Total Float Management: Renovating a Misused and Abused Approach

1. Total Float Management: Renovating a Misused and Abused Approach By: Dr. Anamaria Popescu, P.E, PMP, President CPM Consulting Inc. Co-Author: John Jerz, Vice President CPM Consulting Inc.

2. Agenda • Background • Introduction to Topic • Detailed Procedure & Example • Difficulties in Implementation • Conclusion

3. Background • This paper does NOT try to establish who owns the float • Global competitive environment-projects MUST complete on-time and within budget • Sound project control practices-KEY • Realistic, integrated CPM project schedule-success of the project • Presents a new approach-proactive total float management @ Project Level • Routinely monitor total float to mitigate project delays • Trend Monitoring and Change Management

4. Background • Papers published on proactive total float management. • One method - Pre-allocate float 50/50 between parties at the beginning of the project • Another method - Distribute the float within individual schedule activities based on their durations • Alternative proposed method - Contingency “buckets” & Management of Change (MOC) process.

5. Procedure • CPM Network Development • Duration Ranges • Critical Path Validation & Acceptance • Contingency Buckets • Percentage Allocation • Management of Change Process

6. 1. CPM Network Development • Development of a credible and functionally accurate CPM network schedule • Project team “buy-in” • Characteristics of a Credible Schedule: • Minimum 1 activity per Work Item-lowest level of WBS • No open ends • Activity durations should be no longer than the reporting period • Constraints are minimized-contractual requirements only • Develop a schedule basis document • Ties should be Finish-to-Start (FS) • Lags should be used at a minimum and no longer than five days.

7. 2. Duration Ranges • Part of developing the schedule is the determination of the activity durations. • This is the step most often rushed through. • 3 durations: optimistic, most likely, and pessimistic. • Document Assumptions behind ranges. • Neutralizes overly optimistic or pessimistic mindsets. • Revisit assumptions several months after baseline established. • May need to transfer durations (ML to Ps.) • May need to re-baseline schedule • Develop Activity List in Spreadsheet w/range. • ML-OD & Ps. & Op. in custom data item columns. • Flexibility for “What-If” or PERT Analysis

8. 3. Critical Path Validation & Acceptance • CP is the driving path to the project completion date. • The path needs to be realistic and accepted by the project team AND upper management • All assumptions on the critical path should be clearly documented and presented • The project will have two completion dates: • a finish date without contingency (the early date) • a finish date with contingency (the late date). • Paradigm shift for most companies, usually manage to only one finish date with no or “hidden” contingency

9. 4. Contingency Buckets • This step is based on the organizational structure of the project and the company. • Persons with decision making authority on project need to be assigned a contingency box. • These buckets are represented as activities in the schedule-tied in series • The schedule will now have two finish dates: • the early target finish date, preceding the contingency • the late target finish date that succeeds the boxes.

10. 4. Contingency Buckets (Continued) + + + = *Calendar: 5 Day Work Week

11. 5. Percentage Allocation • Choose the % of Project Contingency to Allocate based on: • The corporate risk culture • Project risk management plan • Monte Carlo Simulation (PERT) of the baseline schedule using the three durations • “What-If” Scenarios using all 3 durations • Benchmark Data from past projects • “Cutting Edge Technology” vs. “Tried and True” Projects • Length of Project • Phase of Project • Calculate contingency amount based on Total Duration of Longest Path x %PC • Contingency distributed to each bucket. DOES NOT HAVE TO BE EQUALLY APPORTIONED. • Early Finish and Late Finish Dates of Project Established and Constrained • Project Float = Total duration of contingency activities

12. EF of Project=11/30/07 15% Project Contingency 300 Day Project Duration Contingency=45 days PM: 60% PGM: 30% PD: 10% “Drop Dead Date” 5. Percentage Allocation

13. 6. Management of Change (MOC) • MOC-Tool for Formal Float Distribution • Two Components of MOC-Trend Monitoring and Change Management • Trends are Monitored and Changes are Implemented. • Trend Management • activity with positive float loses a portion each update • Extrapolate to determine when it will become critical • Mitigate before it becomes negative • Decision needs to be made on the % slippage of TF to become a trend. • Trends become Changes when action is taken. • Include MOC change forms with the updated schedule • Assign specific codes to activities affected by changes. • Project Controls Manager records the cost and schedule impacts of the change in the Change Register

14. 6. MOC - Change Management Negative Float Changes are Reviewed at the Weekly PM Meeting and 1 of 2 decisions made: • MITIGATE Negative Float-Early Finish Date Stays the Same • Change register needs to record: (1) how this mitigation will occur (overtime, additional resources, activity splitting, logic changes), (2) the cost impact, and (3) the responsible party • NO EASY SCHEDULE FIXES THAT WILL NEVER BE FOLLLOWED! OR • Use Contingency-Early Finish Date Increases/Late Finish Date Stays the Same • Extract duration from the 1st contingency activity to bring the float back to 0. • Document in MOC Register • Late Finish Should ALWAYS Revert back to Original Late Finish Date (Contractual Finish Date) if there is Contingency Left 3.Use a combination of both mitigation and contingency allocation “Balancing Act”- Schedule Accounting

15. 6.MOC Procedure Implementation-Before Contingency Distribution 20d to 25d TF:0 to -5 DELAY Original EF Date: 30Nov07 Original LF Date: 06Feb08

16. 6.MOC Procedure Implementation-After Contingency Distribution (1) New Early Finish Date = Old EF (30Nov07) + 5 Days (2) PM Contingency: -5 Days From 27 to 22 (3) Late Finish Date: Back to Original Late Finish Date

17. Contingency Allocation Process NO NO Duration Gone? Duration Gone? Duration Gone? Contingency Allocation Process Yes Yes Yes Total Float becomes negative PGM now involved in Contingency Distribution Director now involved in Contingency Distribution LF< EF Mitigate Mitigate Mitigate NO PM use Contingency or Mitigate? PGM use Contingency or Mitigate? Director use Contingency or Mitigate? Mitigate or Change Contractual Completion Date Contingency Contingency Contingency PM distributes Contingency from box PGM distributes Contingency from box Director distributes Contingency from box Finish

18. Fill out Trend Form BEFORE CHANGEIMPLEMENTATION Review at Weekly Status Meeting Implement in Schedule & Cost Mgt System Identify Schedule float change Record in Change or Trend Register or ≤7 cd Decision to Accelerate or Move Early Finish Date Fill out Change Form CO Register Originator Project Services Manager Leadership Team Record actual cost & schedule impacts of change Schedule AFTER CHANGE IMPLEMENTATION Cost Mgmt Sys MOC Process - Example

19. Difficulties in Implementation • “You will never have upper management buy-in to this implementation.” • “It is difficult enough to come up with one duration and now you except three durations.” • “The float is to be used on a first come first serve basis by the project. It is not fair to create a dictatorship where the PM or PGM distributes the float.” • “It is not reasonable to expect negative float to be reduced in one reporting cycle.” • “You will never get the contractors to participate.”

20. Conclusions • Float is managed at project level not activity level • Focus is on mitigating delays in a timely matter. • Float management using contingency activities is not only feasible, but realistic, being implemented on actual projects with success. • Key Elements to Total Float Management • Organizational buy-in • Realistically accurate baseline schedule • Strictly enforced MOC procedure that focuses on Trends and Changes