Week 4

GSOE9820 Engineering Project Management

Term 2 2021
Edward G. Obbard
C3PE and PMBOK Knowledge Areas
Cost (Part 1, Sec. 7)
Cost
Requirements
& constraints
Scope
WBS Work packages
statement Network
Project Duration
diagram
Deliverables
Scope (Part 1, Sec. 5)
Schedule (Part 1, Sec. 6)
Stakeholders Project
(Part 1, Sec. 13) benefits subsidiary plans

Stakeholders
Risk register Risk responses plan
Resource plan Resources
Communication (Part 1, Sec.9)
Risk (Part 1, Sec 11) plan Communications
(Part 1, Sec. 10)
1
PMBOK Guide (6th Ed) Part 2, Sec. 1.9 Table 1-1
Part 4A:
Estimating,
Cost Mgmt.
What is Estimating?

2
Some Reasons for Estimating:

3
Factors influencing
quality of estimates

Strategic
mis-
representa
tion

Flyvbjerg B. From Nobel Prize to Project

Management: Getting Risks Right. Project
Management Journal. 2006;37(3):5-15.
doi:10.1177/875697280603700302
Optimism
Bias
4
Types of Estimates

5
Conditions for selecting estimating method

6
Top Down
Approaches

PMBOK Guide (6th Ed.) 2017 Part 1 Sec.

6.4.2.2 Analogous estimating & 6.4.2.3
Parametric estimating

7
8
Ratio Method

9
10
Apportionment Method

11
12
Function Point Method

13
14
 This is another type of relative estimating, See:
O’Connell, K. “Sizing and estimating techniques” video in course Cert. Prep: PMI Agile Certified
15 Practitioner accessed 16/02/2021, LinkedIn Learning accessed through UNSW
Bottom-Up approaches

PMBOK Guide (6th Ed.) 2017 Part 1 Sec.

6.4.2.5 bottom up estimating
16
Template Method

17
Parametric procedures applied to specific tasks

• Parametric estimating - an algorithm is used to calculate cost or

duration based on historical data and project parameters. E.g. build rate of road /
cable/ wall/ lines of code

18
Example:

19
Range Estimating

• 3 point estimate tE = (tO + tM + tP) / 3

• PERT estimate tE = (tO + 4tM + tP) / 6

PMBOK Guide (6th Ed.) 2017 Part 1 Sec Harrington, R. “Using a time estimation formula” video in course Project Management
6.4.2.4 Three-point estimating for Creative Projects accessed 16/02/2021, LinkedIn Learning accessed through UNSW
20
21
Bottom-Up vs Top Down

22
A Hybrid:
Phase
Estimating

23
Estimating Projects: a preferred approach

24
Estimating
Guidelines

25
Types of Costs

26
A Typical Bottom-up Estimating Rules used in Power Industry

• Base estimate on a preliminary design sufficient to provide quantities and preliminary schedule
• For in-house activities, base manhours on ratio’d ‘actuals’ from recent previous similar projects
• For ‘buy-in’ materials for in-house processes, base quantities on preliminary design and unit
costs on current or recent supply contracts
• For ‘buy-in’ equipment and services, especially complex electro-mechanical equipment,
preferably use firm quotes; if not, budget quotes; if not, ratio’d estimates off recent actual
purchase of similar equipment
• For labour, base manhours on ratio’d ‘actuals’ from recent previous similar projects; and labour
rates from actual industrial agreements inflated for life of project
• Base direct overheads on ratio’d estimates from recent projects and the preliminary schedule
• Add in indirect overheads, contingencies and profit as percentages to the overall estimate
based on previous experience and with full approval of Management
• Develop a “Top Down” estimate from a ratio’d recent similar project(s) as a point of reference to
check bottom-up estimate

27
Part 4B:
Schedule
Management
C3PE and PMBOK Knowledge Areas
Cost (Part 1, Sec. 7)
Cost
Requirements
& constraints
Scope
WBS Work packages
statement Network
Project Duration
diagram
Deliverables
Scope (Part 1, Sec. 5)
Schedule (Part 1, Sec. 6)
Stakeholders Project
(Part 1, Sec. 13) benefits subsidiary plans

