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The Application of Critical Chain and Portfolio

Project Management at the Gas Pipeline

Costruction of Urucu/Manaus (Petrobras)

Russell D. Archibald

Peter Berndt de Souza Mello

Jefferson Guimarães

Vladimir Liberzon



Presentation Outline



Introduction

• Description of the Project

– 670 km (402 mi) along the Amazon river

– Capacity 4.7 million cubic meters of gas/day

– Replace diesel and fuel oil for electric power

production in the region

– Enormous economic & environmental gains

– 24 river crossings, torrential rains, remote

location, difficult access, challenging schedule



Geographic Overview (Amazon, Brazil)

http://maps.google.com/maps?hl=en&lr=&q=urucu+manaus+petrobras&ie=UTF8&ll=-3.683373,-62.259521&spn=83.82272,221.132813&t=h&z=3&om=1



Introduction

• Situation in 2006:

– Many independent contractors

– Heavy rains, difficult access, unforeseen

problems caused serious schedule delays

– Decision to apply advanced project

management methods to recover to schedule as

much as possible



Introduction

• Advanced PM Methods Applied

– Success Driven Project Management/SDPM

• Proven Russian methods

• Includes approaches that remind Critical Chain

principles

– Project Portfolio Management

• Pipeline viewed as a portfolio of smaller projects for

optimum resource allocation



SDPM Methodology



Success Driven Project Management

(SDPM)• Planning Stage:

– Simulate risks and calculate finish dates & costs with the

required probabilities of their successful achievement

– Set target dates, costs & other restrictions

– Calculate success probabilities

– Determine contingency reserves



Success Driven Project Management

(SDPM)

• Execution and Control:

– Calculate current probabilities of achieving goals

– Track success probability trends

– Manage contingency reserves



Project Scheduling

• Project planning is based on the project resource

constrained scheduling and determining feasible

activity total floats.

• To calculate these floats all constraints (logic,

resources, supplies, financing) must be

considered in both forward & backward passes.



Resource Critical Path

• Activities with zero floats are called critical

and their sequence in the project schedule is

defined by ALL schedule constraints: logic,

resource, finance, supply, calendar, & imposed

dates.

• This sequence is called Resource Critical

Path.



Resource Critical Path

• When financing and supplies are not restricting

factors then Resource Critical Path is the same

as Critical Chain.



Two steps of setting targets

1. System forecasts resulting required

contingency reserves based on user defined

acceptable probability of success to meet

specific scope, schedule & cost targets.

2. System calculates the probability of meeting

imposed targets (success probabilities).



Eight Processes of SDPM

1. Systematic scope definition (indentured

structures)

2. Network planning

3. Resource Definition and Assignment:• Consumable, renewable, utilized & produced

• Units, teams/crews, interchangeable units or crews

• Resource productivities

• Assigned to project activities




4. Activity durations calculated: scope or

volume (quantity) of work ÷ assigned

resource productivities

5. True (resource) critical path calculated:

• Logical & schedule constraints

• Resource, financial & supply limitations in both

the forward and backward passes




6. Risk & uncertainties simulated: probability

distribution for main project results (project

& its main phases finish dates, costs,

resource requirements).

7. Actuals reported & compared, contingency

reserves tracked.




8. Current probabilities of success calculated

and trends determined for:

• Schedules

• Costs

• Resources



Methods Unique to SDPM

• Multiple project breakdown structures

• Resource information & analysis

• Activity duration calculation or estimation

• Resource critical path, assignment floats, & resource contingency reserves

• Risk simulation & success probability analysis

• Success probability trends



Multiple project breakdown structures

• We use multiple Work breakdown structures, Resource breakdown Structures, Cost breakdown structures.

• Multiple WBS create very useful opportunity to get project reports that aggregate project data different ways.

• Usually we use at least three Work Breakdown Structures in our projects: based on project deliverables, project processes and responsibilities.



Multiple project breakdown structures

• The use of multiple breakdown structures allows not only to obtain different project reports as seen from the different standpoints, but also to provide that the project model is truly comprehensive.

• The use of Resource breakdown structures is especially important in multi-project management.

• In this case the matrix organizational structure determines the necessity of obtaining the reports on both Project and Functional Resource Breakdown Structures.



Resource Definition and Assignment

• Resources are divided into two classes:

– renewable (human resources and mechanisms) and

– consumable (materials).

• Besides the individual resources one may set

resource crews (we call them multi-resources)

and resource skills (roles).



Resource Definition and Assignment

• Multi-resources are the settled groups of resources

working together (e.g. a team, a crew, a car with a

driver, etc.).

• Resources sharing the same skills comprise Resource

Assignment Skills.

• Resources belonging to the same Skill are

interchangeable though individuals in a Skill may have

different productivities performing the same activities.



