Concept: R is an estimate of the amount of rework. It is normalized to the remaining work on the project, thereby setting the Schedule Adherence Index (SAI). Periodic readings of SAI are then used in a trapezoidal approximation to determine rework’s value impact on the project. The value impact, in turn, is used to estimate the overall project cost of rework.
The I/C Index (ICI) expresses the performance impact of impediments and constraints across the project timeline. In conjunction with the value at risk, the ICI can be used to estimate the overall project cost of impediments and constraints.
Practice: Recall that the Schedule Adherence Index (SAI) can be used to assess the impact of rework on schedule adherence. It plays a key role in quantifying the impact in terms of cost. Similarly, the Impediments/Constraints Index (ICI) reliably indicates the impact of I/C-tasks across the project timeline. It can also be used to estimate cost. Here’s how.
Let’s start with the value impact of impediments and constraints. Unlike R, the impact does not have to be estimated using a technique like trapezoidal approximation. Instead, it can be measured directly.
For a given task, i, if EVi@AT < PVi@ES, there is an impediment or constraint. [1] In such cases, EVi@AT – PVi@ES is negative. The amount of the impediment or constraint is the absolute value of the difference. Thus, it can be observed through inspection. As long as periodic I/C values (ICp) are retained, their cumulative amount (ICcum) can easily be calculated:
As long as periodic I/C values (ICp) are retained, their cumulative amount (ICcum) can easily be calculated:
…where the cumulative amount is the sum of the periodic amounts from the first period to the Actual Time.
From the cumulative amount and the ICI, an estimate of the total project I/C cost (IC$Tot) can be calculated as follows:
…where the estimate acknowledges the observed I/C cost up to the current time (ICcum) and then forecasts the budget impact over the remainder of the project. The forecast uses the current value of ICI as a benchmark for adherence to the schedule. [2] It then applies that level of performance to the remaining budget (BAC – EV).
In effect, the forecast says that, assuming the same level of performance on the remaining work (as represented by the remaining budget), here is the amount of budget that will be required for the impediments and constraints that are to come. Add that to the I/C cost already incurred, and the result is the I/C cost for the whole project. [3]
Calculating IC$Tot is another new feature of the theory. Before describing how ICI and IC$Tot are used, I need to explain the type of cost now in play. That’s the subject of the next post.
Notes:
[1] As explained elsewhere, “i” is restricted to the set of tasks with value planned and earned as of ES, i.e., the tasks with value planned and earned strictly in compliance with the schedule.
[2] The assumption that a similar level of performance will continue is controversial. Some think the level always changes over the course of a project—see Alleman. Others think that, over time, the level smooths out—initial irregularities are overcome by a more-or-less typical level for the project.
[3] Similar to Rtot, this is reminiscent of the EVM formula for the Estimate at Completion (EAC), EAC=AC + ((BAC-EV)/CPI), where AC is the Actual Cost and CPI is the Cost Performance Index (Lipke, 2011a, p 9).
References:
Lipke, W. (2012). Schedule Adherence and Rework. *CrossTalk, November-December*.
Lipke, W. (2011b) Schedule Adherence and Rework. *PM World Today, July.*
Lipke, W. (2011a) Schedule Adherence and Rework. *The Measurable News, Issue 1* (corrected version). |