Stakeholders
Risk register Risk responses plan
Resource plan Resources
Communication (Part 1, Sec.9)
Risk (Part 1, Sec 11) plan Communications
29 (Part 1, Sec. 10)

PMBOK Guide (6th Ed) Part 2, Sec. 1.9 Table 1-1

Scheduling limitations of the WBS

• All the activities that consume time (e.g. waiting periods)

• Dependencies and interrelationships between activities
• Sequence of activities (e.g. work flow)
• Timing of activities (e.g. how long the project will take)
• What are the most important (e.g. critical) activities?

30
The project network diagram

Is a flow chart that graphically depicts using nodes

and arrows the sequence, interdependencies and
start and finish times of the project job plan of
activities.

31
Benefits of developing the project network
• Provides the basis for scheduling labour and equipment;
• Enhances communication among project participants;
• Provides an estimate of the project’s duration;
• Provides a basis for budgeting cash flow;
• Highlights activities that are ‘critical’ and cannot be delayed;
• Highlights activities that can be compressed to meet a deadline;
• Help managers get and stay on plan.

32
Time elements of a project network

Activity • Is some action which requires time

• It does not consume time.

Event • Is a point in time when an activity is

started or completed.
• May also be known as a “milestone”

33
Project network work flow

Path
•a sequence of connected,
dependent activities.

Critical path
• the longest path through the activity network that allows for the
completion of all activities;
• the shortest expected time in which the entire project can be
completed.

34
Rules for developing a project network
(activity on node)

• Networks flow from left to right

• An activity cannot begin until all preceding connected activities are
complete
• Arrows on networks indicate precedence and flow
• Each activity should have an unique identification number or label
• An activity identification number must be larger than that of any
preceding activities
• Looping is not allowed
• Conditional statements are not allowed

35
Types of activities

Burst - an activity that has more than

one activity immediately following it

Merge - an activity that has two or

more preceding activities on which it
depends

Parallel - activities that can occur

independently and, if desired, not at the
same time.
36
Activity-on-node networks

37
Example – From WBS to project network

38
Example - From WBS to project network

39
Recap

Project Definition (WBS)

• identifies all the work elements
involved in a project.

Project Network
• Places the activities in the
right sequence

40
Example – Koll Business Centre

41
Example – Koll Business Centre

Arrow

Node

42
Adding in activity time/duration

43
Project scheduling questions
About the project
– How soon can the project finish?
– Which activities represent the critical path?

About the activities

– How soon can the activity start?
– How soon can the activity finish?
– How late can the activity start?
– How late can the activity finish?
– How long can an activity be delayed?
44
 Network computation process

Forward pass Backward pass

• How soon can the activity start? • How late can the activity start?
(Early Start—ES) (Late Start—LS)
• How soon can the activity finish? • How late can the activity finish?
(Early Finish—EF) (Late Finish—LF)
• How soon can the project finish?
(Expected Time—ET)

45
Key Activity Times

Term Acronym Description Formula

The latest an activity can finish

Late finish LF and not delay a following activity
LF = LS + DUR

The latest an activity can start

Late start LS and not delay a following activity
LS = LF – DUR

The earliest an activity can finish

Early finish EF if all preceding activities are EF = ES + DUR
finished by their early finish times

The earliest an activity can start.

ES = EF – DUR
Early start ES It is the largest early finish of all
its immediate predecessors

46
Project network activity legend

Early Start Activity Early Finish

(ES) identifier (EF)

Start Slack Finish Slack

(SL-Start) Description (SL-Finish)

Late Start Late Finish

(LS) Duration (LF)

47
Example – Koll Business Centre

48
Forward pass computation process
1. Add activity times along each path in the network (ES +
Duration = EF).

2. Carry the early finish (EF) to the next activity where it

becomes its early start (ES) ……. unless

3. the succeeding activity is a merge activity, in which case

select the largest EF of all preceding activities

9
Example – Koll Business Centre
Backward pass computation process
1. Subtract activity times along each path in the network
(LF – Duration = LS).

