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Schedule Margin Management –The Missing Link

PM Challenge 2010

Rick Price

9-10 February 2010Used with Permission

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Agenda

• Why Schedule Margin/Reserve Management is Important• Current Margin/Reserve Processes & Standards• Definitions• Purpose• Keys to Successful Schedule Margin Management• Process & Recommended Approach• Summary

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Why Managing Schedule Margin/Reserve is Important

• The definition of Program Success (& Failure) has changed− “Technical success at all costs” is no longer acceptable− Increased scrutiny and consequences for missing cost/schedule objectives

• The least expensive path (schedule) is usually the one you start with

• Risks (technical, cost & schedule) & uncertainty (estimating error) exist in every development program

• Schedule “Margin” that is hidden in padded task durations is not managed tasks end up taking longer (Parkinson’s Law)

• The other 2 legs of program success, technical performance, and cost performance use formally managed margins/reserves…why not schedule?

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Current Margin/Reserve Processes & Standards

• Program Success today is defined as meeting technical, cost and schedule commitments− We have well defined approaches and processes for managing technical

requirements including disciplined use and management of design margins− Management Reserve (MR) is formally defined and managed within cost

reporting systems to account for unknown (but real) cost changes within contract scope

− Schedule Margin/Reserve (SR) generally does not have a similar disciplined approach for defining, allocating, and managing appropriate time reserves• Not included in DOD EVM Implementation Guide• Not included in PMI standard on Scheduling• Vaguely included in PMBOK• Is included in NASA’s NPR 7120.5D & Schedule Management Handbook• Is included in DOD Risk Management Guide for DOD Acquisition

• Development of standards and processes for defining and managing schedule margin is lacking or at best lagging

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Why Is This The Case?

• Why do some balk at the idea of having schedule margin discretely identified in critical path (CP) networks/schedules?− Sins of the past

• Not well defined by customers nor contractors/subcontractors• Lack of consistency• Lack of rigorous process and control• Misused

− To offset schedule performance issues (bad performance)− As a “pool” to draw from

− Fear that including it will prevent achieving the earliest possible schedule− Confusing margin (reserve) with slack (float)

• If Management Reserve was ill-defined and misused we’d balk at having it as part of our management processes as well

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Schedule Margin Management Definitions

− Schedule Margin/Reserve (SR):• Defined in DID DI-MGMT-81650 as: “A management method for

accommodating schedule contingencies. It is a designated buffer and shall be identified separately and considered part of the baseline.”

• Defined in NPR 7120.5D NASA Space Flight Program and Project Management Requirements as: “allowances carried in…project schedules…to account for uncertainties and risks…baselined in the formulation process, based on assessments of risks, and are typically consumed as the program/project proceeds through the life cycle.”

• Defined/visible critical path activity (a defined node included in the CPM network) planned during normal work hours with no “defined” scope

• Defined/allocated/managed in direct correlation to known schedule risk• If consumed, it is done so to retire risk; not used to fix schedule performance

degradation• Cannot be negative

− Management Reserve (MR):• An amount of the total allocated budget withheld for management control

purposes rather than designated for the accomplishment of a specific task or set of tasks. It is not a part of the Performance Measurement Baseline.

• NDIA PMSC Intent Guideline (ANSI/EIA-748-A): “The management reserve budget should be commensurate with the level of risks identified by the project and/or withheld for management control purposes.”

• Cannot be negative

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− Schedule Float/Slack:• The amount of time a schedule can fluctuate without impacting the end

date(s)/deliverables• Can change on a regular basis driven by current status• Can be positive or negative• Negative float/slack requires implementation of contingency actions• Positive float is like an underrun; negative float is like and overrun• Managing schedule float/slack keeps things off of the critical path

− Schedule Contingency Actions:• Out of the ordinary & temporary actions taken to handle “bumps in the

road” and recover schedule performance (negative float or negative performance trends)

• Includes unplanned overtime, temporary additional shifts/resources, and out-of-position (re-sequenced) installations

• Define early and assess often− Management:

• “Applying and refining good process”• Dealing with complexity to achieve results

Schedule Margin Management Definitions (cont.)

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The Difference Between Margin and Float Using Cost Terms

• Scenario:− Your favorite meal has cost you $10 at the same restaurant every Sunday for

the past year (historical data)− Someone told you they have a new menu (risk the prices went up)− You decide to take $12 in your wallet just in case ($2 margin)…preplanned &

risk-based− Walking to the restaurant you find $1 on the sidewalk (float)…change en-route− You can spend the $1 on your way (additional scope), lose it through the hole

in your pocket (lost performance), or put it in your wallet (additional margin)…management decision

• Likelihood of Success:− With $10; odds are you will have to settle for something less than planned− With $12 (margin) chances are good you will get what you wanted− With $13 (margin & float) you have an even better chance of getting what you

wanted and possibly more• Recognize the differences and manage both for the best chance of

success

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Keys to Successful Schedule Margin Management

• Schedule Margin Purpose− Designed to protect primarily against critical path “known unknowns”

