Transcript Resource Limited Project Management

Resource Limited
Project Management
Vladimir Liberzon
[email protected]
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Introduction
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We will discuss methodologies and techniques
that are necessary for the proper project
management when project resources are
limited.
And to my knowledge they are always limited.
Please feel free to ask questions any time during
my presentation.
We shall learn from each other and more
discussions create more understanding.
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Introduction
My name is Vladimir Liberzon.
 I am a head of the leading Russian project
management consulting company that:
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– Implements project management systems at
the different enterprises,
– Manages projects for our customers,
– Provides project management training,
– Develops the most powerful project
management software Spider Project.
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Topics of Discussion
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We will discuss:
– Organizing data for the proper project
computer simulation and corporate resource
management,
– Resource constrained scheduling and
Resource Critical Path,
– Project Success Criteria,
– Project Risk Simulation,
– Success Driven Project Management.
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Organizing data
It is Data Structure that defines the possibilities of
simulating the situations occurring in the actual
projects.
 The main elements of a project computer model
are project activities, activity dependencies,
project resources and their assignments, project
calendars, costs, and Work, Resource and Cost
Breakdown Structures.
 We will discuss the main elements of Data
Structure that are vital for understanding the
specific approaches to project simulation.
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Activities
In the majority of well-known PM software
packages project activities are characterized
by their duration.
 Besides duration, it is frequently necessary
to set the activity’s physical volume of work.
 Activity volume can be measured in meters,
tons, etc., planned work hours, percents or
any other units.
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Activities
Activity volume is often used as an initial
activity information instead of duration. If
assigned resource productivity is defined in
volume units per hour then activity duration
may be calculated during project
scheduling.
 Unlike activity duration activity volume does
not depend on assigned resources.
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Dependencies
Sometimes it is necessary to set more than one
link between activities.
 Besides the positive and negative time lags, it is
useful to set volume lags, which is preferable in
many cases.
 The problem with time lags is that if the preceding
work has started but is executed slower than it
was planned, the time lag may be satisfied earlier
than the planned volume of work is fulfilled.
 The time lags call for special attention and regular
adjustments.
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Resources
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Resources are divided into two classes:
– renewable (human resources and mechanisms)
and
– consumable (materials).
In most PM software packages, both are set
together, differing only in setting the costs
of their use - per work hour or per unit.
 Thus you can not define that renewable
resource spends materials during the work.
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Complex Resources
Besides the individual resources one may set
resource crews (we call them multiresources) and resource skills (roles).
 Multi-resources are the settled groups of
resources working together (e.g. a team, a
crew, a car with a driver, etc.).
 Multi-resource can be assigned to activity
which means assignment of all resources
comprising the multi-resource.
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Resource Skills
Resources sharing the same skills comprise
Resource Assignment Pools.
 Resources belonging to the same Pool are
interchangeable though individuals in a pool
may have different productivities performing
the same activities.
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Calendars
The calendars can be set for all activities,
resources and time lags.
 Availability of all these calendars is
important for the proper project simulation.
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Assignments
Assigning resources to activities implies the notion
of a team - a group of resources working on an
activity together.
 The team can include individual resources, multiresources and pools.
 If the activity’s initial information is work volume,
one should set the productivity of at least one of
assigned resources, to enable the calculation of
the work duration. It should be noted that when
the pools are assigned, activity duration can be
calculated only in the process of scheduling.
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Assignments
In assigning resource assignment pool, one
should either set a total number of pool
resources necessary for the execution of
activity or their aggregate productivity.
 Example: a pool consists of the tip lorries
(dump trucks) with different carrying
capacity. One may set a number of lorries
necessary for the execution of this activity
or the aggregate productivity (dependent on
capacity) of assigned tip lorries.
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Assignments
If more than one team is assigned then resources
belonging with the different teams work on an
activity independently of each other.
 One may set the volumes or duration of work for
each team, but it is not obligatory.
 When the volume or duration of assignment are
not defined the team will continue working until
the work on the activity is completed.
