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

Formulating, Building, and Running a Monte Carlo Model (Pertmaster)
AACEi Technical Meeting, Risk Workshop 2 February 16, 2010

JA Gastelum MR Shay
PNNL-SA-70909
Brief Summary of January Presentation

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

Risk Ranking
Establish Technical Baseline
Likelihood
Impact (Months) 0-10% 11-25%
0 3 0 2
Top Risks 76-90%

1 0 2 0
26-75%
1 0 1 28
91-100%
0 1 3 3
>12
2 0 0 4
Identify Risks in Major Work Areas
3-12 0-3 <.5
Assess Likelihood, Consequence & Timing of Risk
Cost Risk Analysis

Forecast: TOTAL CONTINGENCY COST 5,000 Trials
.029
Frequency Chart
5,000 Displayed
147
.022
110.2
.015
73.5
Perform Monte Carlo Simulation
.007 Mean = 21.45 .000 0.00 11.25 22.50 33.75 45.00
36.75
Certainty is 79.88% from -Infinity to 27.15 $M
Schedule Risk Analysis

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

Contingency Profile 10.0 Millions of Dollars 8.0 6.0 4.0 2.0 0.0 2005 2006 2007 2008 2009
0.800
Define Mitigation Actions
0.600 0.400 0.200
Develop Contingency Cost & Schedule Risk

3
0.000 11/9/2004
Nominal=1 /23/2004 1
4/8/2005
80%
9/5/2005 7/22/2005
2/2/2006
10%
7/3/2006
10%
2/22/2005
Agenda for Workshop 2

Formulating, building, and running a Monte Carlo model (Pertmaster)
Definition of Example Project Risk Identification Basic Structures used by Pertmaster to Model risks Loading Risks and Structures into Pertmaster Running Pertmaster Expected Project Risk Posture Improving Expected Project Risk Posture
The Project Landscaping the back yard

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

Identify and Characterize Major Risks to the Project as defined.
Identified Risks
How Pertmaster Represents an Identified Risk

Identified risk affects a scheduled activity (risky activity) Need two new activities to model risk
Baseline (:B) activity with same duration as risky activity, assigned as child to risky activity Risk activity that carries distributions from elicitation, also assigned as child to risk activity.
Result is that risky activitys cost and duration increase when risk is realized
Before:
After:
Risk Ready Schedule

Schedule is logically linked
Activities are constrained primarily by other activities, not explicit constraints
LOE activities can stretch with scope

Activity modeled as hammock and linked to supported scope
Activities are cost loaded appropriately

Normal - cost of activity is dependent on duration Spread - cost of activity is independent of duration
10
Estimation Uncertainty
Second source of variation in Pertmaster Captures inherent uncertainty in the original estimate (both cost and schedule) Generally significantly smaller than contribution from identified risks
11
Getting Risks out of the Register and into Pertmaster

Exploit a feature of Pertmastercopy and paste
Step 1: Validate risks
Do I have all the info I need to model the risk in Pertmaster?
Step 2: Build risk structures

Format data from elicitation, using Pertmaster conventions
From: Ive got a bad back, so if Ive got to trench by hand it could take four to six more days than I had planned. Mike Shay, Project Manager To: Uniform(4;6)
Step 3: Paste into PM
12
Running Pertmaster
Static Risk Loaded Plan Iteration with Realized Risks
13
Initial Results
Entire Plan : Finish Date
100% 09/Jun/10 95% 04/Jun/10 90% 02/Jun/10 280 85% 01/Jun/10 260 80% 01/Jun/10 240 300
Data Finish Date of : Entire Plan
Duration Sensitivity
Analysis Simulation Latin Hypercube 1000
IRR04:OWNERYARD:IRR-002 - Too many rocks and roots means that tren...
62%
Iterations
Analysis Iterations: 1000

