W10_PieroAnticona_Monitoring and Managing Contingency in Public Project Estimates

1)    Step 1- Problem or Opportunity Statement

As most of the point estimates in projects will become accurate in time, it is necessary to assess with certain frequency if risk or opportunities remain after accomplishing certain milestones or a certain period of time passed. By consequence, Contingency should be always assessed to determine if we still need more or less money for certain risk or opportunities identified and tactical or strategical responses will perform accordingly.  

For Public Projects, Contingency is not allowed and based on the last post (W9_Piero_Anticona_Strategic/Tactical Response for Risk/Opportunities in Public Point Estimates), we can hide or create a buffer to add contingency in the point estimates. 
For that reason, we also require to analyze which best practice suggest a good tracking tool or technique for the Buffer and Contingency alternative if we expect to meet Public Projects objectives.

What are best practices for Monitoring Risk that can help to implement the best tool or technique to track and control Contingency in Public Project Point Estimates?

2)    Step 2 – Feasible Alternatives

Most common best practices are:

1.    Project Management Body of Knowledge (PMBOK) from Project Management Institute

2.    Total Cost Management Framework (TCM) from AACE International

We are going to add:

3.    Compendium and Reference (CaR) from Guild of Project Controls

As seen in post  W9_ Piero_Anticona_Strategic/Tactical Response for Risk/Opportunities in Public Point Estimates, the three of them offer Risk Management Process Maps. See maps below:

1.    PMBOK – PMI

PMBOK Risk Management Process

2.    TCM – AACE International

TCM Risk Management Process

3.    Guild of Project Controls

Guild of Project Controls Risk Management Process

3)    Step 3- Develop the outcomes for each alternative

The following tools and techniques are part of the monitoring risk process in the three best practices mentioned before:

Tools and Techniques for Risk Control

As we can see, TCM only suggests one tool for a similar process. If we look closer at its Risk Management Process, there is an Analysis of Contingency as an output of Risk Control Process that belongs to the Risk Assessment Process. Besides, it is part of the Risk Management Process, therefore we can consider this tool in this list because a similar tool is included in PMBOK. We can see a definition of the similar tool for both best practices:

Definition of Reserve Analysis and Analyze Contingency

 Let’s see the final list to be assessed:

Final List of Tools and Techniques for Risk Control

For an effective analyze, we are going to merge those tools or techniques that are similar in two or three groups. The main reason is that as they are similar, results will be the same in both or three groups. So, it will not produce a differentiator between them which might not add value to the analysis. We can compare this merged tools against other tools.

Therefore, we only are going to analyze the following list:

1	PMBOK – Technical Performance Analysis	PMBOK- TPA
2	PMBOK/GPC – Analyze Reserve / Contingency	PMBOK/GPC – A R/C
3	PMBOK - Audits	PMBOK – Aud
4	PMBOK/GPC - Meetings	PMBOK/GPC – M
5	GPC – Statistical Process Control Chart	GPC – SPCC
6	GPC – Pareto Analysis	GPC – PA
7	GPC – Process Capability Analysis	GPC – PCA
8	GPC – Accuracy vs Precision vs Reliable Data	GPC – A/P/R
9	GPC – Contingency Draw Down Graphs	GPC - CDDG

4)    Step 4- Selection of the acceptable criteria.

The following attributes will be considered for the selection criteria:

-       Mandatory to Quantify impacts when event occcurs

-       Mandatory to Create Tendency Charts

-       Can analyze accuracy against baseline

-       Can analyze precision against baseline

-       Can analyze reliability against baseline

5)    Step 5- Compare the outcomes from each alternative analysis done in Step 3 against the minimum acceptable criteria from Step 4.

Using Multiattribute Decision Making, we will analyze as follows:

           

Non Compensatory Models

1.    Dominance

Dominance Matrix

Conclusion

The Tools and Techniques that meet most the acceptable criteria are GPC - Accuracy vs Precision vs Reliable Data and GPC - Contingency Draw Down

2.    Satisfacing

Satisfacing Analysis

Conclusion

The Tools and Techniques that satisfy minimum acceptable criteria are GPC - Accuracy vs Precision vs Reliable Data and GPC - Contingency Draw Down. As the others do not meet minimum acceptable criteria, they can be discarded.

