2011 AACE INTERNATIONAL TRANSACTIONS

PS.766 Predictive Risk Indicators for Construction Project Schedules

C. Douglas Kinard, III
ABSTRACT There has been little inquiry into the impact of a schedules initial conditions its baseline on its eventual outcome or how small changes over time can eventually lead a project to a tipping point. The program, the process, and the procedure involved have been studied but each fails to address how the risk of failure is determined? Every attempt to eliminate the possibility of a project being late is undertaken without understanding why projects are late. Construction, especially building construction, which will be the focus of this research, is certainly a complicated endeavor, but not necessarily a complex one. However, there is sufficient evidence that the scheduling effort of construction projects is complex. As such, a degree of unpredictability is involved. This research develops quantitative measures for schedule risk in a project, creates a monitoring mechanism to determine the change in that risk over time, and establishes benchmark standards for relative schedule risk that is useful to practitioners in both public and private construction projects.

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2011 AACE INTERNATIONAL TRANSACTIONS Table of Contents Abstract .............................................................................................................................................. 1 Table of Contents ................................................................................................................................ 2 List of Figures ..................................................................................................................................... 2 List of Equations ................................................................................................................................. 2 Introduction ........................................................................................................................................ 3 The Problem ....................................................................................................................................... 3 Total Float ........................................................................................................................................... 4 Methodology ...................................................................................................................................... 5 Research Limitations .......................................................................................................................... 6 Project Density Indicator (PDI) ............................................................................................................ 6 Activity Density Indicator .................................................................................................................... 8 Float Utilization Indicator .................................................................................................................... 9 Conclusion .......................................................................................................................................... 10 References .......................................................................................................................................... 11

List of Figures Figure 1 The relationship between data, indicators and indexes ...................................................... 4 Figure 2 Baseline PDI vs. Project Duration ....................................................................................... 7 Figure 3 Predicted PDI Curve ........................................................................................................... 8 Figure 4 Total Float Utilization Curve ............................................................................................... 10

List of Equations Equation 1 Project Density Indicator ............................................................................................... Equation 2 Project Density Coefficient at Day .................................................................................. Equation 3 Schedule Deviation Prediction ....................................................................................... Equation 4 Activity Density Indicator ............................................................................................... 6 7 8 9

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2011 AACE INTERNATIONAL TRANSACTIONS Introduction The scheduling profession and the tools it employs have advanced tremendously over the last five decades. Yet, there are still no reliable standards to determine if project timeliness has improved over time or if one project is at greater risk of finishing late than another. Furthermore, there has been little inquiry into the impact of a schedules initial conditions its baseline on its eventual outcome or how small changes over time can eventually lead a project to a tipping point. Indeed, much of the research to date has focused on three areas: the program, the process, and the procedure. Each is an important and legitimate area of inquiry, but each fails to address what appears to be the central question in scheduling: Given an initial project schedule, how is the risk of failure determined? Risk is simply the absence of certainty. Therefore, in construction project time management, the drive by many practitioners is to eliminate as much uncertainty as possible by using a better program, by bringing as much detail as possible into the process, and finally, by administering the schedule with more rigorous procedures. While this approach to risk management can be successful, it is extremely inconsistent, unpredictable, and unreliable. Every attempt to eliminate the possibility of a project being late is undertaken without understanding why projects are late. Construction, especially building construction, which will be the focus of this research, is certainly a complicated endeavor, but not necessarily a complex one. However, there is sufficient evidence that the scheduling effort of construction projects is complex. As such, a degree of unpredictability is involved. This research develops quantitative measures for schedule risk in a project, creates a monitoring mechanism to determine the change in that risk over time, and establishes benchmark standards for relative schedule risk that is useful to practitioners in both public and private construction projects.

