Critical Chain Program Management and Earned Value Management

Gregg Tiemann, Boeing Eleanor Haupt, USAF

ASC/Industry Cost/Schedule Workshop 5-7 April 2000

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EVMS vs. CCPM?

I only hope it is cast, not as EVM vs. CCPMbut as how to improve PM using the best tools for the project. Wayne Abba

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Agenda

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Review of progress to date Answering the Challenges Quick Review of CCPM and EVMS Processes Issues and Recommendations
Contractor Implementation
Baselining Metrics

Government Implementation Philosophy & Implementation Earned Value criteria

Benefits Open Discussion Review of Action Items

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Review of Progress to Date

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Status
Solicited volunteers for working level team
current e-mail roster
28 experts 4 major defense companies CCPM and EVMS experts

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Co-Leaders
Gregg Tiemann, Boeing Eleanor Haupt, USAF, Wright-Patterson AFB

Created website to share information

http://home.att.net/~ccpm

Conducted working group meeting

9-10 March, WPAFB 4 panels: baseline, metrics, government, implementation & philosophy

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Purpose of Team
Explore, develop, and recommend methods to integrate critical chain scheduling and EVMS in a complex project environment Proposed methodology will be presented and discussed in workshops
ASC/Industry Cost and Schedule Workshop (Apr 5-7) College of Performance Management Conference (May 1517, Clearwater Beach FL, www.cpm-pmi.org)

Results to be documented in Schedule Reinvention Teams schedule resource handbook

E. Haupt has lead

NAME

COMPANY Robbins-Gioia Tecolote Research AFMC, WPAFB OH USAF, WPAFB AFFTC, Edwards AFB

EVMS

Bowman, Tom Cathcart, Bob Collins, Judy Crowell, Jimmie Francis, Ken

Critical Chain

Filiatrault, C. Leigh Proxicom

Attendees of 9-10 Mar Working Meeting

Haupt, Eleanor Kessler, Lee Marshall, Janet Marshall, Ray Peterson, Craig Roberts, Dave Smith, Becky Tiemann, Gregg Troop, Dick Udell, Ellen

USAF, WPAFB Boeing USAF, WPAFB Boeing EDS Boeing Northrop Grumman Boeing C/S Solutions DSD Labs (SAF/AQX)

Vander Wissel, PattyRobbins-Gioia Wachs, Steve Wentworth, Janet Williams, Ken Northrop Grumman USAF, WPAFB Northrop Grumman, ISA

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Goals for 9-10 Mar Meeting

Identify major issues Identify potential solutions to major issues

make recommendations

Identify any disconnects with current DoD policy

EVMS criteria RFP language

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Answering the Challenges

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Answering the Charges

Agree with statement. The measure of EVMS success has always been getting the project done on time and at cost. This should be our motivating principle. Dont agree that it is black or white. Corrective actions should always be focused on how the task impacts the global goal of the entire project. Nonsense. The EVMS baseline should be laid in to a realistic schedule (CCPM or not). You are absolutely wrong. EVMS has been used successfully for over 30 years. It is now migrating to the private and worldwide sectors. EVMS is only as good as the baseline planning. Eleanor

Tell me how you will measure me and I will tell you how I will behave; if you choose to measure me illogically, do not be surprised by illogical behavior. Eli Goldratt EVMS forces focus on local optima (task completion) instead of the global optima (project completion) EVMS fosters starting tasks early to earn value and results in bad multitasking. You are absolutly right. Using Earned Value in managing and controling a project is devostating as I've repeatedly proved in Critical Chain. Eli

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Resolutions
Resolved
The purpose of critical chain scheduling is to achieve breakthrough success, reduce cycle time of projects, and ultimately reduce cost. The purpose of EVMS is the same, and in fact, EVMS baselines should be based on well planned, achievable schedules.