 Such approach allows to simulate the shift work
efficiently.
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Assignments
Resources can be assigned to activities part time.
 In this case one shall set percentage of assigned
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resources utilization together with resource
quantity (not just the total percentage calculated
by multiplying percents and quantities, that leaves
the necessary amount of resources unclear - two
resource units with 50% utilization are equivalent
to one resource unit used to its full capacity).
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Assignments
Another useful option – variable resource
assignments.
 Example:
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– You may define that the number of resources that may
be used at some work is between 2 and 4, and their
workload should be not less than 40% and not more
than 80%.
– In this case activity will start if two units of assigned
resource are available not less than 40% of their time,
and the team may be increased if additional resources
become available. Finishing other assignments resources
may apply more of their time to the specified
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assignment but not more than 80%.
Assignments
Resources can consume materials in the process of
their work,
 Besides materials can be assigned to activities or
resource assignments directly.
 In some projects it is necessary to simulate not
only material consumption but also production of
resources and materials on activities and
assignments.
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Cost
Usually it is not enough just to define activity and
resource costs. It is necessary to know project
expenses and revenues, what will be spent on
wages, on machinery and equipment, on taxes,
etc.
 Sometimes it is necessary to allow for multiple
currencies.
 So there is a need to define and assign cost
components.
 Besides setting the cost of an hour of renewable
resource work and the cost of material unit, it is
necessary to be able to set the cost directly for
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activities and assignments.
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Cost
People may be paid not only for the hours spent
on the task but also by the quantity of work they
have done.
 It means that labor resource cost that is usually
defined by the cost of work hour is not enough.
 Frequently it is necessary to set costs for resource
assignments (fixed or per unit of volume).
 Cost of assignment is one example of setting
contract costs for the project.
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Centers
Setting costs for the components of the project
expenses, materials and resources you may need
to get different reports on the groups of cost
components, materials and resources. That is why
it is necessary to define Cost, Material and
Resource Breakdown Structures or Centers.
 Material center can include any group of materials.
 Resource center can include any group of
resources.
 Cost center includes selected cost components.
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Multiple Breakdown Structures
It is also very useful to have an opportunity to get
project reports that aggregate project data
different ways.
 Usually we use at least three Work Breakdown
Structures in our projects: based on project
deliverables, project processes and responsibilities.
 The use of multiple breakdown structures allows
not only to obtain different project reports as seen
from the different standpoints, but also to provide
that the project model is truly comprehensive.
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Multiple Breakdown Structures
The use of resource breakdown structures is
especially important in multi-project management.
 In this case the matrix organizational structure
determines the necessity of obtaining the reports
on both Project and Functional Resource
Breakdown Structures.
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Project Archives
Another feature that is necessary for the proper
project control is an ability to store project history.
 The planners should be able to store project
versions and to analyze the progress in project
execution, comparing current project schedule not
only with the baseline but with any other previous
version too.
 This possibility enables to assess the progress in
project execution for the last week, last month,
last year, compared to the baseline, etc.
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Project Reference Books
Corporate project management has to be based on
the corporate standards.
 These standards shall include not only processes
and documents that should be used in all projects
but also estimates of the typical activity and
assignment parameters.
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Project Reference Books
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Reference books that should be created should
include at least:
– Activity cost and material requirements per activity
volume unit,
– Assignment cost and material requirements per
activity volume unit,
– Assignment productivity,
– Assignment work load.
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Fragnet Library
Another necessary thing – to create a library of
typical project fragnets.
 Project fragnets usually describe typical processes
and technologies that are used more than once.
 Creating project computer models using the
corporate library of typical fragnets will help to
avoid inconsistencies and assures that the project
model follows corporate standards.
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Fragnet Library
A library of typical fragments is a very important
tool for the development of corporate culture and
management standards.
 An interesting side effect of the use of typical
fragnets library is the technology of work
breakdown structure development not top-down,
as usual, but bottom-up.
 In such structure typical fragments serve as work
packages. Since we commonly use several Work
breakdown structures top-down and bottom-up
technologies are used in parallel, complementing
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each other.