The Problem A systematic approach to construction risk management is the industry accepted means to minimize the impact of risk [4, 9]. The aim of procedures developed by the construction industry during the 1990s was to provide a standardized system for managing risks that would encourage their adoption and use [4, 5, 9]. Regardless of the particular procedure adopted, the basic steps were the same: 1) clearly define the scope; 2) identify the known risks; 3) categorize the identified risks; 4) analyze the qualitative risk; 5) analyze the quantitative risk; and 6) control and monitor the risk. As one might expect the business of risk identification and management is immense and ranges from small localized project risks to regional, to national to global risks. One common thread that all share is the need for indicators derived from processed data, that can be used to determine various thresholds of risk and construct an index of measured or observed parameters [2]. .

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Index Indicators Processed Data Basic Monitoring Data

Figure 1 The Relationship Between Data, Indicators and Indexes [12]

Indicators for risk monitoring are those that imply the level of risk present under certain circumstances without the need to refer back to the underlying data. Indexes are groups of indicators or parameters that form a system to monitor the level of risk.

Over time, project risks in construction began to fall clearly into two broad categories: qualitative and quantitative risks. Most qualitative risks soon became the domain of the risk manager, while the quantitative risks, cost and schedule, were delegated to the project manager. Many analytic techniques were developed to perform quantitative analysis of cost and scheduling; however, a review of the available literature reveals that these mostly academic procedures are cumbersome, difficult to apply in the field and, therefore, are seldom, if ever, employed [1, 8, 10]. The complicated nature of these methods and their resulting disuse means that the risk impacts on the project duration and cost are not always well anticipated in the planning stage. This research proposes to advance the knowledge and understanding of construction project scheduling by developing indicators that will provide advanced knowledge of schedule stress that may indicate eventual failure. In addition, this study will advocate routinely collecting scheduling performance data to enable researchers to examine the effectiveness of the various programs, processes and procedures employed by construction professionals in the field.

Total Float Float, the use of float and the critical impact that float has on a schedule are subjects worthy of considerable study. Float has been described as a byproduct [3] of CPM calculations and has been defined as extra time in a schedule. However, a great deal of research has been conducted on th e impact of float use on delay in construction projects. Nguyen, in his dissertation, provided an extensive review of the literature on the subject and concluded other schedule -related factors such as float and logic affect forensic schedule analysis and these factors should be simultaneously addressed during the [schedule] analysis [6]. Prateapusanond [7], in her dissertation, examined the ownership of float and the impact float ownership has on the schedule. She concluded when owners and contractors face a dispute, the current practice of [first come, first served] total float ownership and management can lead to greater conflict [7]. The obvious importance of float in these situations exposes the need to examine the cost of float in the schedule. When a schedule is accelerated, or compressed, in any way, the critical path is shortened until it is no longer the longest path. When PS.766.4

2011 AACE INTERNATIONAL TRANSACTIONS another path becomes equal to, or longer than, the previous critical path, then all of the float has been consumed. That float had value. However, when calculating the cost of accelerating or crashing a schedule, the cost of float is not considered. This research will endeavor to determine a means of valuing float. Indicators that can assess and predict the changing nature of risk in systems are commonplace throughout business and economics. A major part of this research will be the development and testing of a set of useful indicators and indexes that will enhance the proje ct managers ability to predict and control the project schedule. Many tools and methodologies designed to measure and communicate progress toward the completion of a project along its planned schedule exist, but only one measure indicates if a project is failing to meet that schedule. That is, a project falling behind schedule indicates that the project will remain behind schedule until it ultimately finishes late. This is akin to a patient getting a diagnosis of a terminal illness after he has died. To be useful, indicators must be precautionary. A single indicator can often provide misleading information, but when several indicators are used in an index, the information they provide is often reliable and tends to eliminate outlying information coming from any single source. The indicators that will be developed and tested are the Project Density Indicator, the Activity Density Indicator and the Total Float Usage Indicator. Together, they form the Project Schedule Risk Index. Ideally, the indicators forming the index will show the project to be at risk of finishing late before the project is actually behind schedule.