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Assignments

• Assigning resources to activities implies the notion of ateam - a group of resources working on an activity together. The team can include individual resources, multi-resources and skills.

• If the activity‟s initial information is work volume (quantity of work to be done), one should set the productivity of at least one of assigned resources, to enable the calculation of the work duration.



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Assignments

• If more than one team is assigned then resources

belonging with the different teams work on an activity

independently of each other.

• Such approach allows to simulate the shift work

efficiently.

• In some projects it is necessary to simulate not only

material consumption but also production of resources

and materials on activities and assignments.



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Activities

• In the majority of well-known PM software packages project activities are characterized by their duration.

• Besides duration, it is frequently necessary to set the activity‟s physical volume (or quantity) of work.

• Activity volume can be measured in meters, tons, planned work hours, percents or any other units.



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Activities

• Activity volume is often used as an initial activity

information instead of duration. If assigned resource

productivity is defined in volume units per hour then

activity duration may be calculated during project

scheduling.

• Unlike activity duration activity volume does not

depend on assigned resources.



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Risk Simulation

• Our experience of project planning shows that the probability of successful implementation of deterministic project schedules and budgets is very low.

• Therefore project planning technology should always include risk simulation to produce reliable results.

• Risk simulation may be based on Monte Carlo simulation or use three scenarios approach that will be described further.



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Risk Simulation

• Monte Carlo simulation is very time consuming and not

practical for the large projects.

• Current practice of its implementation mostly do not

consider correlation between activity duration and cost

estimates that exists if activities are performed by the

same resources, do not consider risk events that may

change a set of project activities.



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Risk Simulation

• Even if everything is properly simulated the number of necessary iterations is too high for receiving reliable results in the reasonable time.

• A project planner may be happy with the probability estimates that has low accuracy but only if the error will be stable (high precision). If it may change from one calculation to another then these estimates can not be used as performance management tool.



30

Risk Simulation –

three scenarios approach• A project planner obtains three estimates (optimistic,

most probable and pessimistic) for all initial project data (duration, volumes, productivity, calendars, costs, etc.).

• Risk events are selected and ranked using the usual approach to risk qualitative analysis.

• Usually we recommend to include risk events with the probability exceeding 90% in the optimistic scenario, exceeding 50% in the most probable scenario, and all selected risks in the pessimistic scenario.



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Risk Simulation –

three scenarios approach• These data are used to calculate optimistic, most

probable and pessimistic project schedules and budgets.

• The most probable and pessimistic project scenarios

may contain additional activities and costs due to

corresponding risk events and may employ additional

resources and different calendars than the optimistic

project scenario.



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Risk Simulation –

three scenarios approach• As the result project planner obtains three expected

finish dates, costs and material consumptions for all

major milestone.

• They are used to rebuild probability curves for the dates,

costs and material requirements.

• Defining desired probabilities of meeting project targets

a project planner obtains desired finish dates, costs and

material requirements for any project deliverable.



33

Success Probabilities

• Negotiations may lead to setting other project targets.

• If they are reasonable then they may be accepted.

• Probabilities to meet approved project targets we call

Success Probabilities.

• Target dates do not belong to any schedule. Usually

they are between most probable and pessimistic dates.



34

Baseline

• A set of target dates and costs (analogue of milestone

schedule) is the real project baseline. But baseline

schedule does not exist!

• A schedule that should be used for setting tasks for

project implementers is optimistic.



35

Critical Schedule

• Project planner obtains not only the set of target dates

but also a critical schedule – a project schedule

calculated backward from target dates.

• Usually this schedule is based on most probable

estimates of activity durations and the difference

between current and critical dates shows current

schedule contingency reserves (buffers).

• At the next slide critical schedule is shown in light blue.



36



37

Buffers

• There are time, cost and material buffers that show

contingency reserves not only for a project as a whole

(analogue of Critical Chain project buffer) but also for

any activity in the optimistic project schedule.

• During project execution it is necessary to estimate if

these buffers are properly utilized.



38

Success Probability Trends

• The best way to measure project performance is to

estimate what is going on with the project success

probabilities.

• If they rise it means that contingency reserves are spent

slower than expected, if they drop it means that project

performance is not as good as it was planned and

corrective actions are needed.



39



40


• Success probabilities may change due to:

– Performance results

– Scope changes

– Cost changes

– Risk changes

– Resource changes

• Thus success probability trends reflect not only project

performance results but also what is going on around

the project.



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• We consider success probability trends as the really

integrated project performance measurement tool.

• Success probability trends may be used as the only

information about project performance at the top

management level – this information is sufficient for

performance estimation and decision making.

• We call the described methodology Success Driven

Project Management.



Common Features:

SDPM & Critical Chain

• Resource critical path is the same as Critical

Chain if to add financial and supply constraints.