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Resource constrained scheduling
and Resource Critical Path
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The problems solved with the help of project
management software usually include:
Project scheduling without the limitations of
resources taken into the consideration,
Project
resource
constrained
scheduling
(resource leveling),
Determination of critical path and time float for
project activities,
Determination of the project requirements for
finance, materials and equipment for any time
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period,
Resource constrained scheduling
and Resource Critical Path
Determination of renewable resources utilization
in time,
Risk analysis and development of the project
schedule and other project characteristics
allowing for the risks,
Project performance measuring,
Project performance analysis and forecasting
main project parameters.
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Resource constrained scheduling
and Resource Critical Path
The problem of project schedule development
without allowing for resource constraints has a
correct mathematical solution (critical path
method), which would be the same for all PM
packages, provided that initial data are identical.
 All other problems are solved using different
approaches and yielding different results.
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Resource constrained scheduling
Resource constrained schedules produced by
different PM software are different.
 The software that calculates shorter resource
constrained schedules may save a fortune to its
users.
 Spider Project is based on advanced heuristics that
consistently obtains shorter resource constrained
schedules than using other PM software packages.
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Resource constrained scheduling
The schedule stability is no less important,
especially at the project execution phase.
 That’s why Spider Project features an additional
option - the support of the earlier project version
schedule (the order of activity execution is the
same as in selected earlier project schedule).
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Resource Critical Path
Traditional notion of Critical Path works only in
case of unlimited resources availability.
 Let us consider a simple project consisting of five
activities, presented at the next slide.
 Activities 2 and 5 are performed by the same
resource
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Resource Critical Path
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Resource Critical Path
At the next slide you will see the results of
resource constrained scheduling (leveling).
 Please pay attention to activities that became
critical (red on the diagram).
 Now delaying each of the activities 1, 2 and 5 will
delay the project finish date.
 And though these activities are not linked we call
them Resource Critical and their sequence
comprise Resource Critical Path.
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Resource Critical Path
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MS Project Example
At the next slide you may find MS Project resource
constrained schedule for the same project.
 Please pay attention to the total slack figures and
which activities were considered as critical.
 Unfortunately resource constrained floats are not
calculated not only by MS Project but by other
popular PM software as well.
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MS Project Example
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Resource Critical Path
In many projects it is necessary to simulate
financing and production, and calculate project
schedules taking into account all limitations
(availability of renewable resources, material
supply and financing schedules).
 True critical path should account for all schedule
constraints including resource and financial
limitations.
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Resource Critical Path
We call it Resource Critical Path (RCP) to
distinguish it from the traditional interpretation of
the critical path definition.
 The calculation of RCP is similar to the calculation
of the traditional critical path with the exception
that both early and late dates (and corresponding
activity floats) are calculated during forward and
backward resource (and material, and cost)
leveling.
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Resource Constrained Floats
Activity resource constrained floats have one large
advantage over the total floats calculated by most
PM software. This advantage is feasibility.
 Activity resource constrained float shows the
period for which activity execution may be
postponed within the current schedule with the set
of resources available in this project.
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Resource Critical Path and
Critical Chain
It appears that by adding financial and supply
constraints to the Critical Chain definition as well
as the way of the Critical Chain calculation, we will
obtain something very similar to RCP.
 Thus the proven technology of project
management based on RCP that is described
further may be of particular interest for the Critical
Chain theory supporters.
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Project Success Criteria
If project success criteria are set as finishing
project in time and under budget then proper
decision making will be complicated.
 Project managers will not be able to estimate the
effect of their decisions to spend more money but
to finish the project earlier.
 If some project is business oriented then this
project has to have business criteria of its success
or failure.
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Project Success Criteria
One of potential options – to set the profit that
should be expected at some point in time basing
on the forecast of the profit that will be obtained
after the project will deliver its results.
 Such success criterion will permit to weight time
and money making managerial decisions.
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Project Success Criteria
At the next slide you may see the project schedule
that is calculated without allowing for project
financing and supply restrictions.
