1. Advanced Project Planning and Acceleration with
Risk Analysis, Monte Carlo Simulation and QRPD
Projects have become more sophisticated and complex. Overall project success rates are less than
40 percent, according to studies from IBM and other reputed consulting firms.
This conclusion should come as no surprise, as most projects generate their project baseline
schedules and budgets using single point estimations for individual tasks (work packages) and do
not make appropriate provisions for risks and uncertainty.
Regardless of how elaborate and “expert based” single point estimations are, fact is that they confer
less than 50% confidence level, for the resulting schedule and budget, as explained below.
Combined with the impact of risks, if uncounted for, 40% success rate is quite normal, or even high.
To improve the chance of success for their projects, teams and project managers have engaged in
a wide variety of “techniques”, from padding to even including undetectable “dummy tasks”.
While these empirical “techniques” alleviate the impact of risks and uncertainty, their result is
unknown. The correct approach to planning is to conduct full risk analysis and uncertainty Monte
Carlo simulation to quantify their potential impact on project scope, schedule and budget and
provide the project team with the data it needs to decide how they want to run the project, what
risks they want to be covered for, what level of confidence they want the baseline to be at and what
risks reserves they want to provision, if any. Regardless of the decision they make, the outcome
becomes highly predictable, with predefined actions to be taken, should any deviations from the
decided upon plan occur during execution, due to normal uncertainty distribution or triggered risks.
Risk and Uncertainty in projects
Project risks are of two categories, specific cause risks (simply called “risks”) and common cause
risks (simply called “uncertainty”).
Risks are specific events that may or may not happen but, should they occur, will impact the project
schedule, budget or scope.
Dealing with risks is a well documented four steps process: identification, qualitative analysis,
quantitative analysis and risks response plan (RSP) for selected risks. The results are included in
the master plan as follows:
∑ Any mitigation action (to reduce risk’s probability and/or impact) identified in RSP’s must be
added to the master schedule, as project tasks, because they require additional time and effort.
∑ Any residual risks and contingency plans in RSP’s should be provisioned for in risks reserves.
For the same reasons we would not drive a car without a spare tire, airbag or insurance, we should
not run a project without a risk management plan. Yes, they add time and cost money, but it is a
small price pay to avoid potential disasters. It is good business and good management practice.
Uncertainty in projects derives from the fact that the same task, like the daily commute to work,
that usually takes about the same (most likely) time to complete, for reasons out of our control
(common cause, like stop lights or road conditions), may take less (optimistic), if more stop lights
are green), or more (pessimistic, if more stop lights are red or the road is slippery).
The graphs below show the “beta distribution” (most common distribution) of the likelihood of
completing a task, at any chosen point between the “optimistic” and “pessimistic” estimations and
statistical analysis teaches us that the “most likely” estimation occurs only about 48% of times,
which means that baselines based on that single point estimation have only 48% confidence level.
To increase the confidence level of a project baseline, uncertainty must be accounted for and the
tool that accurately calculates it for the entire project is Monte Carlo simulation.

2. Planning For and Managing With More Certainty Using Monte Carlo Simulation
Although 50% confidence level (using PERT, or about 48% using “most likely”) is acceptable for a
project baseline, sponsors are usually reluctant to approve budgets that include provisions for risks
and uncertainty … unless if they are provided with hard facts and numbers, explaining why and how
much is needed and what are the consequences of not making such provisions.
The tool to provide such hard numbers is Monte Carlo simulation which takes the same three points
estimations (O, M, P) for each task and a predefined probabilistic distribution model (like Beta),
generates, among others, Probabilistic Reports for any and all probabilities (i.e. confidence levels)
for both, duration and cost, for the entire project, or any sub-section of it, as desired.
Included below are the probabilistic reports for an IT project and they reveal a very important and
illuminating conclusion. It takes only 6 extra days in a schedule of 126 days (4/7%) and only $9k in
a budget of almost $700k (or 1.2%) to increase the confidence level from 50% to 80%.
As interesting and illuminating is the fact that reducing the schedule and budget by about the same
amounts, reduces their confidence level to about 20%!!!
The project team has now the data it needs to negotiate with project sponsors the best strategy to
run the project, the desired confidence level for the baseline schedule and budget, the level of
reserves to provision for and what incentives to provide for completion ahead of plan. Monte Carlo
simulation takes the guessing out of the planning process.
110 120 130 140 150
Distribution (start of interval)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
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65.0
Hits
0% 107
5% 115
10% 117
15% 119
20% 120
25% 121
30% 122
35% 123
40% 124
45% 125
50% 126
55% 127
60% 128
65% 128
70% 129
75% 131
80% 132
85% 133
90% 135
95% 138
100% 149
CumulativeFrequency
Jack Neift IT System Rev3.mpp
000001 - Jack Neift IT System : Duration