2. Carry the late start (LS) to the next activity where it

becomes its late finish (LF) ……. Unless

3. the succeeding activity is a burst activity, in which case

select the smallest LF of all preceding activities.
Example – Koll Business Centre
Types of Slack

Total slack Free slack

• Shared by • Owned by the

activities along activity
a path • Affects
• Affects project subsequent
completion date tasks

49
Determining total slack (or float)
The amount of time an activity can be delayed and not delay
the overall project
The amount of time an activity can exceed its early finish
date without affecting the project end date or an imposed
completion date

Total Start Slack = LS – ES, or

Total Finish Slack = LF – EF

Total slack can change as the project progresses

Total slack is shared by ALL activities in a path

50
Total Slack values

Total Slack value Interpretation

Activity delay is possible without delaying the

TS > 0
project completion

Critical situation. Any delay in zero float

TS = 0 activities will cause the project completion date to
slip. Identifies the critical path.

You are behind schedule. You can get negative

TS < 0 slack if you put a constraint on your completion
date

51
Example – Koll Business Centre
Determining Free slack (or float)
Is owned by the activity
Can never be negative

Is the amount of time that an activity can be delayed without delaying the
early start (ES) of any successive activities

FS = ES (of successor activity) – EF (of current activity)

52
Example – Calcuation of free slack

FS = (ES of #7 – EF of #4)
FS = 30 – 12
FS = 18
 Schedule tools summary
• Critical path method (this is what I just showed)
• Further work with float (or slack):
• Negative float analysis - to find possible ways of bringing a delayed schedule back
on track.
• Resource leveling – adjusting tasks within slack to optimize resource usage (e.g.
programmers, excavators, engineers…) and CAN change critical path
• Resource smoothing – like resource levelling, but does NOT modify critical path
• Crashing – Adding more resources to reduce duration for same work
• Fast-tracking – doing work in parallel

53
Sensitivity
Is the likelihood the original critical path(s) will change once
the project is initiated.

Typical rules of thumb:

Very little slack and lots of critical paths
 MORE sensitive

Lots of slack and only one critical path

LESS sensitive

54
 Tips from experience
• Always avoid the temptation to fast-track unless you have a very good
reason – it looks good in theory but adds a new level of complexity and
risk to engineering projects – and to your work as PM! If you fast-track,
then communication between teams has to be exceptional.
• Continuously review and update the schedule. So often the baseline
schedule is done once and not looked at again, whereas it is a living
document and needs constant attention to have any value.

55
Practical considerations
Network logic errors
• Looping
• Conditional statements (e.g. if-then) are invalid

Activity numbering
• Each activity to have an unique identifier
• Number in ascending order
• Leave gaps to add missing or new activities

Calendar dates
• Assign actual dates (include non-workdays)

Multiple starts and multiple projects

• Use a common start and finish event to ensure project has a clear beginning
and end

Note: Detail  Accuracy  Overhead/Costs

56
Part 4C: Risk
mgmt.
What is Risk Management?
A proactive attempt to recognize and manage internal events and
external threats that affect the likelihood of a project’s success.

Incorporates an understanding of:

• What can go wrong (risk event)

• How to minimize the risk event’s impact (consequences/effects)

• What can be done before a risk event occurs (anticipation)

• What to do when a risk event occurs (contingency plans)

57
Benefits of Risk Management
• A proactive rather than reactive approach.

• Reduces surprises and negative consequences.

• Prepares the project manager to take advantage of

appropriate risks.

• Provides better control over the future.

• Improves the chances of reaching project performance

objectives within budget and on time.

58
The risk management challenge

59
4-Step Risk Management Process

Risk Risk
Risk Risk
Response Response
Identification Assessment
Development Control

61
Risk Identification
The process of generating a list of possible risks that could affect the
project.

A common mistake is to identify project objectives rather than events

as risks.
– E.g. Failure to meet schedule is a project objective, whereas
adverse weather is an event which will effect the schedule.

