aace international’s 52 nd annual meeting and icec’s 6th world congress on cost engineering,...

AACE International’s 52nd Annual Meeting and ICEC’s 6th World Congress

on Cost Engineering, Project Management, and Quantity Surveying

Total Float Management: Renovating a Misused and Abused Approach

By:Dr. Anamaria Popescu, P.E, PMP, President CPM Consulting Inc.

Co-Author: John Jerz, Vice President CPM Consulting Inc.

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AACE International’s 52nd Annual Meeting & ICEC’s 6th World Congress

Agenda

• Background

• Introduction to Topic• Detailed Procedure & Example

• Difficulties in Implementation

• Conclusion

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Background

• This paper does NOT try to establish who owns the float• Global competitive environment-projects MUST complete on-

time and within budget• Sound project control practices-KEY• Realistic, integrated CPM project schedule-success of the

project• Presents a new approach-proactive total float management

@ Project Level• Routinely monitor total float to mitigate project delays• Trend Monitoring and Change Management

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Background

• Papers published on proactive total float management. – One method - Pre-allocate float 50/50 between parties at

the beginning of the project – Another method - Distribute the float within individual

schedule activities based on their durations– Alternative proposed method - Contingency “buckets” &

Management of Change (MOC) process.

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Procedure

1.CPM Network Development

2.Duration Ranges

3.Critical Path Validation & Acceptance

4.Contingency Buckets

5.Percentage Allocation

6.Management of Change Process

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1. CPM Network Development

• Development of a credible and functionally accurate CPM network schedule

• Project team “buy-in” • Characteristics of a Credible Schedule:

– Minimum 1 activity per Work Item-lowest level of WBS– No open ends– Activity durations should be no longer than the reporting period– Constraints are minimized-contractual requirements only– Develop a schedule basis document– Ties should be Finish-to-Start (FS) – Lags should be used at a minimum and no longer than five days.

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2. Duration Ranges

• Part of developing the schedule is the determination of the activity durations.

• This is the step most often rushed through.

• 3 durations: optimistic, most likely, and pessimistic.

• Document Assumptions behind ranges.

• Neutralizes overly optimistic or pessimistic mindsets.

• Revisit assumptions several months after baseline established.

– May need to transfer durations (ML to Ps.)– May need to re-baseline schedule

• Develop Activity List in Spreadsheet w/range.

• ML-OD & Ps. & Op. in custom data item columns.

• Flexibility for “What-If” or PERT Analysis

ID Description ML (OD)

Ps. Op.

10 Pour Concrete 5 12 3

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3. Critical Path Validation & Acceptance

• CP is the driving path to the project completion date. • The path needs to be realistic and accepted by the project

team AND upper management• All assumptions on the critical path should be clearly

documented and presented • The project will have two completion dates:

– a finish date without contingency (the early date) – a finish date with contingency (the late date).

• Paradigm shift for most companies, usually manage to only one finish date with no or “hidden” contingency

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4. Contingency Buckets

• This step is based on the organizational structure of the project and the company.

• Persons with decision making authority on project need to be assigned a contingency box.

• These buckets are represented as activities in the schedule-tied in series

• The schedule will now have two finish dates:– the early target finish date, preceding the contingency – the late target finish date that succeeds the boxes.

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4. Contingency Buckets (Continued)

+ +

+=

*Calendar: 5 Day Work Week

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5. Percentage Allocation

• Choose the % of Project Contingency to Allocate based on:– The corporate risk culture – Project risk management plan – Monte Carlo Simulation (PERT) of the baseline schedule using the three durations– “What-If” Scenarios using all 3 durations– Benchmark Data from past projects– “Cutting Edge Technology” vs. “Tried and True” Projects– Length of Project– Phase of Project

• Calculate contingency amount based on Total Duration of Longest Path x %PC

• Contingency distributed to each bucket. DOES NOT HAVE TO BE EQUALLY APPORTIONED.

