Any process for managing time, cost, and performance trade-offs should emphasize the systems approach to management by recognizing that even the smallest change in a proj- ect or system could easily affect all of the organization’s systems. A typical systems model is shown in Figure 16–4. Because of this, it is often better to develop a process for decision-making/trade-off analysis rather than to maintain hard-and-fast rules on trade- offs. The following six steps may help:
● Recognizing and understanding the basis for project conflicts
● Reviewing the project objectives
● Analyzing the project environment and status
● Identifying the alternative courses of action
● Analyzing and selecting the best alternative
● Revising the project plan
The first step in any decision-making process must be recognition and understanding of the conflict. Most projects have management cost and control systems that compare ac- tual versus planned results, scrutinize the results through variance analyses, and provide status reports so that corrective action can be taken to resolve the problems. Project man- agers must carefully evaluate information about project problems because it may not al- ways be what it appears to be. Typical questions to ask are:
● Is the information pertinent?
● Is the information current?
TIME CONTROLS
RESPONSE SERVICE
RELIABILITY
RESOURCES
MARKET POSITION
PROFIT
REPUTATION
COST
PERFORMANCE
FIGURE 16–3. Trade-off forcing factors.
● Are the data complete?
● Who has determined that this situation exists?
● How does he know this information is correct?
● If this information is true, what are the implications for the project?
The reason for this first step is to understand the cause of the conflict and the need for trade-offs. Most causes can be categorized as human errors or failures, uncertain problems, and totally unexpected problems, as shown below:
● Human errors/failures
● Impossible schedule commitments
● Poor control of design changes
● Poor project cost accounting
● Machine failures
● Test failures
● Failure to receive a critical input
● Failure to receive anticipated approvals
● Uncertain problems
● Too many concurrent projects
● Labor contract expiration
● Change in project leadership
● Possibility of project cancellation
● Unexpected problems
● Overcommitted company resources
Methodology for Trade-off Analysis 629
CONSTRAINTS
• Physical
• Financial
• Timing
• Policy
SELECTION CRITERIA
• Performance
• Cost/benefit
• Response time
• Policy
SYSTEM O
B J E C T I V E
REQUIREMENT
REQUIREMENT
REQUIREMENT
REQUIREMENT
ALTERNATIVE ALTERNATIVE ALTERNATIVE ALTERNATIVE ALTERNATIVE ALTERNATIVE ALTERNATIVE ALTERNATIVE
T R A D E O F F
FEEDBACK TRANS-
LATION
ANALYSIS TRADE-
OFF
SYNTHESIS
FIGURE 16–4. The systems approach.
● Conflicting project priorities
● Cash flow problems
● Labor contract disputes
● Delay in material shipment
● “Fast-track” people having been promoted off the project
● “Temporary” employees having to be returned to their home base
● Inaccurate original forecast
● Change in market conditions
● New standards having been developed
The second step in the decision-making process is a complete review of the project objectives as seen by the various participants in the projects, ranging from top management to project team members. These objectives and/or priorities were originally set after con- sidering many environmental factors, some of which may have changed over the lifetime of the project.
The nature of these objectives will usually determine the degree of rigidity that has been established between time, cost, and performance. This may require reviewing project documentation, including:
● Project objectives
● Project integration into sponsor’s objectives and strategic plan
● Statement of work
● Schedule, cost, and performance specifications
● Resources consumed and projected
The third step is the analysis of the project environment and status, including a de- tailed measurement of the actual time, cost, and performance results with the original or revised project plan. This step should not turn into a “witch hunt” but should focus on proj- ect results, problems, and roadblocks. Factors such as financial risk, potential follow-up contracts, the status of other projects, and relative competitive positions are just a few of the environmental factors that should be reviewed. Some companies have established poli- cies toward trade-off analysis, such as “never compromise performance.” Even these poli- cies, however, have been known to change when environmental factors add to the financial risk of the company. The following topics may be applicable under step 3:
● Discuss the project with the project management office to:
● Determine relative priorities for time, cost, and performance
● Determine impact on firm’s profitability and strategic plan
● Get a management assessment (even a hunch as to what the problems are)
● If the project is a contract with an outside customer, meet with the customer’s proj- ect manager to assess his views relative to project status and assess the customer’s priorities for time, cost, and performance.
● Meet with the functional managers to determine their views on the problem and to gain an insight regarding their commitment to a successful project. Where does this project sit in their priority list?
● Review in detail the status of each project work package. Obtain a clear and de- tailed appraisal by the responsible project office personnel as to:
● Time to complete
● Cost to complete
● Work to complete
● Review past data to assess credibility of cost and schedule information in the pre- vious step.