62
Common risk identification tools
• Personal experience
• Individual pondering
• Group processes
– Brainstorming
– Nominal group (PMBOK Sec. 5.2.2.6)
– Delphi method
• SWOT
• Root cause analysis
• Past Project information
• Checklists and Risk Profiles PMBOK Guide (6th Ed.) 2017 Part 1 Sec. 11.2.2.
Identify Risks: Tools & Techniques
• Risk breakdown structure (RBS)
63
Sample Risk Profiling questions

64
 Sample risk breakdown structure (RBS)

Macro
risks

65
Risk Assessment
Takes the list of risks identified in step 1 and filters out and prioritize
them.

We typically evaluate each risk in terms of:

Probability / Likelihood

Impact / Severity

Ease / Difficulty of Detection

PMBOK Guide (6th Ed.) 2017 Part 1 Sec. Stanton, D. “Manage project risks” video in course Leading Projects
11.3.2 Perform Qualitative Risk assessment accessed 16/02/2021, LinkedIn Learning accessed through UNSW
66
Risk Assessment Tools

PMBOK Guide (6th Ed.) 2017 Part

Scenario analysis
1 Sec. 6.5.2.4 Scenario analysis

Impact Scales – (Simple (e.g. low/moderate/high) )/Numerical e.g. 1-5)

Risk severity matrix – (Probability & Impact)

Failure Mode and Effects Analysis (FMEA) – (Probability, Impact & Ease of
Detection)

Statistical Techniques
• Quantitative analysis/ Monte Carlo modelling
PMBOK Guide (6th Ed.) 2017 Part 1 Sec. 11.4.2
• Decision trees – used to assess alternative action using expected values Perform Quantitative Risk assessment
• NPV – for cash flow risks
Chua, R. “How to use failure Mode and Effects analysis” video in
67 course Six-Sigma green Belt accessed 16/02/2021, LinkedIn
Learning accessed through UNSW
68 PMBOK Guide (6th Ed.) 2017 Part 1 Sec. 11.4.2.5:
Simulation
Example – Risk Severity Matrix 1

69
Example - Risk Severity Matrix 2

70
Risk Response Development
Now that the risk event has been identified
and assessed.

We need to make a decision on

what type of response is appropriate
for the specific event.

Stanton, D. “Identify & escalate issues” video in course

Leading Projects accessed 16/02/2021, LinkedIn Learning
accessed through UNSW
71
Risk Management Strategies
Mitigating/Reducing/Controlling Risk
• Reducing the likelihood an adverse event will occur.
• Reducing impact of adverse event.
Avoiding Risk
• Changing the project plan to eliminate the risk or condition.

Transferring Risk
• Paying a premium to pass the risk to another party.
• Requiring Build-Own-Operate-Transfer (BOOT) provisions.
Accepting/Retaining Risk
• Making a conscious decision to accept the risk.

Rogers, J. “Methods of Controlling Risk” video in course Construction Management: Managing

Risk accessed 16/02/2021, LinkedIn Learning accessed through UNSW
72
Contingency Planning
An alternative plan that will be used if a possible foreseen risk event
actually occurs

A plan of actions that will reduce or mitigate the negative impact of a risk
event

Potential disadvantages of not having a Contingency Plan

– Having no plan may slow managerial response
– Decisions made under pressure can be potentially dangerous and
costly

73
Contingency Funding
Funds are established to cover project risks, both identified and unknown.

Size of funds often reflects overall risk of a project

Typical rules of thumb for funding levels

• 1-10% for similar projects

• 20-60% for unique and high tech projects

Project owners are often reluctant to set up project contingency funds that
seem to imply the project plan might be a poor one.

