What is the DIPP? (Warning! Some wonky stuff)

There is a comment by Keith Burns at the end of the Why Do We Plan Projects? article:

“I see a term here that I have not seen previously. DIPP tracking. what is it and where can i learn more about it?”

First, Keith, thanks for following this blog and for taking the time to post a comment.

Insofar as I have become known in the project management world, it’s been for adding to scheduling metrics the concept of critical path drag and how to compute it. That’s largely my fault — drag is so important to scheduling, as well as glaringly obvious once one thinks about it, that it is the concept I have tried hardest to disseminate.

But I’d like to think that, over the course of the past quarter century, I have added some other concepts and metrics. In my opinion (and I admit that some may disagree), my most important contributions have been:

1. The idea that projects are investments; and
2. A metric called the DIPP for planning and tracking expected project profit (or, if you prefer, expected ROI).

Keith, honestly, the best place to get information on the DIPP (and, indeed, most of my other concepts including the value breakdown structure [VBS], the cost of leveling with unresolved bottleneck [the CLUB], the doubled resource estimated duration [the DRED], the ALAP schedule performance index, and several others) is my books. The new one especially, Managing Projects as Investments: Earned Value to Business Value, covers most of the above concepts in what I flatter myself is relatively painless to read.

The DIPP was my first idea in project management, and is the basis for my 1992 article “When the DIPP Dips: a P&L Index for Project Decisions” in Project Management Journal. If you are a PMI member, you can get the article for free. Also, it was reprinted by PMI in 1999 as a featured chapter in the book Essentials of Project Control. It’s an interesting book even apart from my article, and I believe used copies are available.

Or you can get several articles that discuss the DIPP and other stuff in a six-part series I did for ProjectsAtWork on-line magazine. Just do a search on the site under my name. The site is free, but requires registration.

Finally, to describe it in a nutshell, the DIPP was originally an index for determining when to cancel a project and when to keep funding it (a poorly understood concept). But it ultimately evolved into being a planning and tracking index that integrates all three sides of the Golden Triangle.

1. Scope is measured as the expected monetary value (EMV) of the project if completed on a certain date;
2. Schedule is a plus or minus dollar amount based on acceleration or delay; and
3. Cost is the cost of resources and overhead.

• The DIPP = ($EMV + or – $accel premium or delay cost) / $cost estimate-to-complete.

The DIPP can be planned as a baseline across the schedule, with the cost ETC as the complement of the planned value (PV or BCWS). This supports an index that allows tracking of the project’s expected project profit (EPP): the DIPP Progress Index (DPI), which is Actual DIPP divided by Planned DIPP.

Any change in scope, schedule, cost or risk from what was planned would be reflected in this index, including improvement of EPP. And this extends project tracking beyond the cost/schedule realm of earned value.

Finally, Dr. Tomoichi Sato of Tokyo University has done some work extending the DIPP into areas of risk management. This paper by him, Risk-based project value analysis – contributed value and procurement cost was published in 2006.

Keith (and anyone else who was wondering about the DIPP), I hope this helps. The DIPP is a complex topic and it really takes a book to cover all of its implications and potential benefits.

Fraternally in project management,

Steve the Bajan