• CC “project buffer” is analogous to SDPM project

“contingency time reserve”.

• Both approaches recommend to use tight duration

estimates to set targets for work performers and

collect all reserves in one project buffer.



Differences between SDPM and CCPM

CCPM SDPM

Critical Chain never changes, it is

protected by feeding buffers that may

postpone planned dates of CC activities

but will keep its stability.

Resource Critical Path can change many

times during project execution. Project

can have many Resource Critical Paths.

One should always avoid multi-tasking In most cases it is right but sometimes

switching from one task to another and

then returning back may be useful. The

software optimizes resource usage.

There is single project drum resource Critical resources may be different at

each project life cycle phase.



Differences between SDPM and CCPM

CCPM SDPM

Critical Chain Methodology suggests

only qualitative methods.

SDPM suggests certain quantitative

methods for finding RCP, calculation of

project buffers, etc.

Critical Chain Methodology does not

consider costs.

SDPM includes not only schedule but

also cost management.

Buffer penetration is estimated

qualitatively (red, yellow, green zones).

SDPM includes buffer penetration

analysis and performance measurement

technique (success probability trends).







A New Project Management

Information System

• Initial planning started in 2004 with a

segmented view of the project, with several

separated set of schedules for different

regions (geographic division) and different

areas (scope, costs, logistics and supplies).



A New Project Management

Information System

• A new Project Management Information

System was put in production from October

2006 to February of 2007.

A common repository and new WBS

integrated over ten separated schedules



Setting New Project Goals

• Initial estimates created for the project were based on

productivity achieved in other pipeline construction

projects in many parts of Brazil. This forecast was too

high due to the reduced ability of the teams to work

under continuous tropical rain.

– As an example, some drained areas of the construction in the first

semester of any given year would simply be found to be under 12

meters of water in the following semester.




• The lack of a model that would take into account

risks and uncertainties had produced a schedule

that soon proved to be completely unrealistic.

– By the time the SDPM team was set to create a new integrated schedule, the

construction had reached 50% of the original planned time with a Schedule

Performance Index (SPI) under 15%




• Through the simulation of work performance,

schedule and resource constraints, the SDPM team

has helped Petrobras to set new goals with the

contractors.

– For some critical phases, resources were increased by 50% and

now the project has surpassed 7,000 workers, against an

original mobilization of 5,000 people.



WBS – Project Details

• For the true adoption of SDPM project schedules shall

be resource loaded.

• As original planning was not detailed to the resource

level, the SDPM Team put together several weekly plans

into a larger schedule, creating a bottom-up WBS.



WBS – Project Details

• The resulting integration of several weekly plans

made it possible to measure trends and to create

new resource-loaded schedules with incremented

level of details.



Typical Fragnets Library

• By adjusting the necessary resources in the

lowest level of the WBS SDPM Team then

created a library of typical fragnets that was

used to build a model for the larger project.



A Bit of History

• Although the first stages of the project are

dated in 2004, real project activities started

only in July 2006, after the military

engineering brigade had opened the first

roads through the jungle and established

camping sites for storing many tons of pipe.



Resource Usage Optimization

• Success Driven Project Management helped

to identify what phases of the project should

be delayed to make critical resources

available to more critical phases.




• Example: Transferring resources from the

opening of new construction road to the

transportation of the pipes will delay the first

phase of the project, but will speed up the second

phase. The challenge is to optimize resource

assignments for increasing global results.




• When such logistics are carefully planned

we have an increase in general productivity,

as we can see in the following figures.




• In the example, while the “green team” kept

working 720 hours, the “red team” had an

increase in 25% in its productivity and the

“blue team” reached 65%.



800 m

per

day

1150 m

per day

• Before SDPM

Implementation

• After SDPM

Implementation





References



A Few Useful Links• http://www2.petrobras.com.br/ingles/index.asp

• http://x25.com.br/

• http://www.spiderproject.ru/aboutus_e.php

• Vladimir Liberzon and Russell D. Archibald, “From Russia with

Love: Truly Integrated Project Scope, Schedule, Resource and Risk

Information,” PMI World Congress- The Hague, May 24-26, 2003;

download at http://www.russarchibald.com/ [go to „author>recent

papers‟]

http://www2.petrobras.com.br/ingles/index.asp

http://x25.com.br/

http://www.spiderproject.ru/aboutus_e.php

http://www.russarchibald.com/



Russell ArchibaldPrincipal - Archibald Associates, USA

[email protected]

Peter Berndt de Souza MelloDirector - X25 Treinamento e Consultoria, Brazil

[email protected]

Jefferson GuimarãesSenior Project Engineer - Concremat/Petrobras, Brazil

[email protected]

Vladimir LiberzonGeneral Director – Spider Project Team, Russia

[email protected]

Contact Information

mailto:[email protected]

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