• Early Finish and Late Finish Dates of Project Established and Constrained

• Project Float = Total duration of contingency activities

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5. Percentage Allocation

•EF of Project=11/30/07•15% Project Contingency•300 Day Project Duration•Contingency=45 days

PM: 60%PGM: 30%PD: 10%

“Drop Dead Date”

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6. Management of Change (MOC)

• MOC-Tool for Formal Float Distribution• Two Components of MOC-Trend Monitoring and Change Management• Trends are Monitored and Changes are Implemented.• Trend Management

– activity with positive float loses a portion each update

– Extrapolate to determine when it will become critical

– Mitigate before it becomes negative

• Decision needs to be made on the % slippage of TF to become a trend.• Trends become Changes when action is taken.• Include MOC change forms with the updated schedule • Assign specific codes to activities affected by changes.• Project Controls Manager records the cost and schedule impacts of the

change in the Change Register

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6. MOC - Change Management

Negative Float Changes are Reviewed at the Weekly PM Meeting and 1 of 2 decisions made:

1.MITIGATE Negative Float-Early Finish Date Stays the Same– Change register needs to record: (1) how this mitigation will occur (overtime, additional

resources, activity splitting, logic changes), (2) the cost impact, and (3) the responsible party

– NO EASY SCHEDULE FIXES THAT WILL NEVER BE FOLLLOWED!

OR2.Use Contingency-Early Finish Date Increases/Late Finish Date Stays the Same

• Extract duration from the 1st contingency activity to bring the float back to 0.• Document in MOC Register• Late Finish Should ALWAYS Revert back to Original Late Finish Date (Contractual

Finish Date) if there is Contingency Left

3.Use a combination of both mitigation and contingency allocation

“Balancing Act”- Schedule Accounting

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6.MOC Procedure Implementation-Before Contingency Distribution

20d to 25d

TF:0 to -5

Original EF Date: 30Nov07

Original LF Date: 06Feb08

DELAY

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6.MOC Procedure Implementation-After Contingency Distribution

(1) New Early Finish Date

=

Old EF (30Nov07) + 5 Days

(2) PM Contingency:

-5 Days

From 27 to 22

(3) Late Finish Date:

Back to Original Late Finish Date

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Contingency Allocation Process

Contingency Allocation Process

PM distributes Contingency

from box

Duration Gone?

PGMnow involved

in Contingency Distribution

Total Floatbecomesnegative

PM use Contingency

or Mitigate?

PGM use Contingency

or Mitigate?

PGM distributes Contingency

from box

Duration Gone?

Directornow involved

in Contingency Distribution

Director use

Contingency or

Mitigate?

Director distributes Contingency

from box

Duration Gone?

LF< EF

Mitigate or

Change Contractual

Completion Date

Finish

Mitigate

Contingency Contingency Contingency

Mitigate Mitigate

YesYes Yes

NO

NO NO

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MOC Process - Example

Record in Change or

Trend Register

Identify Schedule float

change

Implement in Schedule & Cost

Mgt System

Fill out Trend Form

Fill out Change Form

Decision to Accelerate or

Move Early Finish Date

Review at Weekly Status

Meeting

Record actual cost & schedule impacts

of change

or

Originator Project Services Manager

Leadership Team

CO Register

Schedule

Cost Mgmt Sys

AFTER CHANGE IMPLEMENTATION

BEFORE CHANGEIMPLEMENTATION

≤7 cd

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Difficulties in Implementation

• “You will never have upper management buy-in to this implementation.”

• “It is difficult enough to come up with one duration and now you except three durations.”

• “The float is to be used on a first come first serve basis by the project. It is not fair to create a dictatorship where the PM or PGM distributes the float.”

• “It is not reasonable to expect negative float to be reduced in one reporting cycle.”

• “You will never get the contractors to participate.”

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Conclusions

• Float is managed at project level not activity level• Focus is on mitigating delays in a timely matter. • Float management using contingency activities is not only

feasible, but realistic, being implemented on actual projects with success.

• Key Elements to Total Float Management– Organizational buy-in – Realistically accurate baseline schedule – Strictly enforced MOC procedure that focuses on Trends

and Changes

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