3.    Lexicography

Lexicography Analysis

Conclusion

GPC – A/P/R  and  GPC - CDDG meet acceptable criteria

Compensatory Models

1.    Non Dimensional Escaling

Non Dimensional Analysis

Conclusion
Best choices are GPC – A/P/R  and  GPC - CDDG

2.    The additive weighting technique

The Additive Weighting Technique Analysis

Conclusion

The best choices are GPC – A/P/R  and  GPC - CDDG

6)    Step 6- Selection of the “best”.

One of the main reasons that we want to monitor Buffer or Buried Contingency is because we want to meet Point Estimates and avoid cost overruns. For that reason, the best choices that meet all of the attribute criteria are GPC – Accuracy, Precision and Reliability and GPC Contingency Draw Down Graphs in the previous step. 5 positive results out of 5.
With these tools it is possible to Manage Contingency also in Public Projects.

7)    Step 7- How to plan on tracking/reporting on the recommended choice. 

Assuming that we are working on a Public Project and contingency is hidden or in a buffer, based on author experience a good way to determine if tools are supporting correctly Management Contingency is through Change Management Process. A short list of Change Orders should be submitted or a short list of Change Orders might be produced to request transfer budgets between accounts.

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8)    REFERENCES.

H. Lance Stephenson. (2015). Total cost management framework: An Integrated Approach to Portfolio, Program, and Project Management (2nd Ed.). Morgantown, WV: AACE International. Pages 206 - 209.

Guild of Project Controls. (2016, January 05). 04.6 risk_opportunity_monitoring_and_control-_rev1.00. Retrieved September 15, 2018, from http://www.planningplanet.com/guild/gpccar/risk_opportunity_responses_strategies_and_tactics

A Guide to the Project Management Body of Knowledge (PMBOK® Guide), 6th ed. Newton Square, Pa: Project Management Institute, Inc. 2017. Pages 453 - 458

Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). Decision making Considering Multiattributes. In Engineering Economy (15th ed.). Harlow, England: Pearson Education Limited.

Anticona, P. (2018, November 3). W8.1 Sensitivity Analysis and Contingency. Distance Learning Mode with PDG - 2018 / 2019 [Web log post]. Retrieved from https://pieroanticona-projectcontrol.blogspot.com

Anticona, P. (2018, November 9). W9_Piero_Anticona_Strategic/Tactical Response for Risk/Opportunities in Public Point Estimates. Distance Learning Mode with PDG - 2018 / 2019 [Web log post]. Retrieved from https://pieroanticona-projectcontrol.blogspot.com

W9_Piero_Anticona_Strategic/Tactical Response for Risk/Opportunities in Public Point Estimates

1)    Step 1- Problem or Opportunity Statement

Most of Public Projects do not allow to add contingency to their budgets. Public Projects processes and plans to design and execute future assets are not different from private enterprises. Therefore, Public Projects are not exempt from risk and opportunities when executing project activities. When a risk or opportunity occurs sometimes an impact needs the best as you could predict, a tactical or strategical response.

What are best practices to a Risk Management Process that can help to implement the best strategical or tactical response to an event and especially that can adapt to Public Projects if we want a high confidence level of probability to meet project point estimates?

2)    Step 2 – Feasible Alternatives

Most common best practices are:

1.    Project Management Body of Knowledge (PMBOK) from Project Management Institute

2.    Total Cost Management Framework (TCM) from AACE International

We are going to add:

3.    Compendium and Reference (CaR) from Guild of Project Controls

The three of them offer Risk Management Process Maps. See maps below:

1.    PMBOK – PMI

PMI- Risk Management Process Map

2.    TCM – AACE International

TCM - Risk Management Process Map

3.    Guild of Project Controls

GPC - Risk Management Process Map

3)    Step 3- Develop the outcomes for each alternative
                As explained above, we need to determine which of the three offers better tools or techniques to respond to impacts when events occur.

