Posted by Excessive Project Cost – Where It Comes From: A Quantum Perspective
Models Track
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Abstract:
It is well known that project costs and durations often exceed their planned values. In the accepted practice, this phenomenon is described by asymmetric distribution functions for project tasks or WBS elements. To make predictions reasonable, Low, Most Likely and High values of these distributions are skewed to higher cost and longer durations, with distribution Means exceeding the Most Likely values. Currently, this empirical “expert opinion” methodology satisfies mounting needs for project cost and duration guidelines.
Other than by historical reference, it is not proven theoretically why the task Means suggested by the risk expert may exceed the planned Means. After many generations of industrial projects, especially in construction of buildings, bridges, roads etc., all task estimates should be rationalized, and all distributions become almost normal. This has never happened suggesting that asymmetric distribution functions are “real” and need more solid theoretical basis.
The talk introduces a new method of cost and schedule analysis deriving the asymmetry of distribution functions from the internal complexity of tasks, or from the internal random correlations of sub-tasks, with the sub-tasks distributions fully symmetric. It turns out that randomly delayed tasks have higher probability density than randomly contracted ones. Tasks are described by quantum mechanical “wave functions”, and their wave interference pattern reveals the correlation function of random task variations. The model demonstrates systematic excessive project costs and schedule delays for fully symmetric (normally distributed) WBS elements (tasks).
It will be shown how the new method derives asymmetric probability distributions for milestones, Summary Tasks and groups of interfering (correlated) WBS elements. A reference point is offered to compare with “expert opinions” and to address discrepancy between task Means suggested by planners and risk experts. Unlike conventional Monte Carlo simulations, quantum technique provides some meaningful results without user input. An example is Schedule Risk contingency which relies on intrinsic task uncertainties and relations between task and milestone CoVs. These results establish balance between Schedule (WBS) Risk and risk defined by the user.
When the user submits historical data or expert guesses externally, only one (CoV) parameter is required instead of three (Low, ML, High). The quantum algorithm generates systematic distribution shifts and delivers results close to high quality expert estimates.
Author(s):
Ilya M. Fishman
Dr. Fishman is a physicist with extensive background in the application of methods and techniques of modern physics to optical and solid state problems, as well as extending these techniques to the field of project management. After emigrating from Soviet Union in 1987 where he was Senior Scientist at Ioffe Institute in Leningrad, he worked as Senior Scientist at Stanford Applied Physics Department in 1989-1999. From 1995 to 1997, he was consulting for Sprint’s Advanced Technology Lab in Burlingame before founding Optimight Communications in San Jose, where he served as President and CTO in 1999-2002. In 2004, he founded Ibico with the purpose to advance methodology and accuracy of project planning, risks and cost estimates.
David Graham
Before coming back to the Air Force Cost Analysis Agency, David worked at NASA HQ’s in Washington DC from April 2003 – May 2008. Prior to his NASA assignment, he worked at the Aerospace Corporation for two years supporting the Intelligence Community Cost Analysis Improvement Group (IC CAIG). He began at the Space & Missile Systems Center (SMC), Los Angeles AFB, CA in Jan, 1979. He has held a variety of budget, cost performance, cost estimator, cost-risk and program analyst positions up to the present. His career has taken him from Los Angeles to Washington DC and back three times, finally coming back to where he started at SMC and living in the Redondo Beach area. His work includes earned value analysis, cost estimating, cost-risk analysis, cost as an independent variable (CAIV), Activity Based Costing, aircraft modification financial analysis and space launch range pricing. David is a SCEA Certified Cost Estimator, past president of the SoCal SCEA Chapter (1996-1999) and a former SCEA Board Member. David is looking forward to becoming the SoCal SCEA Chapter president again and reinvigorating the membership with a series of luncheon seminars on cost estimating, cost-risk and cost management tools.