3. The most common (and recommended) strategy is to manage the project for 50% confidence level
baseline, provide reserves for minimum 80% and incentives for completion earlier than 30-40%.
Fringe Benefits - Adherence and Commitment to Plan, Motivating Work Environment
All specialists agree that one of most important factors in a project success is the team’s adherence
and commitment to the project schedule and budget.
Because plans are built with estimates provided and/or validated by the execution team, the
execution team is implicitly committed to the project schedule and motivated to meat it or beat it.
Because sponsors understand that the confidence level of the baseline is only 50%, they accept it
as a desired target, not as a measure of the project success or failure. This creates a work
environment with far less frictions, where team members focus and collaborate to stay on track and
to quickly correct any temporary deviations from the plan.
Fringe Benefits - Detecting and Improving Critical Areas
While basic Monte Carlo simulation can be performed in Excel, more sophisticated tools, like
Primavera Risk Analysis, provide additional reports that allow better planning and management.
Reports like Criticality and Sensitivity reports help identify the tasks with highest direct impact on
the overall project (cost and duration) and need special attention during planning and execution.
Cost Sensitivity Report
16%
19%
19%
23%
23%
30%
31%
32%
33%
34%000115 - Rides Parts Fabrication
000122 - Furniture
000130 - Lanscape
000126 - Shows Interiors Installation
000110 - HVAC Systems
000125 - Rides Installation & Test
000087 - Construction & Fabrication Documents
000116 - Shows Parts Production
000112 - Paint
000106 - Frames
HT T P Rev 1.0
Cost Sensitivity: Entire Plan - All tasks
Project Acceleration and QRPD (Quality Rapid Product Development)
Improving the schedule is always desired and sometimes a must.
Overlapping tasks (fast-tracking) or reduce their execution time by allocating more resources
(crashing) are the most commonly known and used techniques.

4. QRPD draws on the experience of some very successful project managers and defines a set of
over 150 best practices and techniques to accelerate a project and increase its chance of success.
Here are a few examples: Slow down (and plan) to speed up (the execution); Test early and often;
Schedule the riskiest tasks as early as possible; Don’ invent, innovate (incrementally), Don’t do, buy
systems and IP whenever they are available; Prevention is best risk mitigation and many others.
Progress Monitoring and Tracking – Using EVM Metrics
Using KPI’s, like Earned Value Metrics, during execution phase is an import factor in the overall
project success. Being able to detect, as early as possible, deviations from the plan allows for
corrective actions to be implemented before they impact the delivery date.
Planned Value and Cash report of the baseline is the reference against which the actual progress is
tracked. Similar reports can be generated for any subsection of the project. Primavera calculates
and reports a wide range of EVM tracking metrics, like cost performance index, schedule
performance index, estimated cost at completition, and many others.
Planned Value and Cash Flow Report
Time
Cumulative
Non-Cumulative
Resource Flow for Cost
Filter: Entire Plan
Managing Agile Projects
Advanced tools, like Primavera Risk Analysis have built-in features that allow to define and analyze
any sub-set of a master schedule (“Monitoring Tasks”) as a sub-project, or “sprint”. . Using this
feature, the project team can analyze any number of “what-if” scenarios and decide quickly on the
best course of action.
Evaluating Bids, Proposals and Contracts
Conducting a risk analysis and Monte Carlo simulation on proposed bids allows both, the owner
and the contractor, to choose the schedule, budget and type of contract that fit best the situation
and it is mutually beneficial and profitable.
Summary and Conclusion
Risk analysis, Monte Carlo simulation and QRPD are valuable tools that improve the chances of
success for projects and are recommended in all Six Sigma programs.
Experience shows that projects planned for 50% confidence level, with risk reserves for minimum
80% confidence level, have the greatest rate of success and, in the end, cost less than projects
without such provisions. Chances of success increase even more, when incentives are provided for
completing the project under the 50% baseline.
Risk reserves add only 5-10% to the total project cost and duration, which is much less than the
average overrun of 25-30%. Because of the team commitment and motivation, the 50% targets are,
more often than not, achieved and no risk reserves are even used.
Risks reserves are like an insurance policy but much better, do not pay for it unless a claim is filed.
Try this with your insurer (pay the health insurance premium only if get sick and go see a doctor).