PMBOK® Guide Sixth Edition: What Would You Like to See Added?

Sometime in 2016, the next edition of the PMBOK® Guide should be published by the Project Management Institute. We could wait until too late and then complain about how the hard-working folks who author the “bible” haven’t seen fit to include our pet terms, techniques, metrics and ideas. Or we could start now by developing a list of items that we feel it should include, and perhaps either someone will notice it or we can summarize it and email it to PMI for consideration.

Toward this goal, I am starting a “PMBOK® Guide Sixth Edition Wish List” thread in the Discussion FORUM attached to this blog. I hope that readers will weigh in with their own suggestions/nominations, as well as comment on the suggestions of others. And periodically I will compile a summary of them.

For starters, here are ten items that I personally think should be included in the next edition, listed in descending order of how valuable I feel the inclusion of each would be. I will follow each with a brief explanation or descriptive link and a five-scale rating, running from VL (for Very Likely) to L to M to U to VU (for Very Unlikely), of my estimate of the probability of each being included.

  1. Change in the definition of “project” to eliminate the weasel word ”endeavor” and replace it with “investment in work”. My preferred redefinition would be: “An investment in work to create a unique product, service or result.” (No need for “temporary” either, until someone can show me something that isn’t temporary!) [U, even though this would have great benefit for the project management profession by recognizing our important role in utilizing the resources and funds with which we are entrusted to maximize value and ROI.)
  2. Expand the section on “Business Value” that was introduced in the 5th edition and that currently occupies most of pages 15-16, as well as being mentioned in the Glossary. The current description starts: “Business value is a concept that is unique to each organization.” That is indisputable. But it is also such a crucial concept (the raison d’etre of every project and/or program!) that surely it needs to be expanded to far more than two pages. Deserving of exploration are:
  • What are the commonalities of business value across any and all organizations?
  • How should it be measured? (Value is usually measured in monetary units.)
  • What generates the business value? (Answer: the product scope, with occasional contribution from the project scope if just doing the work adds value {e.g., a more experienced workforce}.)
  • What project documentation/technique should be used to define the business value? (Answer: the value breakdown structure (VBS) – which should definitely be included, and I think will be!)
  • How should business value be used to manage the other aspects of the project? (Through optimizing it in integration with schedule and cost, and using it to justify additional resources where their cost is less than the value they add.)

[VL. Business value is an obvious concept that lots of people have been writing about for a while. Whether any of the information mentioned above is included in the expanded treatment of the topic is much more doubtful. But almost any expansion would be useful.]

