Project Managers should really be called Magical Controllers of Uncertainty! Why? Because that is our gestalt -- our form, our being! Our purpose is to make Uncertain things Certain! We organize chaos to make it predictable. Our real job is to reduce variation in each of our 500 project activities so the final duration and final cost fall within the range of our estimate. In reality, we adjust scope, use contingencies, work overtime to influence (control is probably too strong a term for what we do) the trajectory of the outcome so it lands within the estimated range that we fixed months if not years before. Self fulfilling I would say we prophets are!

We really should be providing probabilities like the weather forecaster saying we have a 30% probability of finishing in eight months and a 100% probability of finishing in twelve. There are scheduling programs that will do that; however, they depend on our triple point estimates as did PERT fifty years ago. Just what is the probability of the reasonable expectancy? Is it 50% or is it 80%? How do you know? Is the worst case probability truly 5% or is it 20%? How can you predict that a duration will only occur once in twenty times when for many projects you only do it once! (We may be surprised to learn how much actually repeats from project to project.) My current belief is we can predict the actual duration and cost within plus 20% on good days. Contractors mark-up their force labor 20 to 25% to account for this Risk. 

The PERT probability calculation uses four times the reasonable estimate increasing its influence on final probability. These scheduling programs allow you to select one from multiple distribution diagrams based on your wisdom and experience? Just where in your magic kit bag did you learn to calculate distribution ranges much less predict 5 % probabilities? Can you do the same with cost? But I digress.

Over four articles, I will be giving my two cents on Risk – our reason for existence. Together, we will look at Risk in each of the project fundamentals of Results, Scope, and Performance. We will discuss phases of the risk management per the PMBOK_®. We will culminate with a workshop on Risk letting you run through risk management on a simulated project. A second outcome will be a paper for the Congress in Atlanta this fall.

The first and most dangerous form of Risk or Uncertainty lurks in Results. If your project does not produce the technical Results, it is a guaranteed failure. Please remember that the reverse is not true – a project can be a technical success producing the Required Results and it can still be a failure. I worked on a 350 million dollar successful Co-Gen project that was never fired up. Another cause of failure can be the destruction of the relationship with the Customer (which I have also unfortunately accomplished). So before you undertake a project, interrogate the Results and the Customer with questions like these:

1)          Has this Result ever been produced?

2)         Have we ever produced this Result?

3)         If not, have we produced anything similar?

4)         Can we produce these Results?

5)         Does the customer know what they are buying?

6)         Do we know what we are selling? Are they the same? How do we know?

7)         When does the customer expect the Result and for what Cost?

8)        What will it take to keep this customer happy while the project is underway?

9)         Can you implement or commercialize the product from the project? The project is not complete until it is installed and being used. Be careful where you think the project ends.

10)    Does your team have proven skills deliver these time and cost requirements?

11)      How does the customer benefit from this project and its product?

12)    What are the opportunities to complete early? Late?

13)    What are the opportunities in meeting the budget? In exceeding the budget?

14)    What do you not know that you need to know?

When we plan work, we rehearse, we practice, we build the work on paper. I believe it is important to plan each activity, operation, or job carefully. This detailed planning can vary as to when it happens – even to the point of planning just before doing. (I am not an advocate of not planning even if you have done the same thing fifty times before.) Planning allows us to do things we have never done before. The first astronauts to the moon commented on how the moon walk experience was just like they had rehearsed.

Planning is not the same as scheduling. Planning is analysis; selection of the work method; detailing of materials, tools, people; estimation of cost; sequencing steps to determine duration. Scheduling is the organizing of these activities into concurrent networks. Both Planning and Scheduling reduce Risk because we have now built the job on paper. We will address these in more detail later when we discuss Planning Scope and Scheduling Performance. There are dangers in Planning and Scheduling at the same time. Planning and Scheduling should be separate distinct steps in preparing to execute a project.

Risk Response Planning is the next to last step in Risk Management. PMBOK_® Risk Management finally includes positive risk or opportunity which in many cases can dramatically contribute to extraordinary project success. There are three responses to Negative Risks or Threats:

1)          Resolve / Eliminate /Avoid

2)         Mitigate / Lessen Impact or Probability

3)         Transfer / Insure / Contract – get rid of the risk

Much Risk can be eliminated by careful thorough planning. In pre-planning a project, identify the activities with the greatest number of unknowns which also have great impact on cost, time, or results. Careful negotiation can identify those risks the project accepts or rejects – this is tough to do on internal projects but is especially beneficial. The better the planning (and scheduling) the higher the Quality of the project and lower the Risk either positive or negative.

As I watched one of the new houses on my commute burn, I reflected on Builder’s Risk Insurance. Being within an existing development, it appeared the homeowners owned the ground. I hoped they had insurance policies from the Builder on both liability and constructed project naming them as additional insured. This is both contracting away Risk (the Risk of building the house) and insuring the risk (for both the Homeowner and the Home Builder).

From my experience, it is the Risk you know that bites you. Our purpose is the drain the swamp but we may fall in love with wrestling alligators. We also ignore lizards to go into the business of farm raised alligators.

I say again, it is the Risks we know that we ignore or exaggerate that hurt us. On renovating a theatre, the designer said we would leave the main floor alone and not change it. I did not ask how much it will cost to renovate the main floor if that decision is overruled. We did not create a contingency plan. A Known Risk ignored.

Another example of Known Risks is the delay on the mid-field terminal because false work crushed about a foot lowering huge roof beams. In construction, no one wants to address temporary supports because they are not part of the final product. These appear to be made from stacked wood timbers. Because they only crushed a foot or so rather than collapse, I speculate this would be bearing failure – wood fibers can only carry so much load before they crush. The beams should have had a bearing plate to transfer the load over the entire temporary column. A Known Risk.

We deal with the Known Unknown Risks such as exactly how long it will take to widen the proscenium arch from sixty feet to seventy-five feet plugging in a sufficiently large time estimate to deal with the worst case. We plan that work carefully weeks before it is needed reducing the duration by one third. This is a contingency built into the schedule. Risk is resolved through planning and scheduling a specific event. Its impact is not diminished.

Unknown Unknown Risks have unallocated contingencies. My experience here is 20% -- twice I have been bitten simply by not having sufficient unallocated contingency. This contingency can be reduces as more is known about a project. The solution is to plan in detail – sometimes more than once carefully managing what you know you do not know and how much you do not know you do not know. Let me say again it is the Risks we know that bite us.

Next time we will discuss Scope Risk and Quantitative Analysis -- Impact times Probability calculations. Let me know if you have specific questions about Risk Management. Many of our risks are resolved and/or mitigated by detailed planning and scheduling