We recognize that...
- CC and EVMS are not mutually exclusive; - that EVMS application is flexible enough to integrate with CC without driving additional reporting requirements

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Quick Review of CCPM and EVMS Processes

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Critical Chain Scheduling

Lay out tasks, assuming 90% probability for durations Network the tasks, perform backward pass, establish late finish dates (critical path established) Identify resource constraints and critical chain
Assign duration with 50% probability to tasks Deconflict the resource constraints

Protect the critical chain

Establish resource buffers on schedule legs before constraining resource Establish feeding buffers on schedule legs that feed into the critical chain Establish program buffer (assign half of interval between the end of the 50% and the 90% probable schedule)

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Program Buffer
Normal Schedule, at around 90% probability for task durations

Reduce durations to 50% probability

Divide difference by 2, assign as program buffer

resulting program buffer is about 33% of program

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Resource Alerts Assure CC Resource Availability

RB RB

Protects due date from CC variation

Task A

Task B

Task C
RB RB

Task F Task D Task E

FB

Task G

Task J

Program Buffer

Task H

Task I

FB

Aggressive Target Duration Estimates

Due Date

Protects CC from non-critical task variation

= Critical Chain FB RB = Feeding Buffer = Resource Buffer

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EVMS Baselining
Lay out tasks Network the tasks
perform forward pass to establish early finish dates perform backward pass, establish late finish dates to meet milestones critical path established

Program manager establishes assumptions for baseline dates

early or late finishes or somewhere in between dependent on risk and overall schedule constraints

Networked schedule (with milestone dates) used as basis for resource allocation
Budgeted Cost of Work Scheduled (BCWS)

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Issues and Recommendations

Contractor Implementation

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Baseline Panel
Potential Issues

sizing of buffers assign $ to buffers? is 50% the right probability? use of milestones change process/control initial program duration

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Baselining

Issue: Sizing of buffers

Discussion:
may be constrained by contractually mandated dates

Recommendations:

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Baselining

Issue: should resources ($ or hours) be assigned to buffers?

Discussion:
con:
buffers may cover several WBS or OBS elements any task on this leg may cause usage of the buffer, therefore the scope of the increased work may not be known until it happens if the time buffer is not used, then it goes away, causing a paperwork drill to pull back resources student syndrome: if I have funding reserve, Ill spend it accumulation of added costs as buffer is consumed without being able to claim earned value drives poor CPIs leaving about 1/3 of program value in management reserve invites raiding some buffer is usually consumed, therefore requiring budget resources

pro:

Recommendations:
alternative one
may allocate management reserve to some lower level to protect buffers would not have: work scope, WBS identity, or phasing

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Baselining

Issue: is 50% probability for durations the best assumption?

Discussion:
CCPM advocates using 50% probability for establishing task durations irregardless of nature of work (development, production, etc.) May insert too much risk into complex development efforts Team noted that typical DoD programs may actually start at less than 50% probability may wish to use different probabilities based on program phase 70% for highly complex development efforts 60% for normal development efforts 50% for production efforts on complex DoD programs, perform Monte Carlo simulation to determine probability of success BEFORE cutting duration times

Recommendations:

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Baselining

Issue: protecting contract milestone dates

Discussion:
CCPM ignores all milestones except the end of the program typical contracts include milestone dates, and can be used for payment purposes government programs report milestone dates to OSD and report progress against this baseline government should be flexible in agreeing to milestone activities without set dates
e.g.: Preliminary Design Review has a duration of 3 days, actual date will float should work with contractor for insight into predicting milestone dates

Recommendations:

government may need to find alternate way to assess progress and make payments government should establish OSD goals on more conservative schedule (e.g., 90%) or, possible to insert buffers before milestone dates or, phase program buffers before major milestones and treat as mini projects
e.g., activity from award to CDR is a mini project, with project buffer

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Baselining

Issue: Baseline change process and control

Discussion:
contractor may need more flexibility in processing baseline changes

Recommendations:
contractors should establish rules for use of schedule buffers contractors may wish to establish more flexibility in approving management reserve e.g., allocate MR to IPT leads, with authority to approve at IPT level

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Baselining

Issue: Initial program duration

Discussion:
government contracts may be based on unrealistic milestones, high concurrency between development and production probability may be less than 50% to begin with

Recommendations:
outside the purview of this group continue acquisition reform efforts to minimize schedule risk during initial program planning (before release of RFP) on complex DoD programs, perform Monte Carlo simulation to determine probability of success BEFORE cutting duration times

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Metrics Panel
Potential Issues

Ignore SPI? What are the appropriate metrics? Create a new index? Change variance reporting? Impacts to EAC predictions need demonstration projects drill down into detail problem areas

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Metrics

Issue: Can or should we ignore SPI?

