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The Application of Critical Chain and Portfolio Project Management at the Gas Pipeline Costruction of Urucu/Manaus (Petrobras)

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Title: The Application of Critical Chain and Portfolio Project Management at the Gas Pipeline Costruction of Urucu/Manaus (Petrobras)


1
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

2
Presentation Outline
3
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

4
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5
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

6
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

7
SDPM Methodology
8
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

9
Success Driven Project Management (SDPM)
  • Execution and Control
  • Calculate current probabilities of achieving
    goals
  • Track success probability trends
  • Manage contingency reserves

10
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.

11
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.

12
Resource Critical Path
  • When financing and supplies are not restricting
    factors then Resource Critical Path is the same
    as Critical Chain.

13
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).

14
Eight Processes of SDPM
  • Systematic scope definition (indentured
    structures)
  • Network planning
  • Resource Definition and Assignment
  • Consumable, renewable, utilized produced
  • Units, teams/crews, interchangeable units or
    crews
  • Resource productivities
  • Assigned to project activities

15
Eight Processes of SDPM
  • Activity durations calculated scope or volume
    (quantity) of work assigned resource
    productivities
  • True (resource) critical path calculated
  • Logical schedule constraints
  • Resource, financial supply limitations in both
    the forward and backward passes

16
Eight Processes of SDPM
  1. Risk uncertainties simulated probability
    distribution for main project results (project
    its main phases finish dates, costs, resource
    requirements).
  2. Actuals reported compared, contingency reserves
    tracked.

17
Eight Processes of SDPM
  • Current probabilities of success calculated and
    trends determined for
  • Schedules
  • Costs
  • Resources

18
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

19
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.

20
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.

21
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).

22
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.

23
Assignments
  • Assigning resources to activities implies the
    notion of a team - a group of resources working
    on an activity together. The team can include
    individual resources, multi-resources and skills.
  • If the activitys 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.

24
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.

25
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 activitys physical volume (or quantity)
    of work.
  • Activity volume can be measured in meters, tons,
    planned work hours, percents or any other units.

26
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.

27
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.

28
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.

29
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.

31
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.

32
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 Probability Trends
  • 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.

41
Success Probability Trends
  • 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.

42
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.

43
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.
44
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).
45
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46
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47
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).

48
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

49
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.

50
Setting New Project Goals
  • 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

51
Setting New Project Goals
  • 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.

52
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.

53
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.

54
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.

55
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.

56
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.

57
Resource Usage Optimization
  • 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.

58
Resource Usage Optimization
  • When such logistics are carefully planned we have
    an increase in general productivity, as we can
    see in the following figures.

59
Resource Usage Optimization
  • 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.

60
800 mper day
  • Before SDPM Implementation
  • After SDPM Implementation

1150 m per day
61
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62
References
63
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
    authorgtrecent papers

64
Contact Information
  • Russell ArchibaldPrincipal - Archibald
    Associates, USA russell_archibald_at_yahoo.com
  • Peter Berndt de Souza MelloDirector - X25
    Treinamento e Consultoria, Brazilpeter.mello_at_x25.
    com.br
  • Jefferson GuimarãesSenior Project Engineer -
    Concremat/Petrobras, Braziljefferson.guimaraes_at_co
    rrentecritica.com
  • Vladimir LiberzonGeneral Director Spider
    Project Team, Russiaspider_at_mail.cnt.ru
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