SOD03:OWNERYARD:SOD-002 - Forecast predicts inclement w eather du... 56%
Sensitivity measurement Pearson's product moment Measured Against: Entire Plan
Statistics
75% 01/Jun/10
Minimum:
220 70% 31/May/10 65% 31/May/10 200 60% 30/May/10 180 55% 29/May/10
23/May/10 09/Jun/10 29/May/10 day
FNC03 - Dig holes
28%
Display settings Normal tasks only Show ing 10 highest values
Maximum: Mean: Bar Width:
IRR05 - Install system
26%
Values greater than:
Cumulative Frequency
Highlighters
SOD01:OWNERYARD:SOD-001 - Delivery of SOD is delayed. 24%
Hits
160
50% 28/May/10 45% 28/May/10 40% 28/May/10
Deterministic (25/May/10) 50% 80%
12% 28/May/10 01/Jun/10

IRR01 - Design system 21%
140
120 35% 28/May/10 100 30% 28/May/10 80 25% 28/May/10 FNC04:OWNERYARD:FNC-001 - Post installation takes substantially longe... 60 20% 27/May/10 15% 26/May/10 40 10% 25/May/10 20 5% 25/May/10 0% 23/May/10 24/May/10 29/May/10 03/Jun/10 08/Jun/10 IRR02 - Prepare bill of materials 0% FNC05 - Install fencing 3% 6% IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri... 18%
Distribution (start of interval)
Entire Plan : Cost

100% $5,809 150 95% $5,506 140 90% $5,437
Data Cost of: Entire Plan
Cost Sensitivity
IRRIGATION:OWNERYARD:IRR-001 - Irrigation increases qualif ying age fo...
73%
Iterations
Analysis
130 85% $5,370 80% $5,313 120 75% $5,255
Sensitivity measurement 1000

FENCE:OWNERYARD:FNC-002 - Financing terms change, substantially inc... 53%
Iterations:
Pearson's product moment Measured Against: Entire Plan
Statistics Minimum: $4,379 $5,809 $5,058 $100

FNC02 - Buy f encing materials 22% SOD02 - Sod delivered 33%
110
Display settings Tasks Displayed: Normal tasks Milestone tasks Monitor tasks
70% $5,214 65% $5,169 60% $5,128
100
90 55% $5,093
Highlighters Deterministic ($4,700) 50% 80% 12% $5,064 $5,313

IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri... 6% IRR03 - Buy irrigation system materials 11%
Hammock tasks Show ing 10 highest values Values greater than: 0
Hits
80 50% $5,064 70 45% $5,029 40% $5,000 35% $4,953 50 30% $4,894 40 25% $4,842 20% $4,786 15% $4,734 20 10% $4,675 10 5% $4,612 0% $4,379 $4,500 $5,000 $5,500
60
IRR01 - Design system
0%
30
IRR02 - Prepare bill of materials
0%
SOD01 - Order sod
0%
SOD04 - Landscape complete
0%
14
Identified Risks
15
Results with Mitigations

Entire Plan : Finish Date
350 100% 03/Jun/10 95% 01/Jun/10 90% 01/Jun/10
Data Finish Date of: Entire Plan
Duration Sensitivity
SOD03:OWNERYARD:SOD-002 - Forecast predicts inclement w eather du...
68%
Iterations
Analysis
300 85% 01/Jun/10 80% 31/May/10

IRR05 - Install system 36%
Iterations:
Statistics
75% 31/May/10 FNC03 - Dig holes 34%
Minimum:
250 70% 29/May/10 65% 29/May/10 60% 29/May/10 200 55% 28/May/10
23/May/10 03/Jun/10 28/May/10 day

SOD01:OWNERYARD:SOD-001 - Delivery of SOD is delayed. 29%
Display settings Normal tasks only Show ing 10 highest values Values greater than: 0
Highlighters Deterministic (25/May/10) 50% 80% 21% 28/May/10 31/May/10
IRR01 - Design system
24%
Hits
50% 28/May/10 45% 28/May/10 150 40% 28/May/10 35% 28/May/10
IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri...
23%
FNC04:OWNERYARD:FNC-001U - Post installation takes substantially long... 30% 28/May/10 100 25% 27/May/10 IRR04:OWNERYARD:IRR-002M - Too many rocks and roots means that tre... 20% 25/May/10 15% 25/May/10 IRR04:OWNERYARD:IRR-002U - Too many rocks and roots means that tre... 10% 25/May/10 5% 24/May/10 FNC05 - Install fencing 0 23/May/10 25/May/10 27/May/10 29/May/10 31/May/10 02/Jun/10 0% 23/May/10 04/Jun/10 1% 3%
8%
6%
50
Entire Plan : Cost