Discussion:
SPI compares earned value to planned value if durations (and budgeted resources) are established at 50% probability, then it is likely that earned value will lag more more than normal SPI will be low, driving a lot of variance reporting SPI can still be a valid indicator, pointing to problem areas

Recommendations:
use SPI to drill down to problem areas select alternate metrics to establish variance reporting (see other charts)

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Metrics

Issue: What are the appropriate metrics?

Discussion:
Need appropriate metrics to serve as early warning system Should be appropriate to new TOC culture manage the buffers

Recommendations:
Focus on analyzing schedule variances through buffer consumption Program manager should establish simple tiered warning system, e.g.,
0 - 33% buffer consumed 34 - 66% buffer consumed 67 - 100% buffer consumed green (okay) yellow (watch & plan) red (act)

Tailor tiered system to different buffers or risk areas in program

tighter control needed for resource buffers?

Tailor color coding to percent complete

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Early Warning - Notional

% project buffer consumed

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

25

50

75

100

critical chain percent complete

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Metrics

Issue: Create a new index?

Discussion:
SPI metric not appropriate for culture of buffer management

Recommendations:
Buffer Performance Index (BPI) = BPI of 1 or greater is good % complete % buffer consumed

Others?

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Metrics

Issue: How should variance reporting change?

Discussion:
typical variance reporting thresholds would result in many more variances to report need to tailor CPR or C/SSR DID

Recommendations:
contractor defined significant variances eliminate reporting on traditional schedule variances report on buffer consumption need to evaluate potential for additional cost variances to occur

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Metrics

Issue: Impacts to EAC predictions

Discussion:
some EAC formulas rely on a combination of CPI and SPI as a performance factor SPI factors that are significantly worse could overstate EAC

Recommendations:
use new index (BPI?) in place of SPI in EAC formulas, e.g., EAC = ACWP + (BAC - BCWP) (CPI*BPI)

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Metrics

Issue: need demonstration projects

Discussion:
theory and proposed recommendations need to be tried out in a demo project concern: can CCPM work for a very large and complex DoD project?

Recommendations:
conduct smaller scale demo projects track alternate metrics analyze final results vs. metrics analyze organizational behavior in relation to metrics - what drove behavior? recommend best metrics for future projects dont implement policy until we have a few demo projects completed

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Metrics

Issue: need to be able to drill down into detail problem areas

Discussion:
balance need for insight into problem areas vs. desire to control amount of reporting

Recommendations:
provide drill down to the detail necessary to understand cost and performance

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Issues and Recommendations

Government Implementation

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Government Panel
Potential Issues
Status reporting impacts to FPRA business base Paying subcontractors Funding profiles Incorporation into IBR process Leveraging larger MR for out-of scope changes

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Government

Issue: potential impact to government program status reporting

Discussion:
quarterly OSD reports (Defense Acquisition Executive Summary) reports CV and SV and program office explanations other reports go to Program Executive Officers and service staffs SV could be misleading use of SPI to forecast EAC could result in Nunn-McCurdy breaches

Recommendations:
seek OSD approval to report alternate metrics avoid use of SPI in EAC calculations

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Government

Issue: Potential impacts to FPRA business base

Discussion:
Are there significant changes from the baselined business base assumptions and the realized business base? In other words, we forecast indirect rates on the 50% probable schedule, but real performance causes a significant shift in the business base for the actual or applied rate.

Recommendations:
Continue process of baselining rates at beginning of program and updating yearly to new forecast. May wish to allocate MR to protect potential difference in rates Educate DCMC at next quarterly DCMC earned value conference

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Government
Issue: Timing of payment to subcontractors if they are on time, but prime is not
Discussion:
What happens when a subcontractor delivers on time to the 50% probable schedule, but the primes performance has slipped, resulting in material sitting on dock prior to actual need date? Will government allow payment to subcontractor in advance of revised need date?

