W9_Hilal_Estimating Cost at Completion (Part 2)

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Problem Recognition
In W8 Blog, I discussed about using IEACs method in order to forecast the possible progress for the coming weeks. In this blog, I will use the Monte Carlo Simulation in order to estimate the progress. I am going to use MS Excel to run the simulation.
Feasible alternative
The Guild of Project Controls Compendium and Reference suggest using three main furcating/ estimation techniques:
-       Independent estimate at completion (IEAC)
-       Monte Carlo Simulation
-       Best Fit
Analysis of Monte Carlo Simulation Alternative
The table below shows the current progress of the PMP course project:

Table 1: Up to W6 PMP Course Progress
Now we start with the original budget at completion and allow for 0.5% deviation from the original. Then, if the random number is higher than 0.5%, it will take the above number and add to it the 0.5% and if it is less it will take the above number again but subtract from it the 0.5%. In other words, we are using this function (=IF(RAND()>0.5,A1+(0.005*$A$1),A1-(0.005*$A$1)). The results can be shown below:

Table 2: MS Monte Carlo Simulation Resultes

Now we calculate the probabilities:

Table 3: Probabilities Calculations.

Figure 1: Distribution curve of the results.
Selection of Preferred Alternative

Since we are discussing which method to select, the preferred alternative will be selected once all the methods has been discussed in the future blogs.

Tracking/ reporting plan

The next step is to do the same analysis using different estimation methods (i.e. Best Fit). This method can then be applied to our forecasts of project completion and present this to the management based on the confidence level they choose.

References

Stephen, J. (2017).W10_SJP_Forecasts Part 5. Retrieved fromhttps://js-pag-cert-2017.com/w13_sjp_forecasts-part-5/ 

National Defense Industrial Association. (2014). A Guide to managing programs using predictive measures. Retrieved from http://www.earnedschedule.com/Docs/NDIA%20Predictive%20Measures%20Guide.pdf

Guild of Project Controls. 2015. Monte Carlo Simulation – Guild of project controls compendium and reference (CaR) | Project Controls – planning, scheduling, cost management and forensic analysis (Planning Planet). Retrieved from http://www.planningplanet.com/guild/gpccar/conducting-a-cost-risk-analysis

Comments

  1. Dr. PDGJanuary 1, 2018 at 2:58 PM

    Hi Hilal,
    In your introduction you make the statement "I will use the Monte Carlo Simulation in order to estimate the progress."

    Is that really what you are doing or are you FORECASTING the EAC time and/or cost?

    May seem to be a small point but important difference.......

    Other than that, you are in great shape as this is an incredibly important and USEFUL skill set to master for your real life projects.

    BR,
    Dr. PDG, Jakarta

    ReplyDelete

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