• Defined risks• Cannot afford (time or $) to protect against all the “unknown unknowns” or

against catastrophic failure− Should also be used to protect use of key shared resources (test facilities,

etc) as well as deliverables− Can be used to accommodate “in-scope” changes to the baseline (like MR)

• Margin burn-down tied to successful completion of key events/milestones and retirement of associated schedule risk

• When initially allocated across the period of performance, provides reasonable schedule dates for all scheduled activities

• Must be managed to provide a reasonable probability of schedule success

• Do NOT use it to “fix” schedule performance issues or allow to erode with the passage of time− Doing so creates the illusion that things are still on track− This “fix” with no action creates potential downstream schedule problems

since the future risks still exist

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Schedule Margin Management Hurdles-Changing the Culture

• Misunderstanding of the purpose of schedule margin− What it is and is not− Used to fix poor schedule performance− Belief that future schedule margin means “minor” CP schedule delays are “OK”

• Fear of defining/showing margin in a schedule• Often buried within tasks to “protect” individual performance• If identified, often based on what’s available vs. what’s needed• Margin is often created by squeezing task durations resulting in

unachievable schedules• Schedule risks created in proposing aggressive schedules forgotten

at ATP• Schedule risks and opportunities not actively identified nor tracked

(all risks should be continuously assessed for schedule risk)• Schedule contingency actions not developed in advance and

implementation is not timely to address schedule delays• Not managed through the entire supply chain creating unreasonably

early dates at the front end due to unintentional “margin stacking”• No defined process for schedule margin management

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Common Approaches to Managing Margin That Can Create Problems

• Holding all schedule margin at the end of the schedule− Forces everything as early as possible and SPI will likely degrade from the

start with “poor” performance compounding each month.− Not used to retire schedule risk− Umbrella affect (“No problem, we have margin at the end.”)− Unclear on what it can be used for or when contingency actions should be

taken− The desired affect of accomplishing all work ASAP can be accomplished

with margin allocated across the POP & conserving unused margin • Establishing and managing margin as a percentage

− Ignores schedule risk− More time-based than task-based− Allows margin “erosion” without retiring schedule risk (“As long as we stay

above X% we can eat into the margin.”)− Leads to unwise compromise (“if we started at 10%, 9 % is OK…8% isn’t too

bad…1% is still margin…”)

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Schedule Margin Management Process

• The Schedule Margin Management process should define:− How the total amount of schedule margin will be determined and allocated

(according to schedule risk & schedule performance objectives)− Conditions for determining red/yellow/green schedule margin ratings and/or

need for associated recovery actions− Conditions for allowable margin use (and who owns it)− How unused margin will be conserved, reallocated or spent as risk is retired− What, when, how, and by whom contingency actions will be implemented to

immediately address schedule performance issues

• Implementation of a schedule margin management process will help reduce chaos, variability & unpredictability, and dependence on individual heroism, ultimately resulting in better schedule performance.

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Recommended Approach

• Develop 3 time estimates (optimistic, most likely, pessimistic) & perform Monte Carlo analysis

• Determine required confidence level needed for the schedule (i.e. 75%)

• Decide on using either “most likely” or “expected value” durations• Determine difference between most likely (or expected value)

schedule and XX% confidence level schedule (this = amount of total schedule margin needed)

• Allocate incremental discrete schedule margin according to known risks to CP(s) & protect usage of critical shared resources− Check MR availability to cover identified schedule risks/margin

• Baseline program schedule to early dates with margin included; this is the schedule you believe will happen

• Manage resources to achieve the current schedule• Allow non-critical path activities to use resources efficiently• When total float erodes/goes negative, Implement fixes

immediately; do not let risk defined margin to be used for schedule performance issues

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Establish the Baseline with Risk Based Margin

Risk based schedule margin included in logic to establish baseline event dates (contractual commitments and most likely plan)

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Manage Critical Path to Earliest Possible Plan(Achieving the earliest possible schedule without holding all margin at the end)

Risk based schedule margin bypassed in logic to establish best case event dates (contractor’s current plan); if margin is not used, reallocate it and begin subsequent tasks earlier

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Mar

gin

(Wor

k D

ays)

Weeks Until Ship

5101520

20

10

SPT #2

Acoustic TestCompl

EMC/EMI Compl

TVAC Compl

SPT #3Compl

Spin Balance

6/1611/11

Ship

Green-No Action RqdYellow-Implement ContingencyRed-Implement All Contingencies

Spacecraft Test Schedule Margin Management Plan

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* = Actual Performance

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Summary

• Formalize your process and definitions• Elevate the understanding and importance of “SR” to that of “MR”• Plan and manage schedule margin in direct correlation to

schedule risk• Validate management reserve will cover schedule margin• Communicate with your team (including your customer and key

suppliers) on the reasons for margin (both quantity & placement) and the need to take immediate action for critical path delays

• With margin assigned to retire specific schedule risk, do not allow margin to dwindle without retiring the associated schedule risk

• Continually assess schedule risk and conserve/reallocate unused margin

• Define realistic contingency actions early and assess continuously. Take action immediately when float erodes/goes negative

• Managing & conserving float, in addition to managing defined margin, increases the likelihood of schedule success