The project manager may have sufficient background to quickly assess the signifi- cance of a particular variance and the probable impact of that variance on project team per- formance. Knowledge of the project requirements (possibly with the assistance of the proj- ect sponsor) will usually help a project manager determine whether corrective action must be taken at all, or whether the project should simply be permitted to continue as originally conceived.
Whether or not immediate action is required, a quick analysis of why a potential prob- lem has developed is in order. Obviously, it will not help to “cure the symptoms” if the
“disease” itself is not remedied. The project manager must remain objective in such prob- lem identification, since he himself is a key member of the project team and may be per- sonally responsible for problems that are occurring. Suspect areas typically include:
● Inadequate planning. Either planning was not done in sufficient detail or controls were not established to determine that the project is proceeding according to the approved plan.
● Scope changes. Cost and schedule overruns are the normal result of scope changes that are permitted without formal incorporation in the project plan or increase in the resources authorized for the project.
● Poor performance. Because of the high level of interdependencies that exist within any project team structure, unacceptable performance by one individual may quickly undermine the performance of the entire team.
● Excess performance. Frequently an overzealous team member will unintentionally distort the planned balance between cost, schedule, and performance on the project.
● Environmental restraints—particularly on projects involving “third-party ap- provals” or dependent on outside resources. Changes, delays, or nonperformance by parties outside the project team may have an adverse impact on the team performance.
Some projects appear to be out of tolerance when, in fact, they are not. For example, some construction projects are so front-loaded with costs that there appears to be a major discrepancy when one actually does not exist. The front-end loading of cost was planned for.
The fourth step in the project trade-off process is to list alternative courses of action.
This step usually means brainstorming the possible methods of completing the project by compromising some combination of time, cost, or performance. Hopefully, this step will refine these possible alternatives into the three or four most likely scenarios for project
Methodology for Trade-off Analysis 631
completion. At this point, some intuitive decision-making may be required to keep the list of alternatives at a manageable level.
In order fully to identify the alternatives, the project manager must have specific an- swers to key questions involving time, cost, and performance:
● Time
● Is a time delay acceptable to the customer?
● Will the time delay change the completion date for other projects and other customers?
● What is the cause for the time delay?
● Can resources be recommitted to meet the new schedule?
● What will be the cost for the new schedule?
● Will the increased time give us added improvement?
● Will an extension of this project cause delays on other projects in the cus- tomer’s house?
● What will the customer’s response be?
● Will the increased time change our learning curve?
● Will this hurt our company’s ability to procure future contracts?
● Cost
● What is causing the cost overrun?
● What can be done to reduce the remaining costs?
● Will the customer accept an additional charge?
● Should we absorb the extra cost?
● Can we renegotiate the time or performance standards to stay within cost?
● Are the budgeted costs for the remainder of the project accurate?
● Will there be any net value gains for the increased funding?
● Is this the only way to satisfy performance?
● Will this hurt our company’s ability to procure future contracts?
● Is this the only way to maintain the schedule?
● Performance
● Can the original specifications be met?
● If not, at what cost can we guarantee compliance?
● Are the specifications negotiable?
● What are the advantages to the company and customer for specification changes?
● What are the disadvantages to the company and customer for performance changes?
● Are we increasing or decreasing performance?
● Will the customer accept a change?
● Will there be a product or employee liability incurred?
● Will the change in specifications cause a redistribution of project resources?
● Will this change hurt our company’s ability to procure future contracts?
Once the answers to these questions are obtained, it is often best to plot the results graphically. Graphical methods have been used during the past two decades to determine
crashing costs for shortening the length of a project. To use the graphical techniques, we must decide on which of the three parameters to hold fixed.
With performance fixed, cost can be expressed as a function of time.
Sample curves appear in Figures 16–5 and 16–6. In Figure 16–5, the circled X indicates the target cost and target time. Unfortunately, the cost to complete the project at the target time is higher than the bud- geted cost. It may be possible to add resources and work overtime so that the time target can be met. Depending upon the way that overtime is burdened, it may be possible to find a minimum point in the curve where further delays will cause the total cost to escalate.
Curve A in Figure 16–6 shows the case where “time is money,” and any additional time will increase the cost to complete. Factors such as management support time will al- ways increase the cost to complete. There are, however, some situations where the in- creased costs occur in plateaus. This is shown in curve B of Figure 16–6. This could result from having to wait for temperature conditioning of a component before additional work can be completed, or simply waiting for nonscheduled resources to be available. In the lat- ter case, the trade-off decision points may be at the end of each plateau.
With performance fixed, there are four methods available for constructing and ana- lyzing the time–cost curves:
● Additional resources may be required. This will usually drive up the cost very fast.
Assuming that the resources are available, cost control problems can occur as a re- sult of adding resources after initial project budgeting.
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