74
Types of Contingency funding

Budget Management
reserves
Are linked to the
reserves Are funds to be
identified risks of used to cover major
specific work unforeseen risks
packages or cost (e.g. change in
accounts in WBS. project scope) of
the total project

Are created after

budget reserves
are identified

75
Contingency funding

PMBOK Guide (6th Ed.) 2017 Part 1

PMBOK Guide (6th Ed.) 2017 Part 1 Sec. 7.3.3
Sec. 6.4.2. Estimate Activity
Determine budget: outputs
Durations: Tools & Techniques
6.4.2.6 /7.2.2.6 Data analysis
(reserve analysis)
77
Time Buffers
Are amounts of time used to compensate for unplanned delays in the
project schedule

Time buffers are often added to:

• Activities with severe risk
• Merge activities that are prone to delays due to one or more
preceding activities being late
• Noncritical activities to reduce the likelihood that they will create
another critical path
• Activities that require scarce resources to ensure resources are
available when needed

78
Types of project risks

Technical

Schedule

Cost

Funding
79
Technical Risks
Technical risks are often difficult to manage

Mitigation Strategies
• Backups/Alternatives
- Different solutions can be implemented if a chosen
technology fails
• Testing and modeling
- Assessing whether technical uncertainties can be
resolved through the use of:
• CAD systems
• Build models/prototypes
80
• Experiments
Schedule Risks
Is the threat of a project not finishing on time

Mitigation Strategies
• Time Buffers/Project Slack
• Compression/Crashing of project schedules by running
activities in parallel or changing relationships (e.g. start-
to-start lag relationships)

81
Cost Risks
Projects of long duration often need some contingency for
price changes.

Mitigation Strategies
• Contingency funding
• Cost sensitive projects should be evaluated item by
item

82
Funding Risks
Changes in the supply of funds for the project can
dramatically affect the likelihood of implementation or
successful completion of a project

Mitigation Strategies
• Contingency funding
• Modularisation of project

83
Opportunity Management tactics

Exploit • Seeking to eliminate the uncertainty associated with

an opportunity to ensure that it definitely happens.

Share • Allocating some or all of the ownership of an

opportunity to another party who is best able to
capture the opportunity for the benefit of the project.

Enhance • Taking action to increase the probability and/or the

positive impact of an opportunity.

Accept • Being willing to take advantage of an opportunity if it

occurs, but not taking action to pursue it.

84
Risk Register
Contains the following information
• All identified risks and descriptions
• Probability of occurrence
• Impact
• Responses (mitigations / contingencies)
• Owners
• Current Status

McGannon, B. “Risk records and registers” video in course Leading Projects

accessed 16/02/2021, LinkedIn Learning accessed through UNSW
85
Risk Response Control
Involves the
• Execution of the risk response strategy
• Monitoring of triggering events
• Initiating contingency plans
• Watching for new risks
• Establishment of a Change Management System
- Monitoring, tracking, and reporting risk
- Fostering an open organization environment
- Repeating risk identification/assessment exercises
- Assigning and documenting responsibility

86
 Probabilistic Vs Deterministic
Assessments
Probabilistic risk assessment
• is ubiquitous in industry, business, PM,
(academia!).
• Most easily recognized in the impact/likelihood
risk matrix.
• Readily extended to quantitative methods (see
PMBOK Ch. 11)

87
 Probabilistic Risk Assessment
• Is ubiquitous in industry, business, PM,
(academia!).
• Most easily recognized in the impact/likelihood
risk matrix.
• Readily extended to quantitative methods (see
PMBOK Ch. 11)
• Always includes the assumption that probability
of occurrence is predictable

88
 The problem with PRA
• For low frequency events, the probability is
(almost) never accurately known
• Even if you know the probability, a low
probability does not preclude the event
happening to you.
• The black swan effect says that the most
significant changes are usually caused by such
low probability events.