Methodology There are two sources of data for this research. First, data from idealized models of construction project schedules ranging from 1 year to 4 years were generated using RanGen1 and RanGen2. Second, a set of case studies from actual construction projects will be used to validate the models. The time frames selected for the simulated models were determined from a review of the Construction Length of Time Statistics data compiled by the US Census Bureau [11]. The data for all dates since January 2000 for non-residential public and private projects indicate that, regardless of size, few projects take longer than 48 months to complete. The decision to limit the data to projects that are at least 1 year long stemmed from evidence suggesting that projects shorter than 1 year rarely experience significant delays; when shorter projects do experience significant delays, there is generally not enough time to recover and finish on time. Furthermore, the case studies used to validate the findings have durations of between 1 and 3 years; thus, limiting the simulations to this time frame helps to synchronize the data. Limiting the duration in this way has the added benefit of providing a means of further validating the models by using them on projects shorter and longer than the study projects to determine if the conclusions hold true. For this research and given that both primary and secondary data are needed, three data collection methods were used. Apart from the desk-based data collection method traditionally associated with secondary data collection, primary data, including archival records, interviews with school administrators, project managers and other stakeholders, were used. Research Limitations

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2011 AACE INTERNATIONAL TRANSACTIONS Although project scheduling has many applications beyond construction, this paper focuses on construction project schedules and particularly building construction. The simulated models were designed specifically to eliminate all variables except those being studied. Therefore, only differences in amount of total float, number of activities, average length of activities, project length and activity density were included. The case study projects are subject to all of the variables normally experienced in construction and will be studied to determine how well the tools predict actual outcomes in real projects. The case studies were selected to limit variables by selecting the same type of building, constructed in a narrow period of time, in the same local geographical area, based on the same set of design specifications, for the same owner by the same construction manager.

Project Density Indicator (PDI) The Project Density Indicator (PDI) is the sum of the durations of all activities in a project baseline schedule divided into the total project duration of the baseline schedule. The PDI is a coefficient that is an indicator of project complexity. As such it will approach the number one (1.0) for less complicated projects and approach zero for more complicated projects. A project in which every activity is critical (with zero float) and in which every activity follows its predecessor in a finish-to-start relationship would have a PDI equal to 1.0. equation 1 - Project Density Indicator PDI = Project Density Indicator PD = Project Duration in Baseline Schedule = Sum of Activity Durations for entire project

For example: If the project duration is 300 days and there are 30 activities that total 500 days then the PDI equals 300 divided by 500 which is a coefficient of 0.6. If, however, the 30 activities total only 400 days then the PDI is 300 divided by 400, which equals 0.75. A coefficient of 0.6 indicates a more complicated project than one with a coefficient of 0.75. In the examples above the same number of activities are longer on average which indicates there will be more overlap and more activities ongoing on any given day. Therefore, the PDI can be used as an independent measure of the risk of any project relative to any other project or group of projects. This assumption was tested using the case study projects of the Greenville School System BEST Schools Initiative. The plot of the PDI relative to project completion is displayed in figure 2. While largely inconclusive, the trend line indicates that the longer the project the less complicated it becomes. This demonstrates the need to have more than one indicator to establish an index of risk to a project. It is only when we combine indicators to observe the overall risk picture that we can establish the relative risk of projects regardless of size, duration and cost.

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0.80

Baseline PDI for Greenville, SC Schools

0.60
Baseline PDI 0.40 0.20 0.00

PDI PDI Trend

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Figure 1 - Baseline PDI vs. Project Duration In addition to indicating the relative complexity of a project at it initial condition, the PDI can be used to indicate the increasing or decreasing complexity of a project schedule over time. The PDI for any day in the project can be determined by dividing the remaining project duration ( RD) from Day n to the end of the project (typically, substantial completion, SC) by the sum of activity durations from day n to the end of the project. equation 2 - Project Density Coefficient at Day n PDIn = Project Density Coefficient at Day n RDn = Remaining Duration of the project from Day n to Substantial Completion = Sum of all remaining Activity Durations from Day n to Substantial Completion If the baseline schedule is used to calculate the PDI for every day in the schedule, a graphical representation results that can be used to determine if the risk to the schedule is unfolding as-planned. An idealized project would have a PDI nearer to 1.0 at the beginning that would decline through the middle of the project and rise toward the end. As the actual complexity of the project is plotted, the risk in terms of the PDI would be above, below or on the predicted baseline plot.

