Risk Management
MANG 6463
Project Risk Management
Mario Brito
Reading for this week
- Chapman(2019), Chapter 7, page 338-343
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Transcon 1
case study discussion
Discussion starting point
Start with the working assumption that the objective is
maximizing the expected value of
M = B – C,
where M = margin (contribution to profit),
B = bid (price),
C = cost (direct),
and assume we want to understand the expected values
of M, P and C plus associated risk.
Start with C for two components which are useful examples.
Your task this week is to:
- Read Transcon 1 case study in Chapter 6 of the core textbook. Select one of the problems to discuss in the forum:
Item 3, initial operation and training, (Chapman, 2019), page 242. Which one is the best bid based on the expected margin? Zoro or Astro?
Item 4, convert existing programmes, (Chapman, 2019), page 245. Which one is the best bid based on the expected margin? Sysdoc or Datapol?
Discuss what factors have influenced your decision?
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The create and enhance plans phase
- This phase is not part of the PUMP process, or ‘project risk management’ as this concept is usually perceived – it is ‘project management’.
- This phase is relatively straightforward basic project planning provided the roles of the base plans developed in this phase are seen within the basic SPP framework, with everyone involved understanding which lifecycle stage is involved and the full role of all seven Ws.
- An understanding of related underlying modelling issues at a conceptual level is needed, including all of those aspects which might or might not be modelled operationally in the next phase, and the way the SPP generally works over all lifecycle stages as the project progresses through successive lifecycle stages, from the beginning of the concept strategy progress stage until the end of the termination stage.
- An important basic concern is the level of detail required and the way the depth of decomposition required may need to be developed on successive passes through the process in this particular progress stage.
- A useful place to start to understand what is involved is an overview of some of the key issues addressed in the next phase.
Design and lay a pipeline and deliver
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| Code | Activity name | Activity duration (days) | Precedent |
| A | Requirements | 80 | None |
| B | Design | 35 | A |
| C | Recruitment | 40 | A |
| D | Development of the safety case | 20 | B |
| E | Purchase | 20 | B |
| F | Test – onshore | 40 | E |
| G | Transport | 10 | F and C |
| H | Test connection and deliver | 10 | G |
Activity
- Using the activity table design the corresponding activity-on-node network
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A is preceded by nothing
B is preceded by A
C is preceded by B
A is preceded by nothing
B is preceded by nothing
All A and B must be completed before C can begin
B and C are preceded by A
A
B
C
A
B
C
A
B
C
Activity-on-Node network
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ES - early start
EF – early finish
SL – slack or float
LS – late start
LF – late finish
DUR - duration
| A |
| Requirements |
| B |
| Design |
| C |
| Recruitment |
| D |
| Safety case |
| E |
| Purchase |
| F |
| Test-onshore |
| G |
| Transport/ Assembly |
| H |
| Test/deliver |
| ES | ID | EF |
| SL | Test-onshore | |
| LS | DUR | LF |
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Activity-on-Node network – Forward propagation
| 0 | A | 80 |
| Requirements | ||
| 80 |
| 80 | B | 115 |
| Design | ||
| 35 |
| 80 | C | 120 |
| Recruitment | ||
| 40 |
| 115 | D | 135 |
| Safety case | ||
| 20 |
| 115 | E | 135 |
| Purchase | ||
| 20 |
| 135 | F | 175 |
| Test-onshore | ||
| 40 |
| 175 | G | 185 |
| Transport/ Assembly | ||
| 10 |
| 185 | H | 195 |
| Test/deliver | ||
| 10 |
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Activity-on-Node network – Backward propagation
TS = 0 FS = 0
TS = 0 FS = 0
TS = 0 FS = 0
TS = 50 FS = 50
TS = 0 FS = 0
TS = 0 FS = 0
TS = 55 FS = 55
TS = 0 FS = 0
| 0 | A | 80 |
| Requirements | ||
| 0 | 80 | 80 |
| 80 | B | 115 |
| Design | ||
| 80 | 35 | 115 |
| 80 | C | 120 |
| Recruitment | ||
| 135 | 40 | 175 |
| 115 | D | 135 |
| Safety case | ||
| 165 | 20 | 185 |
| 115 | E | 135 |
| Purchase | ||
| 115 | 20 | 135 |
| 135 | F | 175 |
| Test-onshore | ||
| 135 | 40 | 175 |
| 175 | G | 185 |
| Transport/ Assembly | ||
| 175 | 10 | 185 |
| 185 | H | 195 |
| Test/deliver | ||
| 185 | 10 | 195 |
The shape base plans using models of some key issues phase
- Using a general precedence diagram framework with useful special cases like the linked bar chart portrayal of activities at a very simple level to portray activity precedence relationships (not an activity-on-arrow Critical Path Method (CPM) or Programme Evaluation and Review Technique (PERT) diagrams) is one useful example.
- Using a generalisation of simple indirect plus direct cost minimisation to seek an optimal project duration is another useful example.
- Consider the SPP process linked bar chart used earlier first, then some other examples.
Revisiting the bar chart for the SPP considered earlier
The useful generality of this linked bar chart format and the underlying precedence diagram concept.
intense effort
on-going effort
no effort or intermittent effort
key:
ownership
quantify
evaluate
structure
phase
create & enhance
select & focus
start of the
process
end of the first
complete cycle
capture
identify
shape base plans
A simple indirect plus direct cost relationship graph
Generalising the ideas underlying ‘deterministic’ models of this kind to cope with very important ‘planning uncertainty’.
project
cost
in £
joint cost
minimum
cost
project duration in months
crash duration optimum duration normal duration
0
indirect cost
direct cost (efficient frontier)
0
Using the BP examples to outline what the concept strategy progress stage should have achieved, followed by what the DOT strategy progress stage should have achieved, prior to starting the E&D strategy progress stage, and looking back with hindsight now.
Using the WSL example discussion to outline what creating and then shaping base plans using models of some key issues ought to involve and achieve.