 There are periods when project has no money to
proceed and necessary materials are absent.
 But if project manager will find money and
materials then total profit to some imposed date
will be close to $225,000.
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Project Success Criteria
If to calculate project resource, financing and
supply constrained schedule than total profit will
become more than $16,000 less.
 Maybe it will be reasonable to borrow $41,000 for
ten days or to find some other solution?
 To be able to weight options and to choose the
best it is necessary to simulate not only expenses.
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Risk Simulation
Our experience of project planning shows that the
probability of successful implementation of
deterministic project schedules and budgets is very
low.
 Therefore project planning technology should
always include risk simulation to produce reliable
results.
 Risk simulation may be based on Monte Carlo
simulation or use three scenarios approach that
will be described further.
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Risk Simulation
Monte Carlo simulation is very time consuming and
not practical for the large projects.
 Current practice of its implementation mostly do
not consider correlation between activity duration
and cost estimates that exists if activities are
performed by the same resources, do not consider
risk events that may change a set of project
activities.
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Risk Simulation
Even if everything is properly simulated the
number of necessary iterations is too high for
receiving reliable results in the reasonable time.
 A project planner may be happy with the
probability estimates that has plus or minus 10%
accuracy but only if the error will be stable. If it
may change from one calculation to another then
these estimates can not be used as performance
management tool.
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Risk Simulation –
three scenarios approach
A project planner obtains three estimates
(optimistic, most probable and pessimistic) for all
initial project data (duration, volumes, productivity,
calendars, costs, etc.).
 Risk events are selected and ranked using the
usual approach to risk qualitative analysis.
 Usually we recommend to include risk events with
the probability exceeding 90% in the optimistic
scenario, exceeding 50% in the most probable
scenario, and all selected risks in the pessimistic
scenario.
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Risk Simulation –
three scenarios approach
These data are used to calculate optimistic, most
probable and pessimistic project schedules and
budgets.
 The most probable and pessimistic project
scenarios may contain additional activities and
costs due to corresponding risk events and may
employ additional resources and different
calendars than the optimistic project scenario.
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Risk Simulation –
three scenarios approach
As the result project planner obtains three
expected finish dates, costs and material
consumptions for all major milestone.
 They are used to rebuild probability curves for the
dates, costs and material requirements.
 Defining desired probabilities of meeting project
targets a project planner obtains desired finish
dates, costs and material requirements for any
project deliverable.
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Risk Simulation –
setting targets
There is a preferable interval for setting project
targets that is defined by market competition.
 Let’s consider an example:
– Some company delivers projects that bring her
$10,000 profit per project if the project is
successful.
– Unsuccessful project means $10,000 lost.
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Risk Simulation –
setting targets
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Let’s create a table with the following data:
P - Probability of project success
M - Mean profit from the single project
N - Number of expected customers
T - Expected total profit
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Risk Simulation –
setting targets
P
M
N
T
100
10000
3
30000
90
8000
5
40000
80
6000
8
48000
70
4000
12
48000
60
2000
20
40000
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Risk Simulation –
setting targets
For this company it is reasonable to propose
project targets that will be met with the probability
that is between 70% and 80%.
 These data form basis for the negotiations that
may result in establishing other target dates, costs,
material consumption.
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Success Probabilities
In this case it is necessary to calculate the
probabilities of meeting required project targets.
 If they are reasonable then they may be accepted.
 Probabilities to meet approved project targets we
call Success Probabilities.
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Baseline
Target dates do not belong to any schedule.
Usually they are between most probable and
pessimistic dates.
 A set of target dates and costs (analogue of
milestone schedule) is the real project baseline.
But baseline schedule does not exist!
 A schedule that should be used for setting tasks
for project implementers is optimistic.
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Critical Schedule
Project planner obtains not only the set of target
dates but also a critical schedule – a project
schedule calculated backward from target dates.
 Usually this schedule is based on most probable
estimates of activity durations and the difference
between current and critical dates shows current
schedule contingency reserves (buffers).