  1. Change the EVM term from planned value (PV) to planned cost (PC). It is cost, as the original earned value terms (that are still used in US Department of Defense contracting) BCWS, BCWP and ACWP emphasized: notice the “C” as the second letter in each of those. Yes, using two letters instead of four for each term made the metrics more accessible, and PMI has done a great job in spreading the use of the technique. However, the word “value” instead of “cost” in PV and (and in EV!) confuses people over the concept of business value. (For a great illustration of this, read Mike Hannon’s review of my book Managing Projects as Investment: Earned Value to Business Value.) [U. Okay, maybe I’m too optimistic and it should be VU. But if PMI wants (as it should!) to expand the concept of business value, it has to start clearly distinguishing between cost and value.]
  2. Include critical path drag as a scheduling metric. Wikipedia definition here. Every item on the critical path of a project or program has drag (unless two parallel paths are both critical, in which case neither has either drag or float but both, in combination, have drag compared to the next longest path). Why does the PMBOK® Guide include the non-critical float (slack) metrics but not the always-critical drag that costs the project time and money? Knowledgeable project managers are now computing drag “manually” – but drag analysis would be done so much more routinely if all the software did the calculation. That will happen someday – but much faster if the next PMBOK® Guide recognizes it. Besides, it’ll stimulate a lot of additional opportunity for PMP Exam questions! [L. Again, maybe I’m being overly optimistic — but it’s just hard to see how knowledgeable people could think that drag doesn’t belong in the Time Management section.]
  3. Stress the importance of a clear estimate of the value/cost of time as part of the charter or project business case or other initiation documentation. [U. It’s an obvious idea which would help tie PMBOK® Guide methods to the shutdown and turnaround discipline, where such estimates are standard and hugely important. I think it will happen eventually, but probably not in the 6th Edition]
  4. Include drag cost as either a Time Management or Integration Management metric, or both. Wikipedia definition here. On more than 98% of projects (by my estimation) extra duration (i.e., time on the critical path) reduces the expected value-over-cost (expected project profit (EPP?) of a project. And on those few exceptions, it’s important to know that they are exceptions! If critical path drag is included, it would be hard to understand a rationale for not mentioning drag cost. [M. Less likely to be included than plain naked drag, but still a good chance. If it is included, it would increase the chances for inclusion of #5, stressing the importance of a clear estimate of the value/cost of time.  But #5, recognition and quantification of the value/cost of time, is more important than just the act of tying it to an activity’s drag.]
  5. Mention and discuss the DIPP formula (DIPP = {$EMV of Scope ± $Acceleration or $Delay} ÷ Cost ETC} for planning, optimization and tracking. [VU. A rephrasing of the definition of “project” to include the word “investment” (see #1) would obviously make this more likely. But the “enabler” (see below) has to be recognition of projects as investments. Maybe this important metric will be included in the 7th or 8th]
  6. Recognize and discuss the multiplier effect on the value of “enabler” projects within a program, as well as the multiplier effect on an enabler’s acceleration premium and/or delay cost. The failure to recognize the special nature of enabler projects and to designate them as such leads to many bad decisions in terms of resource targeting. [U. Again, it’s an obvious and important concept. Some of the PMBOK® Guide authors are very smart people, so I hold out some hope.]
  7. Discuss/mention the doubled resource estimated duration (the DRED) as a technique for estimating the resource elasticity of an activity’s duration in response to additional resources. The DRED is an estimate of what an activity’s duration would become (shorter, longer or stay the same) if its assigned resources were doubled. [VU. Too bad, it’s a useful little tool for identifying where additional budget would help the most.]
  8. Discuss/explore the cost of leveling with unresolved bottlenecks (the CLUB). We know that resource insufficiencies cause delays. If we start measuring the value/cost of time, we will be able to quantify that cost and attach it to the specific bottleneck causing the delay. This metric is extremely valuable on a single project basis, and even more when compiled for an entire resource type or functional department across all the projects it supports – in other words, this is a toll that can move us toward right-sized staffing levels. [VU. But the CLUB is SO valuable to project and functional managers! I’m allowed to dream, ain’t I?]

Well, here are ten to start the ball rolling. C’mon, now, you must have some ideas too, don’t you? CCPM folks? Agile expansion suggestions? Add them to the list.

Fraternally in project management,

Steve the Bajan

New Weekend Puzzler: Earned Value and DIPP Analysis on the Phlogiston Mining Project

After a cold spring, weather in Boston is finally nice and so I’ve decided to offer readers another little Weekend Puzzler, this time on earned value and DIPP analysis.

But before I explain the puzzle, I want to mention that I was interviewed on Blog Talk Radio by Elaine Jackson (a fellow Bajan!) of Holistic Consulting Project Management. The topic, which you can listen to here, was “Financial Success of Projects Using the Critical Path Drag Method.” It runs about half an hour.

Earned Value and DIPP Puzzler

First, let me say that, as a teacher, it has always been my belief that every exercise, quiz and test should teach as well as evaluate. So that is how this Puzzler is intended.

Next, here are the earned value and DIPP terms and their formulas that you will need in answering the questions.

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PV (also known as BCWS) is Planned Value and is the earned value baseline (and should be called PC for planned cost). It is the cumulative budgets for the activities as scheduled.

EV (also known as BCWP) is Earned Value, the cumulative budgets for the activities that have been performed at any given point of project progress.

AC (also known as ACWP) is Actual Cost, what it actually cost to perform the work that has been performed.

CPI is the Cost Performance Index or EV ÷ AC, the ratio between the budgets and the actual cost for work performed. It is used for trend analysis in estimating the project’s Cost Estimate-at-Completion (Cost EAC).

Cost EAC is Cost Estimate-at-Completion, or what the project will cost if current spending trends continue. It is calculated using the formula: Cost EAC = Budget at completion ÷ CPI.

Cost ETC is Cost Estimate-to-Complete, or how much more the project will cost from any given point onwards, subtracting sunk costs. It is calculated using the formula: Cost EAC = (Budget at completion ÷ CPI) – AC.

SPI is the Schedule Performance Index or EV ÷ PV, the ratio between the budgets for the work actually performed so far and the budgets for the work scheduled to have been performed to this point. It is used for trend analysis in forecasting the project’s Estimated Duration. (NOTE: The way SPI is currently used, it is often distorted due to float and other factors. These, along with corrective procedures are described in detail in my book Managing Projects as Investments: Earned Value to Business Value. But for purposes of this Puzzler, we will assume the SPI to be an accurate index.)