Recommendations:
Get DCMC/DCAA buy-in to allow payment for on-time delivery Educate administrative contracting officers

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Government

Issue: Government funding profiles can be a constraint

Discussion:
Funding profile for development contracts are incremental Profiles are usually laid in before RFP is released Potential problem could result from mismatch between longer funding profile and more aggressive CCPM schedule

Recommendations:
Program office should attempt to build funding profile to CCPM schedule Seek approval to treat development money as 2 year money (which it is) for flexibility Establish contingent liabilities as needed

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Government
Issue: How do we incorporate this into the Integrated Baseline Review process?
Discussion:
How do we revise the IBR process? How do we perform a more global look at constraining resources? How do we evaluate a 50% probable schedule?

Recommendations:
Alternatives Joint IPT participation in baseline development, (not a single point review) Phased IBR (work scope, then schedule, then budget) Phased IBR (global and top level assessments, then look at control accounts)

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Government
Issue: Temptation to use Management Reserve (if much larger) for subsequent contract changes
Discussion:
If not educated on CCPM, program office could lean on contractors to use large pot of MR for future changes

Recommendations:
Education is key May wish to allocate and identify MR based on 90% schedule

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Issues and Recommendations

Implementation & Philosophy

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Implementation & Philosophy Panel

Potential Issues
Customer, Govt, & DCMC Education Tools Impact to IPTs? Bargaining agreements? Apply to Subcontractors?

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Implementation & Philosophy

Issue: Customer education

Discussion: Commercial customer may not like size of buffers Recommendations:

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Implementation & Philosophy

Issue: Government and DCMC education

Discussion: Recommendations:

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Implementation & Philosophy

Issue: Availability of tool sets

Discussion:
ProChain and Concerto are currently availability schedule tools for CCPM Flexible enough to handle the toughest DoD project? Impact to current EVMS analysis tools

Recommendations:

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Implementation & Philosophy

Issue: Impact to IPT Concept?

Discussion:
discussed no impact seen

Recommendations:

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Implementation & Philosophy

Issue: Impact to bargaining agreements?

Discussion:
Discussed no impact seen

Recommendations:

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Implementation & Philosophy

Issue: How does the prime apply CCPM to subcontractors?

Discussion: Recommendations:
Apply CCPM according to degree of risk

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Benefits

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Benefits of CCPM and EVMS Integration

Better baselines and program execution
Schedule and cost

Better focus on enterprise resources during IBR Better tailoring of metrics (e.g. focus on buffer consumption vs. strict thresholds)
Time saving

CC forcing re-examination of tools that have been around but ignored or not adequately utilized
Results in better project management

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Earned Value Criteria

Youre under suspicion for violation of EVMIG 2.3 sub para 2a, questions 139 and 152

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Review of Earned Value Criteria

EVMIG criteria reviewed by entire team EV Criteria
2.2 May need to apply CCPM to subcontractors based on risk and complexity (prime contractor decision)
Alternatively: place feeding buffer where sub schedules feed into critical chain or have supplier place buffer on their schedule

2.5 Any buffer should have a unique WBS & organization ID (e.g.: program buffer may be assigned to the Program Mgr) 2.6 Should only have ONE schedule 2.7 Recommend insertion of buffers before key milestones (e.g. design reviews) IF there is a contractually required date 2.8 Recognized: DoD awards contracts with aggressive schedules (RFP requirement or competitive environment) 2.12 LOE effort for time period of program buffer may be placed in management reserve at lower levels (e.g. at level of CAM for LOE activities)

Note: number refers to criteria contained in Earned Value Management Implementation Guide, Chapter 2, Criteria.

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Review of Earned Value Criteria

EV Criteria
2.13 Current process of baselining rates at beginning of program and updating yearly to new forecast should not significantly change if using CCPM as baseline schedule. There may be more variability between the baseline and new rates. May wish to allocate MR for this potential difference. Recommendation: Have DCMC/DCAA look at this 2.23 conclusion: variance analysis supports schedule variance on buffer consumption 2.24 no change (rate variance) 2.25 tailor reporting in DID

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Review of Earned Value Criteria

CONCLUSION:
No current problems seen implementing CCPM on a program that requires compliance with EV criteria

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The final chart...

Open Discussion Review of Action Items

early cultures often relied on hard milestones