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Predicted PDI vs. Project Duration

0.75 Fewer Ongoing Activities Less Dense Project

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More Ongoing Activities Denser Project

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Figure 3 Predicted PDI Curve The difference between the actual complexity of the project and the planned complexity at Time n can be translated into a potential early or late finish: Equation 3 - Schedule Deviation Prediction Devn = Predicted Schedule Deviation at Point n. |x| = Absolute value of the difference between the actual PDI and planned PDI at time n PDIn = Planned PDI at point n PD = Planned Duration of the project from the Baseline Schedule The formula returns a number in the same terms as the project duration (usually days) that is added or subtracted from the baseline project duration to provide a predicted new completion date based on a change in schedule complexity. While the project at point n may be on schedule according to traditional CPM methods, this indicator can provide project stakeholders with an early warning of impending schedule failure.

Activity Density Indicator The Activity Density Indicator (ADI) is a function of the sum of all activity durations and the number of activities active on any given day. As with the PDI, the Activity Density Indicator returns a coefficient. However, the ADI coefficient is for a particular day in the project and is an indication of the relative activity risk for that day. Therefore, the daily coefficients can be plotted against time to return a curve of the daily activity density risk to the project. The denominator is the mean number of activities per day for the project, and the numerator is the number of activities at Day x. Thus, an ADI of greater than one indicates the project is becoming more complicated because more activities are ongoing at PS.766.8

2011 AACE INTERNATIONAL TRANSACTIONS one time. On the other hand, an ADI of less than one indicates the project has fewer activities ongoing at the same time; however, as a result, a greater percentage of ongoing activities are now critical. Hence, an ADI close to one is better than an ADI too far above one or an ADI too close to zero. Equation 4 - Activity Density Indicator Density Indicator on Day X = Number of Activities in progress on Day X = Average Number of Activities per Day As an example: If the project duration is 300 days and there are 30 activities that total 450 days, then the denominator, or the mean number of activities per day, equals 450 divided by 300, which is 1.5. If the number of activities ongoing at Day x is 12, then the ADIx equals 12 divided by 1.5, which equals 8. For this project, an ADI of 8 would be very high and would indicate the project is very busy. Once the ADI is determined for each day of the projects duration and plotted on a graph, the ADI rises and falls as the project becomes more and less complicated. The value of the ADI to the project planner cannot be overstated. Before a project begins, the planner can set benchmarks that indicate where additional supervision is required. Since these benchmarks can be assigned an ADI as the trigger the project manager can justify the need for additional supervision should there be a sudden change in project complexity. Furthermore, the ADI is a sterile measure and can, over time, deliver an unbiased assessment of relative project complexity.

Float Use Indicator Finally, the Float Use Indicator measures the amount of total float available at any given point in a project. This indicator is more complicated than the PDI or ADI. While the information for the PDI and ADI is easily available in any commercially available scheduling program, the same is not true for the total float information. The amount of float is different for each path through the network, and each group of paths that converge at a merge event loses some float. It is important that the Float Utilization Curve process be within the ability of the average field project manager, or s/he will not use the process just as the many processes derived by computer scientists and mathematicians go unused. The most efficient way to approach this problem is to consider each day of the schedule, add the total float available for that day and then add all float from that day to the end of the project to arrive at the total remaining float in the project. This process is essentially the same one used to level the resources in a project except the resource here is Total Float. When complete, the graph of the Float Utilization Curve displays the planned float usage for the project which can then be used as a baseline to score actual float usage. A typical project, like the graph in Figure x, would display the total float available according to the baseline schedule, the planned float usage and the actual float usage. At any point along the chart, a projection can be made by translating a percent loss in total float into a potential delay in the project completion. For example, in a 300 day project, one percent of the project duration is 3 days. Therefore, a two percent unplanned use of total float has the potential to delay the project by as much as 6 days. Knowing well in advance the potential delay because of float loss can provide the PS.766.9

