Practised by thousands of individuals across the world, project scheduling is perhaps the most common discipline of project planning and control. Every project in every industry is managed according to a schedule, regardless of size or scale, and the use of scheduling software has become a staple ingredient of project planning. With such significance placed upon scheduling activities, you'd be forgiven for thinking that projects are well-planned and successfully-executed, but research tells us that projects often, even usually, overrun their schedules by some margin.
A study of public transportation infrastructure projects published in the American Planning Association Journal found that 9 out of 10 projects overran their initial estimates and that overruns of between 50 to 100 percent were common.
Project overrun can often be attributed to a lack of in-depth analysis at the planning stage and a failure to investigate and test initial estimates. Not only can this lead to logistical headaches for contractors, but equitable adjustments can add up to spectacular sums for project owners, often amounting to millions of dollars.
To significantly reduce the threat of overrun, headaches, and accompanying economic fallout, project leaders must perform schedule risk analysis. This helps deliver an equal focus on the three main variables in any project scheduling activity: duration; cost; and risk.
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What is Schedule Risk Analysis?
Schedule risk analysis is a planning procedure that aims to improve the predictability and performance of a project. As a result, it helps project managers assess the likely impact of uncertainty and of individual risks on time to completion.
Used effectively, schedule risk analysis is a key weapon in any project manager’s arsenal and will provide meaningful and actionable information to drive better decision-making. There are five key reasons why all project leaders should perform schedule risk analysis:
- To Reduce Resource Costs
The essence of integrated schedule risk analysis is that “time is money.” In simple terms, the cost of non-labour resources is likely to increase if the task they're used for takes longer than planned. With a better analysis of time-to-completion and an accurate determination of project end-date, project leaders can better estimate the number of resources required and therefore reduce burn rate costs.
- To Reduce Labour Costs
If an activity is originally scheduled to take 30 days and takes 50 instead, labour costs are likely to increase in line with the extra time. Likewise, indirect costs such as the management of the project team will increase if the project goes on longer than expected. Once more, with a better estimation of project end-date, project leaders can improve communication with their labour force and reduce unnecessary costs.
- To Identify High-Risk Areas
Traditionally, the aim of schedule risk analysis was to identify the greatest risks to project overrun. Today, it has evolved to be used to prioritise risk mitigation effort. Using quantitative methods, project managers can focus key resources where attention is needed, making risk mitigation an available and practical tool for effective management.
- To Accurately Determine Project End-Date
As time estimates are always subject to a margin of error, stakeholders often feel more comfortable with a range of duration for project activities rather than a precise calculation. Range estimates and risk assessment are complex and require analytical skills and basic knowledge of statistics. But with a basic understanding of probability and distribution functions, project managers can better estimate the effects of unexpected events on the project outcome and more accurately determine project end-date.
- To Produce Actionable Information
Schedule risk analysis is only beneficial when it produces information that can be acted upon to minimise or mitigate the risks it's outlined. While schedule risk analysis is often synonymous with techniques such as the Monte Carlo simulation, if it is to be truly effective it must include the impact of individual risks rather than just a measure of the uncertainty of schedule durations.
A basic Monte Carlo analysis will provide a list of cost items or schedule activities, but it will not provide actionable information to inform key decisions. Schedule risk analysis used properly provides substantially more actionable information and assesses the likely impact of individual risks to time-to-completion to provide tangible results in a variety of real-world situations.
The Value of Schedule Risk Analysis Software
Despite its significance in project planning, scheduling is a difficult discipline to master. Without the proper tools, training and support, individuals thrust into the practice will struggle to overcome the many pitfalls along the path to success.
Using high-value software that allows for accurate scheduling, real-time analysis, and risk reporting can be a lifeline. Not only will it help project managers to identify and mitigate risks likely to lead to overrun, it will also provide a valuable service for reporting likely risks to key stakeholders.
Platforms such as Safran Risk simplify what would otherwise be an extremely complex procedure into a step-by-step process, allowing project managers to deploy quantitative risk analysis across their projects and empowering them to deliver better project outcomes.
To learn more about the impact of cost and schedule risk analysis on project success and to gain in-depth understanding on cost and schedule overruns from an acknowledged expert in the field, Dr David T. Hulett, download our free guide.