EMV is the expected monetary value of the project if completed on a specific date.

Acceleration premium is increase in EMV if a project is completed early.

Delay cost is the reduction in EMV if a project is completed late.

The Planned DIPP (DIPP stands for Devaux’s Index of Project Performance) is the baseline for the ratio between a project’s EMV and its Cost ETC (ignoring sunk costs). It is calculated using the formula: Planned DIPP = $EMV ÷ Planned Cost ETC.

Actual DIPP is the project EMV plus or minus an Acceleration Premium of Delay Cost if it is ahead or behind schedule (usually generated through the SPI), all divided by the Actual Cost ETC (usually generated through the SPI). It is calculated using the formula: DIPP = ($EMV ± $Acceleration Premium OR Delay Cost) ÷ Planned Cost ETC.

DPI stands for DIPP Progress Index. It is the ratio between the actual expected profitability of a project at any given point of progress (taking into account schedule acceleration or delay, but factoring out sunk costs) and the planned expected profitability at that point. It is calculated using the formula: DPI = Actual DIPP ÷ Planned DIPP.

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The Phlogiston Mining Project

Our geologists have just discovered that beneath a piece of real estate that we happen to own lies a rich pocket of phlogiston. They have performed tests which show that we should be able to recover 10,000 kilograms of the substance.

Phlogiston

Our commodities analysts have informed us phlogiston is currently selling for $10,000 per kilogram on world markets. However, that price is currently trending down at an average rate of $100 each week. Additionally, the Tierra del Fuego Megamine is due to start producing in 50 weeks. That is expected to so increase the availability of phlogiston for industrial use that starting at Week 51, the price of phlogiston is estimated to start falling at $200 per week.

We begin a 50-week project, with a budget of $10 million, to recover the phlogiston and sell it.

Q1.      What is the expected value of the 20,000 kg. of phlogiston if we could get it right now?

Q2.      What is the EMV of the project with its 50-week schedule?

Q3.      What is the EPP of the project with its 50-week schedule and $10M budget?

Q4.      What is the Starting DIPP of the project?

Q5.      What would be the acceleration premium for each week less than 50 if we could speed up the project?

Q6.      What would be the delay cost for every week more than 50 if the project takes longer?

We are now 20 weeks into the project and we have had some problems. We receive the following earned value report:

PV= $4M

EV = $3M

AC = $5M

Q7.      What is our current CPI?

Q8.      What is our current Cost EAC based on the CPI?

Q9.      What is our current Cost ETC based on the CPI and AC?

Q10.    What is our current SPI?

Q11.    What is our current Estimated Duration based on the SPI?

Q12.    What is our current estimated schedule delay based on the SPI?

Q13.    What is our current expected delay cost based on the SPI?

Q14.    What was our project’s Week 20 Planned DIPP?

Q14.    What is our project’s Week 20 Actual DIPP?

Q15.    What is our project’s current DPI?

Q16.    What is our project’s current EPP?

Q17.    If we have all this data (including EMV and the value/cost of time!), what are some of the things we might do to improve the situation?

Q18. If there is nothing we can do to pull in the schedule, but there are also no other issues such as opportunity costs, project termination costs, salvage value, etc., should we terminate the project at Week 20?

Scroll down below my sig for the answers.

Fraternally in project management,

Steve the Bajan

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ANSWERS

Q1.      What is the value of the 20,000 kg. phlogiston if we could get it right now? [$10,000 * 10,000kg. = $100M]

Q2.      What is the EMV of the project with its 50-week schedule? [$100M – (10,000kg * 50W * $100) = $100M – $50M = $50M]

Q3.      What is the EPP of the project with its 50-week schedule and $10M budget? [$50M – $10M = $40M]

Q4.      What is the Starting DIPP of the project? [$50M ÷ $10M = 5.00]

Q5.      What would be the acceleration premium for each week less than 50 if we could speed up the project? [10,000kg * $100 = $1M]

Q6.      What would be the delay cost for every week more than 50 if the project takes longer? [10,000kg * $200 = $2M]

We are now 20 weeks into the project and we have had some problems. We receive the following earned value report:

PV= $4M

EV = $3M

AC = $5M

Q7.      What is our current CPI? [$3M ÷ $5M = .60]

