Published here August, 2004.

Introduction | Book Structure | What We Liked | Downside | Summary

Downside

Under Scope/Cost/Schedule Integration, Stephen observes:[16]

"Work scope is the foundation on which the whole project rests. It is the reason for doing the project - to obtain the value that will accrue from the work Once we recognize this, two things come into clearer focus:
  1. Quantifying scope is important. It is directly related to profitably. In a project-driven company, if you haven't quantified project scope, you cannot accurately estimate, or work to increase, profit
  2. The metric used to quantify scope is the dollar. To be precise, the expected dollar that measures the value that the project is undertaken to generate."

But Stephen skates round the issue of how you arrive at this expected value by stating "Now, how one goes about estimating the value of a project is a topic of its own, beyond the scope of this book."[17] Unfortunately, that means the whole premise of his book rests on an undefined EMV parameter - which itself is changing due to external influences.

Stephen's thesis, and consequent metrics, relies on a tacit assumption. This is that you have projects where the activities can all be identified, their resource requirements established and the time and cost of each reasonably accurately estimated. And further, that those resources are sufficiently flexible that schedule changes can be accommodated. On most projects, this is unreasonable, and for projects in the early part of their life span, this is patently impossible.

Some of the metrics may be open to question. For example, Glen Alleman, VP, Program Management Office at CH2M HILL has commented on the DIPP formula (i.e. EMV divided by ETC), as follows:[18]

"There are several issues with the DIPP equation.
  1. The denominator creates a "divide by zero" error as the project reaches the end and the estimate to complete approaches zero. This is poor behavior of a performance indicator not a ratio of two values drawn from the same time sample.
  2. The indicator has nonlinear behavior over its life cycle.
  3. The ETC value in the equation needs to be the sum of multiple estimates to complete, since EMV is the sum of all possible outcomes. The equation's ETC is a point value with no index i to correlate with EMV's sum across the indices of possible outcomes.

The primary issue here is that DIPP does not include the sunk costs of the project.

"Devaux states these are not necessary for the assessment of completion decisions. In fact the estimate to complete is based on the previous performance. The 'performance factor for remaining work' is most often derived from the performance of the previous work. Past is a predictor of the future. The sunk costs are accruals and burden the net profit of the project. Ignoring sunk costs is not only poor financial management it is poor project management as well. The sunk costs must be paid by "someone." The project manager must consider whom and how much is to be paid in assessing future decisions for the project. Ignoring these is like driving in the rear view mirror. It can be done, but not recommended."

We may not agree entirely with Glen's assessment, but the point is well taken.

Another bone of contention is about reserves. Stephen cites the example of catching a plane under a plan based on median time estimates. Such a plan would probably mean that we would miss the plane 50% of the time. Clearly this is unacceptable so we must add contingency time. Stephen then says this is sometimes called "management reserve" and[19]

"There is an important difference between management reserve and padding. Management reserve is always added either at the end of the project, or immediately before a major milestone. It belongs to the project manager and the entire project."

We agree with the intent but not the definitions. In our view, "Contingency" should provide for variances in durations and belongs to the project manager. "Management Reserve", as the name implies, should belong to management for possible changes in scope (like picking up a coffee and donut at the airport), and "Padding" is a political issue and should be a no, no. Still, where workers are required to work on several projects concurrently, may be it is necessary to cover loss of productivity because as Stephen says: "Such multitasking is one of the great time wasters of corporate projects."[20]

But here's a thought. If we are in DRED of missing that plane we just talked about, how much safer would we be if we doubled our resources and had two people running to catch that plane?

What We Liked  What We Liked

16. Ibid. p30
17. Ibid. p31
18. Alleman, G., The DIPP Formula Control Flag, An Assessment of the DIPP Indicator, Viewpoints, Project Management World Today, November-December 2003, http://www.pmforum.org/pmwt03/viewpoints03-11.htm
19. Devaux, S. A., Total Project Control, Wiley, NY, 1999, p113
20. Ibid. p114
 
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