89
 Deterministic Risk Assessment
• Any/all adverse events are assumed to occur,
regardless of probability
• Objective is to demonstrate that adequate
contingencies are in place, for any combination of
these impacts.
• Drawback is it may results in expensive treatment of
very unlikely and unimportant events.
• Advantage is that by planning contingencies, you are
in fact developing a range of responses that can be
modified for an emerging scenario (the essence of
90 emergency plans)
 Summary of PRA Vs DRA
• PRA is demonstrating your plan can work, while DRA is
demonstrating it can’t not work.
• Despite some weakness, PRA is normal, and widely accepted
• You might consider deterministic assessment for unacceptable
events, such as crises and events that could result in injury
• In a limited PM context, many major project risks are treated
by escalation.
• Severe hazards are a notable exception, because they cannot
ever be delegated, or completely transferred.
91
 Communications
Plan

GSOE9820 Engineering Project Management

Edward Obbard
 Communication plan needs to describe:
• Why are you telling them?
• What do you expect them to do?
• What information does the Stakeholder need?
• How often?
• What media (phone, email, video, chat…)
• How urgent is it? What latency is allowed?
• What is the risk if they don’t know?

92
 Developing your communications plan
Tips from the change management discipline
• Who?
• Why and When?
• How?
• What?

Stanton, D. “Project Communications” video in course Leading Projects accessed 16/02/2021,

LinkedIn Learning accessed through UNSW

93
 Who?
• Use stakeholder
register
• Target
individuals and
groups with a
tailored
message

94
Why and when?
Engagement level of stakeholders – from stakeholder management
Name Unaware Resistant Neutral Supportive Leading
Faculty Mgmt. C D
MME Mgmt. CD
Convener C D
Demonstrators C D
Students C D

C=Current position
D=Desired position

95 Stakeholders in ‘100% digital delivery and assessment in GSOE9820 T2 20’

 Why (cont.)
• Attract users or customers
• Support the HR management
plan
• To mitigate risks (e.g. resistance
to change)
• If comms is a prerequisite to
success criteria (remember -
organizational strategy?)

96
 What?
5 pressing questions for people undergoing organizational change:
1. What is changing?
2. Why are we changing?
3. How does it affect me?
4. How will I know if I’m going OK?
5. What kind of support is available to me?

97
 Human
Resources
Planning
GSOE9820 Engineering Project Management
Edward Obbard
 Things to include in a HR plan
• Acquiring resources – how will you find the team?
• Roles and responsibilities (use RACI chart)
• Project organization chart
• Position descriptions for project team members
• Training strategies for team members

(See PMBOK Ch. 9)

98
 What do people cost?
• All the people in your project must be paid for their time.
Cost =
Work (time) x Base salary rate ($/time) x [1 + oncost rate] x [1 +
overheads]

UNSW salary and oncost rates:

https://www.hr.unsw.edu.au/services/salaries/salrates.html

99
 Risks associated with HR
• Can’t fill a position
• Recruit people with inappropriate skills/ can’t do the job
• People take longer to train than you expect
• And others…

100
 UNSW employment policy
Most roles need to be advertised. Some of the advantages are:
• Contracts can be extended in the future
• Wider selection pool, best candidate selected
• May be required if visa sponsorship is involved (labour market testing)
Professional roles require a minimum of 2 weeks advertising and academic roles require
a minimum of 4 weeks

Some instances where advertising may not be feasible as a first option and a nomination
request can be submitted for approval as per the UNSW nomination policy
• Strictly short-term (under 12 months). If the role is required beyond 12 months, need to
advertise again (no extensions).
• If the position and candidate are highly specialised (often senior appointments), there is
a very limited pool of applicants and the appointment does not exceed 3 years.

101
 Position Descriptions
Need to make it sound interesting! Have a look at some job profiles
https://external-careers.jobs.unsw.edu.au/cw/en/listing/

• Position title:
• Background surrounding the position:
• Responsibilities:
• Essential/Desirable attributes of the applicant:
• Appointment duration:
• Level:
• Full time/ Part time / casual:
102
 Training strategies
• Take existing UNSW courses
• Go to conferences
• Attend industrial training, e.g. by manufacturers
• Self study (reading, online learning etc.)

Note: all require duration, work hours and resources!

103