 At the next slide critical schedule is shown in blue.
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Buffers
There are time, cost and material buffers that
show contingency reserves not only for a project
as a whole (analogue of Critical Chain project
buffer) but also for any activity in the optimistic
project schedule.
 Time buffer for activity is defined as the difference
between activity starts (finishes) in the current and
critical schedules.
 During project execution it is necessary to estimate
if these buffers are properly utilized.
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Success Probability Trends
The best way to measure project performance is to
estimate what is going on with the project success
probabilities.
 If they rise it means that contingency reserves are
spent slower than expected, if they drop it means
that project performance is not as good as it was
planned and corrective actions are needed.
 In any case if the project meets project targets
then corresponding success probabilities will reach
100% before project finish.
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Success Probability Trends
Success probabilities may change due to:
– Performance results
– Scope changes
– Cost changes
– Risk changes
– Resource changes
 Thus success probability trends reflect not only
project performance results but also what is going
on around the project.
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Success Probability Trends
We consider success probability trends as the
really integrated project performance
measurement tool.
 Success probability trends may be used as the
only information about project performance at the
top management level – this information is
sufficient for performance estimation and decision
making.
 We call the described methodology Success Driven
Project Management.
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Success Probability Trends
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If project performance is estimated by success
probability trends then project managers are
encouraged to resolve uncertainties ASAP
– This can increase success probabilities even with activity
finish delays & cost overruns.
Postponing problem activities leads to negative
trends in success probabilities.
 This attribute of success probability trends is
especially useful in new product development
project management.
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Success Probability Trends
It is useful to set not one but several targets for
the same project parameter.
 In this case success probability trends will show to
what interval of final results project is going.
 In any case there are always several sets of target
data for each project.
 Let’s discuss it using project budget as an
example.
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Project Budgets
The first project budget is the optimistic budget
that is set as a target for the project team.
 The second one is the budget of the project
management team that includes approved
contingency reserves.
 The third budget includes management reserves
and may be called executive budget.
 And at last the project may have contract cost that
includes profit.
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Project Budgets
Optimistic budget has zero success probability.
 As for others it is useful to know what is going on
with the probabilities to meet project management
team budget, executive budget and contract cost.
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Critical Chain
You may notice that the approaches to the project
management discussed today are similar to those
that are used in Critical Chain Project
Management.
 I do not see the difference between Resource
Critical Path and Critical Chain except I have never
met the description of the Critical Chain
calculation.
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Critical Chain
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Both the SDPM and the Critical Chain theories
recommend project managers to use optimistic
estimates of the project data to set the tasks for
the project manpower and to control contingency
and management reserves. SDPM also offers a
technique for calculating necessary contingency
reserves, while CCPM suggests to use qualitative
estimates.
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Critical Chain
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Unlike Critical Chain theory SDPM approach states
that:
– RCP can change during the project execution,
– multitasking is sometimes necessary, and
– critical (drum) resources can be different at the
different stages of the project life cycle.
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Critical Path
RCP and classical Critical Path are the same if
project resources are unlimited.
 If project resources are limited then the classical
Critical Path is useless and total floats calculated
without considering resource limitations are not
feasible.
 Really critical activities belong to Resource Critical
Path and resource constrained floats show real
activity time reserves.
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Conclusions

Resource Limited Project Management
requires implementing special techniques
that include:
– Organizing data in a way that supports proper
resource work simulation and application of
corporate norms and standards.
– Creating a set of reference-books and a fragnets
library that are obligatory for creating project
computer models.
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Conclusions
– Calculating Resource Critical Path and resource
constrained floats.
– Risk assessment and simulation.
– Defining target dates and costs (and
corresponding contingency reserves) that may
be achieved with reasonable probability.
– Recalculating the current probabilities of
meeting project targets during project execution
and analyzing success probability trends.
– Applying corrective actions if these trends are
negative.
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Thank you
Thank you for your participation.
 I am looking forward to your feedback and
comments.
 My E-mail: [email protected]

Vladimir Liberzon
Владимир Либерзон
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