We will analyze risk/opportunities response on strategies and tactics to treat risk/opportunities. What are the steps to implement a plan to treat risk/opportunities? Let’s see following lists:

Comparison of Tools and Techniques 

   

        For an effective analyze, we are going to eliminate those tools or techniques that are similar in the three groups. The main reason is that as they are similar, results will be the same for the three groups. So, it will not produce a differentiator between them which might not add value to the analysis. Also, Expert Judgement can be eliminated because as shown in the table above an individual or group of experts will produce the same responses as described in another item that will go for further analysis. 

.

Eliminated items

        Therefore, we only are going to analyze the following list. TCM as all of the tool and techniques are similar to PMBOK and GPC is eliminated for the analysis.

Final Tools and Techniques for Analysis

To facilitate the analysis we are going to list the outcomes alternatives as follows:

1	PMBOK – Data Gathering	PMBOK-DG
2	PMBOK – Interpersonal and Team Skills	PMBOK-I&TS
3	PMBOK – Strategies for Threats/Opportunities Escalate	PMBOK-Escalate
4	PMBOK – Contingent Response Strategies	PMBOK-Contingent
5	PMBOK - Data Analysis	PMBOK-DA
6	PMBOK – Decision Making	PMBOK-DM
7	GPC – Buffer vs. Contingency	GPC-BvsCont
8	GPC – Decision Trees using EMV	GC-EMV

4)    Step 4- Selection of the acceptable criteria.

The following attributes will be considered for the selection criteria:
- Mandatory to Produce a Quantitative response
- It is possible to be assigned to project budget accounts
- Increase Probability to Meeting Point Estimates

5)    Step 5- Compare the outcomes from each alternative analysis done in Step 3 against the minimum acceptable criteria from Step 4.

              Using Multiattribute Decision Making, we will analyze as follows:

              

              Non Compensatory Models

1.    Dominance

Conclusion

     We can see that alternative GPC – BvsCont dominate others

2.    Satisficing

Conclusion

So far, the only alternative that meets all requirements is GPC Buffer vs Contingency. Alternatives PMBOK-DG,PMBOK-I&TS,PMBOK-Escalate,PMBOK-Contingent can be discarded.

3.    Lexicography

Conclusion

GPC BvsCont is better than GPC - EMV

Compensatory Models

1.    Non-Dimensional Escaling

Conclusion

The best choice is GPC – BvsCont

2.    The additive weighting technique

Conclusion

                      The best choice is GPC – BvsCont

6)    Step 6- Selection of the “best”.

      It is important for Public Projects to avoid cost overruns. For that reason, the best choice that meet all of the attribute criteria is GPC – Buffer vs Contingency as shown in the previous step. 5 positive results out of 5. 
          As Contingency is not allowed it can be hidden or create a buffer so it still complies public policies. In addition, it will help to increase probabilities to meet point estimates. 

7)    Step 7- How to plan on tracking/reporting on the recommended choice. 

A good recommendation for further analysis is to identify which of the three best practices can help to track better this alternative as part of the change management process.

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8)    REFERENCES.

H. Lance Stephenson. (2015). Total cost management framework: An Integrated Approach to Portfolio, Program, and Project Management (2nd Ed.). Morgantown, WV: AACE International. Page 201.

Guild of Project Controls. (2016, January 05). 04.5 risk_opportunity_responses_strategies_and_tactics_-_rev1.00. Retrieved September 15, 2018, from http://www.planningplanet.com/guild/gpccar/risk_opportunity_responses_strategies_and_tactics

A Guide to the Project Management Body of Knowledge (PMBOK® Guide), 6th ed. Newton Square, Pa: Project Management Institute, Inc. 2017. 

Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). Decision making Considering Multiattributes. In Engineering Economy (15th ed.). Harlow, England: Pearson Education Limited.