100% $5,651 95% $5,303 160 90% $5,229
Data Cost of: Entire Plan
Cost Sensitivity
IRRIGATION:OWNERYARD:IRR-001 - Irrigation increases qualifying age fo...
86%
Iterations
Analysis
85% $5,187 140 80% $5,147

SOD02 - Sod delivered 34%
Iterations:
Statistics
75% $5,121
Minimum:
120 70% $5,083 65% $5,043 60% $5,012 100 55% $4,967
$4,405 $5,651 $4,916
FNC02 - Buy fencing materials
28%
Display settings Tasks Displayed: Normal tasks
FENCE:OWNERYARD:FNC-002U - Financing terms change, substantially i...
26%
$100 Show ing 10 highest values
Hammock tasks
Highlighters Deterministic ($4,700) 50% 80% 24% $4,910 $5,147
IRR03 - Buy irrigation system materials
20%
Values greater than:
Hits
50% $4,910 80 45% $4,851 40% $4,807 35% $4,769
IRR05 - Install system
5%
60
IRR06:OWNERYARD:IRR-003 - Design does not cover entire area, requiri... 30% $4,735 25% $4,704 40 20% $4,676 15% $4,643 20 IRR01 - Design system 10% $4,611 5% $4,553 IRR02 - Prepare bill of materials 0 $4,600 $4,800 $5,000 $5,200 $5,400 $5,600 0% $4,405 FNC05 - Install fencing
4%
3%
0%
0%
16
Summary of Workshop 2
Defined an Example Project Identified Risks Discussed Basic Structures used by Pertmaster to Model risks Examined Risks and Structures Loaded into Pertmaster Ran Pertmaster Examined the Expected Project Risk Posture Examined the Improved Expected Project Risk Posture
17
Questions/Discussions
18

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

AACEi Technical Meeting, Risk Workshop 2 February 16, 2010

Brief Summary of January Presentation

Integrated Project Cost and Schedule Risk Management Flowchart

Top Risks 76-90%

Identify Risks in Major Work Areas

3-12 0-3 <.5

Assess Likelihood, Consequence & Timing of Risk

Cost Risk Analysis

Perform Monte Carlo Simulation

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

Certainty is 79.88% from -Infinity to 27.15 $M

Schedule Risk Analysis

Contingency Cost Profile

Define Mitigation Actions

0.600 0.400 0.200

Develop Contingency Cost & Schedule Risk

Agenda for Workshop 2

The Project Landscaping the back yard

Project Gantt Chart

Project Risk Elicitation

How Pertmaster Represents an Identified Risk

Risk Ready Schedule

LOE activities can stretch with scope

Activities are cost loaded appropriately

Getting Risks out of the Register and into Pertmaster

Step 2: Build risk structures

Step 3: Paste into PM

Data Finish Date of : Entire Plan

Analysis Simulation Latin Hypercube 1000

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

Analysis Iterations: 1000

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

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

FNC03 - Dig holes

Display settings Normal tasks only Show ing 10 highest values

Maximum: Mean: Bar Width:

IRR05 - Install system

Values greater than:

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

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

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

Distribution (start of interval)

Entire Plan : Cost

Data Cost of: Entire Plan

Analysis Simulation Latin Hypercube 1000

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

Sensitivity measurement 1000

Pearson's product moment Measured Against: Entire Plan

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

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

Maximum: Mean: Bar Width:

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

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

IRR01 - Design system

IRR02 - Prepare bill of materials

SOD01 - Order sod

SOD04 - Landscape complete