Q8.      What is our current Cost EAC based on the CPI? [$10M ÷ .60 = $16.67M]

Q9.      What is our current Cost ETC based on the CPI and AC? [$16.67M – $5M = $11.67M]

Q10.    What is our current SPI? [$3M ÷ $4M = .75]

Q11.    What is our current Estimated Duration based on the SPI? [50W ÷ .75 = 66.67W]

Q12.    What is our current estimated schedule delay based on the SPI? [66.67W – 50W = 16.67W]

Q13.    What is our current expected delay cost based on the SPI? [16.67W * ($200 * 20,000kg) = 16.67W * $2M = $33.33M]

Q14.    What was our project’s Week 20 Planned DIPP? [$50M ÷ ($10M – $4M) = $50M ÷ $6M = 8.33]

Q14.    What is our project’s Week 20 Actual DIPP? [$16.67M ÷ $11.67M = 1.43]

Q15.    What is our project’s current DPI? [1.43 ÷ 8.33 = .17]

Q16.    What is our project’s current EPP? [$50M – $33.33M – $16.67M = $0]

Q17.    If we have all this data (including EMV and the value/cost of time!), what are some of the things we might do to improve the situation? [A. Crash or fast track activities with lots of drag to pull in the schedule and gain $2M/week. B. Prune optional activities with low value-added and lots of drag and gain $2M/week. As the critical path migrates through other activities, repeat this process until the DIPP is as high as you can get it.]

Q18. If there is nothing we can do to pull in the schedule, but there are also no other issues such as opportunity costs, project termination costs, salvage value, etc., should we terminate the project at Week 20? [NO! Our project investment has gone very badly, as the DPI of 17% of expectations at this point tells us. However, the $5M of actual cost we have already spent is GONE, sunk, no matter what. This project now requires investment of $11.67M more with an EMV of $16.67M. If we finish the project, we will be $5M better off than if we cancel it. What this means is that any time the Actual DIPP is well above 1.00 (and it’s currently 1.43), we are better off finishing it than cancelling it UNLESS there are other factors that would offset a DIPP that suggests a return of 43% in 30 weeks on every future dollar invested.]      

Project Management and Senior Management: Reconciling Their Needs

I’ve been developing and teaching techniques and metrics for managing the business value of projects for over 20 years. My first major article was “When the DIPP Dips: A P&L Index for Project Decisions”, published in the Sep/Oct 1992 issue of Project Management Journal. And the first edition of my Total Project Control book included techniques such the DIPP Tracking Index, the value breakdown structure (VBS), drag cost and the cost of leveling with unresolved bottlenecks (the CLUB): all techniques for managing and tracking projects for optimum value.

But something was missing. I would explain these techniques to experienced project managers in corporate classes and PMI seminars, and from time to time I’d be hired as a consultant to help plan a big project or pull in a slipped schedule. And then I’d leave and realize that I’d only handed the organization a fish. Despite my efforts, I had failed to teach them how to implement the processes to catch it themselves.

teach a man to fish

About five years ago, during the fourth day of a corporate class on the TPC methodology, an attendee said:

“Steve, these concepts and techniques that you’ve been teaching us are great – but we’re the wrong audience. We’re just the master sergeants. You need to be teaching the colonels and generals in this company. Because they don’t understand any of this!”

I started thinking: what is it that I’m missing? Why is it that senior managers have almost no interest in learning about the techniques of something that so clearly impacts an organization’s bottom line?

And so it finally hit me: the concept that I had been talking all around for two decades, the magic word that would make senior managers sit up and take notice. Investment! The thing that senior managers do understand! Not just understand, but respect and study and believe in planning and tracking and optimizing.

Project managers are subject matter experts. They are engineers and chemists and programmers and biologists and doctors and geologists and… They know a lot! They have not only extensive education, but experience in things that it is very important to know!

Where they often don’t have a great deal of knowledge is in terms of what some would call “business skills”: investment and economics and marketing. And you know what? That’s okay! Knowing how to make sure that the building doesn’t collapse, or the airplane crash, or the software consume the hard drive, or the pharmaceutical compound kill someone, or the ground water get polluted… That’s hard and that’s important! Yes, it would be nice if these smart and conscientious folks also had business knowledge and skills – but if we want those skills, they are going to have to be “add-ons”, because these people have been busy all their lives putting their energy into other very valuable knowledge. And that’s why corporations bring in people like me to teach their SMEs project management.

