

1-03-EDB-00 Brown Field Mods Detail Design 234 266 280


Below is a step-by-step guide to populating the above distribution of values into the Schedule Risk Model:

1. Click anywhere on the activity line to display the Task Details window for that activity. With the Risks, Duration tabs selected, enter in the data as follows:

Tick Risk On: this is to ensure that the Activity is included during the simulation

Distribution: Triangle (type of distribution that will be applied to the Activity)

Minimum: Minimum Duration from the above table

Most Likely: Most Likely Du-ration (i.e Remaining Duration) from the above table

Maximum: Maximum Duration from the above table

Notes: Because Activities 1-17-GEN-13 Start EPCM and 1-17-GEN-24 Start Up / Hand-Over are Milestones (with zero durations), it is not possible to apply a Risk Range distribution to these Activities. Similarly, it is not possible to apply a Risk Range distribution to the previously created Sum-mary Activities.

Once the Project Services Engi-neer has populated the Schedule Risk Model with the distribution of durations, the Model can be printed out:

2. Select Menu Item File / Page Setup from the main toolbar. With the Page tab selected, use the Scaling option to fit one page.

Note: The Header and Footer of the Barchart can be formatted to suit reporting and presentation requirements.

Once the Schedule has been printed out and the Monte Carlo simulation can be run.

Save the Schedule Risk Model .

1

2


Running the simulation

Below is a step-by-step guide to running the simulation on the Schedule Risk Model:

3. Select Risk, Run Risk Analy-sis from the main toolbar (or press F10). Click Analyse

4. Click Complete

Generating the Analysis Graphs

As a default, once the simulation has been run, the Probability Distribution graph will be gen-erated.

This is a graphical representation in the form of a cumulative distri-bution representing the likelihood of the project completing on or before each possible date.

The Probability Distribution can be generated for the entire pro-ject or for a specific activity or milestone.

Graphical Area:

a.) Distribution (start of interval) [X axis]: represents the possible completion dates for the Project that were determined during the simulation

b.) Hits [Y1 axis]: represents the number of times a specific date was selected during the simulation

c.) Cumulative Frequency [Y2 axis]:represents the probability (measured in %) that the Project will be completed by a certain date

3

4

A

B

C


Tabular Area - Statistics

d.) Minimum : minimum date value of the Probability Distribution, i.e. the earliest Project completion date resulting from the simulation

e.) Maximum : maximum date value of the Probability Distribution, i.e. the latest Project Completion date resulting from the simulation

f.) Mean : mean date value of the Probability Distribution, i.e. the most probable Project Completion date resulting from the simulation

g.) Max Hits : the maximum number of hits that were made during the simulation

h.) Standard Deviation : shows how much variation or "dispersion" there is from the average (mean, or expected value). A low standard deviation indicates that the data points tend to be very close to the mean, whereas high standard deviation indicates that the data are spread out over a large range of values.

i.) Selected Confidence : as the Cumulative Frequency [Y2 axis] is selected in the Graphical Area, this will be reflected in terms of %

j.) Deterministic Finish : represents the originally determined Project Completion date as defined by the Schedule, i.e. based on Activity durations, logic, etc only

k.) Probability : this represents the probability (measured in %) that the Deterministic Finish date (originally determined Project Completion date) will be achieved based upon the simulation that has been carried out


Once the Probability Distribution graph for the overall project finish date has been generated and printed out, other graphs can be generated as well.

To generate the Probability Dis-tribution for a specific activity or milestone, use the hierarchy list to the left of the graph (WBS and tasks) select one that fits the criteria, i.e. key interim milestone, or start and/or finish of an im-portant activity.

Sensitivity and Index Tornado Graphs

Sensitivity can be measured for an activity as it gives an indica-tion of how much the duration of each activity affects the overall project completion date or the completion date of other activi-ties.

It can also be used for identify-ing activities that are most likely to cause delay to the project.

A series of Tornado graphs are

available to graphically display and rank sensitivity, schedule sensitivity index, criticality and cruciality values for each Activity.

5. Selection of variety of sensi-tivity graphs is available un-der the Menu Item Reports / Tornado Graph from the main toolbar.

Schedule Sensitivity Index Tornado Graph

The Schedule Sensitivity Index (expressed in %) identifies and ranks the activities most likely to influence the overall project du-ration and/or project completion date.

Graph formatting options are also available.

5


6. Duration Sensitivity Tornado Graph

Duration Sensitivity (expressed in %) is a measure of the correla-tion between the duration of an activity and the duration of the project.

The activity with the highest Du-ration Sensitivity is the activity that is most likely to increase the overall project duration.

7. Criticality Tornado Graph

Criticality (expressed in %) is a measure of how often a particular activity was on the Critical Path during the analysis.

Activities with a high Criticality Index are more likely to cause delay to the project as they are more likely to be on the Critical Path.

If an activity has a 100% Criticali-ty Index it means that during the analysis no matter how the activi-ty durations varied, the Critical Path always included that activi-ty.

Therefore the completion of the activity is likely to be key in com-pleting the project on time.

8. Cruciality Tornado Graph

Cruciality is calculated from the Duration Sensitivity and the Criti-cality Index

Cruciality = Duration Sensitivity x Criticality Index

Duration Sensitivity can display low positive and negative values for activities that are not on the Critical Path.

These low values are due to random correlation between the activity and the project duration.

Cruciality is designed to remove low positive and negative values by multiplying Duration Sensitivi-ty by the Criticality

The participant is to print out all the Sensitivity and Index Tornado Graphs. Save the Schedule Risk Model.

6

7

8


EXERCISE 3: SCHEDULE RISK ANALYSIS RESULTS AND REPORTS

Interpreting the Analysis Re-sults

The analys

module 7 - schedule risk analysis_rev0 (2)

Documents

schedule risk analysis

schedule risk analysis

quantitative risk analysis

schedule risk analysis

qualitative risk analysis

risk model

quantitative schedule

risk planning