2011 AACE INTERNATIONAL TRANSACTIONS stakeholders with a valuable tool that can be used to determine potential impact of a proposed change that will use float and the potential impact of non-critical delays in the project. To date, no such analytical tools exist. In the project represented in figure 4, the project schedule proceeded as planned for the first 27 percent of the schedule then there was a noticeable drop in the available total float.
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Total Float Available Planned Float Usage Actual Float Usage

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Figure 4 Total Float Use Curve Conclusion The objectives of this research were to provide tools to enhance the forecasting and decision-making abilities of the stakeholders. The PDI, Project Density Indicator, provides a quantitative measure for schedule risk in a project. The ADI, Activity Density Indicator, creates a monitoring mechanism to determine the change in that risk over time, and establishes benchmark standards for relative schedule risk that is useful to practitioners in both public and private construction projects. The Total Float Utilization curve provides an additional early warning that the project is under schedule stress as a result of over use of total float. Additionally, the total float utilization indicator can aid decisionmaking when the stakeholders are determining whether to go forward with a change that affects only non-critical activities in the schedule. There is a great deal of additional research that needs to be done to further validate the usefulness of these indicators as well as to refine them into an easily accessible format that will allow a project manager to make them an effective tool.

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2011 AACE INTERNATIONAL TRANSACTIONS REFERENCES 1. Akintoye, A.S. and M.J. MacLeod, Risk Analysis and Management in Construction, International Journal of Project Management, 15(1), 31-38, doi:DOI: 10.1016/S0263-7863)96)00035-X, 1997. 2. Davies, J. and M. Haubenstock, Building Effective Indicators to Monitor Operational Risk, RMA Journal, 2002. 3. De La Garza, J.M., M.C. Vorster, and C.M. Parvin, Total Float Traded as Commodity, Journal of Construction Engineering and Management, 117(4), 716-727, doi: 10.1061/(ASCE)07339364(1991)117:4(716), 1991. 4. Flanagan, R., Risk Management and Construction, Oxford: Blackwell Publishing Ltd., 2006. 5. ICE and FIA (Ed.), RAMP: Risk Analysis and Management for Projects, London: Thomas Telford, 1998. 6. Nguyen, L.D., The Dynamics of Float, Logic, Resource Allocation and Delay Timing in Forensic Schedule Analysis and Construction Delay Claims, 2007. 7. Prateapusanond, A., A Comprehensive Practice of Total Float Pre-Allocation and Management for the Application of a CPM-based Construction, 2004. Retrieved from: http://scholar.lib.vt.edu/theses/available/etd-01062004-103309/ 8. Tah, J.H., A. Thorpe, and R. McCaffer, A Survey of Indirect Cost Estimating in Practice, Construction Management & Economics, 12(1), 31, 1994. Retrieved from: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=555867&site=ehost-live 9. Thompson, P.A. and J.G. Perry, Engineering Construction Risks: A Guide to Project Risk Analysis and Risk Management, Revision Edition, London: T. Telford, 1992. 10. Uher, T.E. and A.R. Toakley, Risk Management in the Conceptual Phase of a Project, International Journal of Project Mangement, 17(3), 161-169, doi:DOI: 10.1016/S0263-7863)98)00024-6, 1999. 11. Construction Spending Length of Time, U.S Bureau of Censis, 2008. Retrieved from: http://www.census.gov/const/C30/length.html 12. Zadek, S. and A. MacGillivray, Accounting for Change: Indicators for Sustainable Development, New Economics Foundation, 1995.

C. Douglas Kinard, III Western Carolina University

cdkinard@wcu.edu

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