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Quantifying Risks in Scheduling

How many times you executed a project with schedule extension?

In how many projects you have tried to get approval from your client for the delay in the hand over and you couldn’t, and penalty applied?

How many times you tried to expedite, load resources more than planned, pay incentives to your suppliers to get your goods in time or before, in order to safeguard the critical path?

Why this is always happening, did you expect this in the begining of the project?

Have you forecasted the same?

Reason:- While planning for any project and putting together all the activities with successors, predecessors, links, loading recourses….. etc, almost all the planners and schedulers are paying less attention to the schedule risks while iterating the schedule.

Let us talk on one of the most complicated schedule -for example the EPC-Oil & gas projects or power plant- in general the Energy Sector schedule.

Why it’s complicated? What is the difference between this type of projects and real estate construction projects?

The real estate project has almost standard pattern where time and resources are almost proportional. In other words in 98% of the activities when you increase the resources it will decrease the time, because the required resources wither material or manpower are almost standard.

In the other hand; the energy sector professions or materials are not standard and varies from one project to another. For example, the power plant projects are not the same like upstream oil production or refinery projects. Each requires specific skills & customized materials.

It does not mean that the real estate construction sector does not have risks, absolutely no, there are a lot of risks but it’s almost known from experience and can be quantified from the lesson learned.

Let us talk about Energy projects….

The first question comes in the risk management plan or process:- What is the appropriate time to start the risk management process with respect to scheduling process?

Is it before break down structure, is it after, is it while creating the links and critical path, or while scheduling from the mile stones or L1, etc.

The answer is:- the most optimum time to start risk management process is just after developing the breakdown structure and while preparing the linkage and creating the critical path to get the first cut of the baseline.

From experience, the proper and complete schedule cannot come from first time, and it always comes out after number of modifications or iterations, therefore the first schedule or baseline should be the input to the risk management process, and one of those iteration should be exclusively for the risk calculation to quantify the impact on the baseline properly.

Before going in details, let us have some examples of common schedule risks in order to get the feeling of the importance of risk management in scheduling.

We can talk about the most obvious risk that can happen and has negative impact on the project: – Risk Vs Mistake?

It is always advisable to start scheduling from historical data, for Ex: past similar project, but there is always risk in this process, because almost all schedulers are taking the planned dates and durations from the past project and they are not comparing with the actual dates from the same project.

It is fact that the planned date is not always correct or happens exactly as planned, therefore to make realistic schedule, the actual execution should be considered. This is one of the biggest mistakes rather than a risk, which almost all schedulers fall, into.

Another question that comes up in the same topic is: in the past project the same activity was planned as 10 days duration, and actually happened in 25 days!

How to consider this? Do we consider 10 days in the schedule and 15 registered in the risk register, or directly apply 25 day in the schedule.

If we take into consideration the fact that the 10-day estimate was correct based on experience and executed projects, the optimum solution is to consider at least 25% of the extra duration in the schedule and register the balance 75% in the risk register until end of the scheduling process. Then find out the available float and accordingly final tuning to be performed (iteration) on the schedule with keeping the risk as open and assigning it to the proper risk owner with proper trigger to flag while executing.

Another very famous risk is the lead-time

There is always a risk in delivering the items in time due to various reasons, like supplier performance, logistics issues, customs clearance, financial issues, etc.

In the scheduling process, there should be float or additional lead-time based on historical data for the delay case, and it should be registered in the risk register with alternative mitigation plan.

For example you can consider in the commercial budget (management reserve) the vendor incentives to supply in time. Other mitigation also is performing sort of audit, due diligence, vendor qualification assessment before placing a contract in order to make sure that vendor can perform well and deliver in time and he has enough resources to perform, etc.

The most important aspect in this type of risks is the lessons learned & historical data, which are giving the view of how was the delivery or delay event for the same order.

Other major risk in scheduling is changing the laws, international codes, and government polices during the execution of the project. This is one of the trickiest risks, but in the same time can be managed well. There should be clear attribute or clause in the contract stating the edition/ revision / year of all applicable laws, standards codes and polices, any change to that shall be assessed in the time of the change and a proposal of the change with the impact and mitigation to be raised to the change management board for approval. Unfortunately, this risk cannot be quantified during scheduling process, however in the time of the change the impact on the schedule can be determined & rebaseline can be proposed.

Other important risk is the approval time for the critical documents.

There is always risk in delaying the critical documents or delay in the approval process. This risk is difficult to predict or to quantify the delay until it happens. Nevertheless, it is always advisable to consider the historical data and try to add contingency as much as possible in the schedule. However, this risk always happens.

So how to deal with it?

First, the approval duration should be clear in the contract and the delay impact should be assigned to the right party. In the other words, there should be a robust mechanism to count the delay in the execution phase and legitimate process of official recording of the delay. One of the other major risks that could affect the project is the mobilization of the manpower and their competency. We always face problems in the execution phase while mobilizing the right person in the right time. In order to reserve the competent manpower, we usually mobilize them early in the project which is affecting the budget otherwise we will never get them. In other hand, the process of getting the competent manpower is taking long time and we always miss the schedule due to unavailability of these expertise. For me this is a cooperate risk and not only project risk and it has to be dealt by company’s main management office. However, in the project level there should be response or mitigation plan. It starts from the project WBS and identifying the required competencies and resources to achieve it, then highlighting the most unique expertise for which without them the project schedule will negatively affected. Check the schedule and plan when these expertises are required and accordingly get this plan endorsed from cooperate. Still there is always risk for not getting them in time, so the mitigation plan in the risk register could be getting a subcontract manpower to perform this activity and accordingly adding a contingency in the budget. Until now, what we have spoken is about the predetermined risks from the historical data. What about the new risks which are custom for the project and may happen?

How to define and quantify?

The optimum method of schedule risk identification is by professional expertise involvement; wither by Delphi technique, interviews, brainstorming, etc.

This gives the highest level of accuracy and professionalism. In addition, we have to consider these expertises not only in the scheduling process, but also in the overall risk management process.

What is the outcome? How to get them onboard?

For me the optimum methodology is a combination of Delphi or interview technique along with brainstorming or nominating group workshop.

Since this kind of unique or high expertise are not having time to spent specifically for your project, the Delphi technique is good.

This technique is simply sending the relevant expertise or stakeholders a template of risk register along with the first cut baseline schedule, considering the fact that they already know the project and contract scope. Then ask them to fill this template within a reasonable time, compile the responses in one list & resend again to all for their final review.