Integrated Cost and Schedule Risk Analysis (IRA). Why? 5 visuals explain it!

mindmap — Thu, 12 Mar 2020 15:42:02 +0000

Summary

In Oil & Gas industry projects are always complex whether onshore or offshore. Remote locations, site access, communities, resource constraints and long lead items (LLI), etc. can be challenging to execute the project. Performed schedule and cost risk analysis with uncertainty using Monte Carlo simulation for Condensate Process and Storage Facility Project.

Developing a schedule model for a level-I schedule is challenging and time-consuming. Then level-II & level-III schedule models will take more time and effort. After developing the model, it is a common understanding to use “index finger” to run simulations and that’s it. Although it’s required to run simulations many times to analyze the data and spread of the distribution. Adding time-dependent cost plays an important role in displaying the Schedule –cost Joint confident level (JCL).

It is more challenging when schedule using different calendars and assign weather probabilistic calendar to one specific activity. Developing a schedule and cost stochastic model for risk analysis using Monte Carlo simulation requires time to work with key stakeholders including planners. Activity links also play a vital role in output.

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Keywords

Oil & Gas, Condensate, Processing Facility, Schedule, Cost, Level -1 Schedule, JCL, Risk, Risk Register, Quantitative, Qualitative, Quantitative Schedule Risk Analysis (QSRA), Quantitative Cost Risk Analysis (QCRA), Integrated Cost & Schedule Risk Analysis (IRA), Probability distribution, Cumulative probability Distribution, Monte Carlo Simulation (MCS) , Iteration, Uncertainty, Data, Data Analysis, data gathering, Calendar, Construction, Engineering, procurement, FEED, Resources, Resource Risk,

Project Schedule for Condensate Storage Facility

Schedule risk analysis (SRA) helps to analyze the uncertainty in the project schedule using Monte Carlo Simulation. Deterministic schedule duration and finish date don’t provide enough information to answer the following questions:

What is the probability of completing the project on the target date?
What if the predecessor of an activity finishes late?
What is the eighty (80%) chance of finishing the project?

SCR scope is:

Schedule Risk Analysis (SRA) to analyze uncertainty
Correlating the activities
Probabilistic Branching

Level – I schedule is required to perform cost and schedule risk analysis during the feasibility or initial stage of the project. Level – I schedule is given with cost estimates below:

Project Uncertainty and Risk

uncertainty to project activity can be a result of lack of information, sudden market up and down, inflation and inaccurate estimation etc.

Following risk events has been identified after risk workshop with key stakeholders. risk management is an iterative process and new risks are identified during the complete project life cycle. List of identified risk is:

Quantitative & Schedule Risk Analysis

Cost and schedule risk analysis is performed using Monte Carlo simulation. cost and schedule risks are linked to activities. Activities are correlated to avoid merge biased. It is very important to re-run the simulation and visualize the result. Before running simulation perform checking:

1- Schedule activity relationship and linkage.

2- Check for any soft and hard constraint.

3- validate cost estimate.

4- Resource allocation, resource over allocation and resource leveling.

5- Project calendar(s) and linking of calendar to project activities.

6- It is recommended to perform DCMA 14 points analysis to validate the schedule.

Results are:

Joint Confidence Level (JCL) is an integrated uncertainty analysis of joint cost, schedule, uncertainty and risk. It helps to visualize schedule and cost results to make decision under uncertainty.

Conclusion

Integrated Cost and Schedule Risk (IRA) is performed to analyze the complete project scenario as a whole with associated uncertainty and risk. It also helps to validate the project estimates and budget. It also useful to calculate contingency reserves to manage risks.

Thank You

@RISK

Earned Value Management (EVM) Concept

mindmap — Fri, 06 Mar 2020 16:30:36 +0000

Earned Value Managment - EVM. Why is it so important?

Earned Value Management (EVM) has always been challenging to understand. EVM covers 4 to 5 questions in the exam. I am going to narrate an example to explain this concept:

Q – A company ABC is hired to install underground pipes for water supply to metropolitan city. Total length is 9 km. The cost is $ 30/Ft. Project duration is 6 months. Today 2nd month is completed. The Company has installed pipes over 1.8 km. The Cost incurred is $ 185,000.

Calculate CV, CPI, SV, and SPI?

A – First need to calculate EV. EV is Budgeted cost multiplied by % complete i.e.

EV = Budgeted Cost x % Complete

The Cost to install one running foot of pipe is $ 30. The Total distance is 9 km. The Cost is expressed per running feet and distance is taken in Kilometer. So unit conversion is required. Convert cost and distance into the same unit. Therefore Budgeted Cost is

Budgeted Cost = Total Cost (Some of PV)

= $ 30/ft *9 km

= $ 98.425/m * 9000 m

= $ 885,825

Budgeted Cost (BC) = $ 885,825

1.8 km is complete so far. It means

% complete = 1.8/9

= 0.2

= 20 %

% complete = 20 %

EV = 885,825 x .20

Ev = 177,165

Now Calculate

1 – Cost variance (CV):

CV = EV-AC

= 177,165 – 185,000

= – 7,835

CV = – 7,835

2 – Cost Performance Index (CPI):

CPI = EV/AC

= 0.95

CPI = 0.95

3 – Schedule Variance:

SV = EV – PV (Planned Value)

= 177,165 – 295,275

= – 118, 120

SV = 118,120

4 – Schedule Performance Index (SPI):

SPI = EV/PV

= 177,165/295,275 = 0.6

Project is cost overrun and behind schedule

* One ft is 304.8 mm, one m to1000 mm.

**PV is calculated as:

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