Executives have learned an awful lot as well: about investment and economics and marketing and taxes and interests rates and corporate bonds and organizational structures and behavior… and that’s all important stuff too. What they don’t know about is project management. And most of the time, they are not willing to attend project management classes.

Now, I’ve met some senior managers who seem to think that project management is somehow “beneath” them. (After all, what’s the big deal about delivering a mall or a jet fighter or an oil well or a cure for depression by an arbitrary deadline for an arbitrary budget, right?) But actually most senior managers I have met are bright and conscientious people, too! It’s just that no one has explained to them why knowledge of project (and program!) management – its techniques, metrics, and governance — is importance to what they do: especially investment!

This is where both sides have to learn! They have to learn a common language. They have to institute and use common metrics that are based in the investment information that senior management respects. But those metrics must then guide the project teams in making the right decisions, and senior management must know that this is occurring.

This is the approach that I took in my book Managing Projects as Investments: Earned Value to Business Value that came out last September. It was intended to provide the “common ground”, the knowledge and understanding that both senior managers and project managers need to share. And that is why it was so rewarding for me when the June issue of PM Network included that very nice review of the book by Gary Heerkens, himself the author of The Business-Savvy Project Manager, which I strongly recommend.

Gary’s review said: “But what about during the project? Luckily, in his book,… Stephen Devaux makes solid points about what can be done to maximize ROI during project execution, and it reveals a large void in my perspective on the business of projects.”

Do not be fooled by Gary’s humility! His own book and his regular writings in his PM Network column have taught me a great deal that I didn’t know. Both of us (and let me emphasize that I have never met Gary!) share a love for project management, a desire to learn and, most important, a willingness to admit when we don’t know something. But what makes me happiest is that he identified, without any assistance from me, the deepest intention of the book: to create, define and explore that crucial nexus between the project management discipline and its techniques and the senior management interest in, and concerns about, business value and investment.

I believe project managers must say that word again and again – investment, investment, INVESTMENT! – to project sponsors and customers and all of senior management (especially, when possible, to the Chief Financial Officer!) to establish that we understand why we are doing these projects. (And then, of course, we must be sure to manage them as investments!)

By the way, I have seen this work in a slightly different arena: job interviewing. I often mentor former students through the interview process, and I always urge them to say, at an appropriate point: “Of course, all projects are investments and really need to be managed as such.” They invariably report back to me that the hiring manager’s face lights up. The next former student that tries this technique and later reports that they didn’t either get the job or at least get another interview will be the first!

This territory is also where this blog will continue to cultivate and nourish the improved status of and respect for project management. I believe it is where project/program management and business management must come together for the sake of organizational progress and efficiency.

Fraternally in project management,

Steve the Bajan

The Benefits of Recognizing Projects as Investments: “And yet, it moves!”

One of the great afflictions of mankind throughout history has been the stubborn refusal of certain figures who see themselves as ”authorities” to alter their views in light of new ideas and evidence.

In the 17th and18th centuries, combustion was explained as the escape of a substance called phlogiston from a material. This theory was staunchly defended even after it was shown that magnesium gained mass when it burned. Finally, Antoine-Laurent Lavoisier proved conclusively that combustion was the combining of a material with oxygen. This new explanation led to giant steps forward in both physics and chemistry.

Galileo

Some of the most stubborn ideas are those that come with the imprimatur of sacred scripture. Thus the heliocentrism ideas of Copernicus, Kepler and Galileo were banned by the Vatican as conflicting with the Bible and the teachings of the Council of Trent. Galileo was threatened with burning as a heretic, placed under house arrest, and left only able to mutter about our planet: “Eppur si muove.”

Yesterday I had a discussion on a LinkedIn group in which I tried to explain that, in fact, all projects are investments and that recognizing them as such could have great benefit both for the development of better management techniques and metrics and for the greater esteem for our discipline. Alas, I ran into an individual who refused to accept any definitions or techniques beyond the pages of the Fifth Edition of the PMBOK® Guide.

Make no mistake – I regard the Guide as a very valuable book. But both I and PMI also regard it as a guide, and not as the entire body of knowledge of project management! It is also an evolving document, or there would be no need for new editions.

There are techniques and tools and metrics and, yes, definitions that are being used within our discipline that have not yet made it into the PMBOK® Guide. Undoubtedly many will some year. Critical path drag is an example – every project, however scheduled, has a longest path of activities and other delaying factors, and the amount that each item on that path delays completion is its drag. And drag is always there, and has been since the pharaohs’ projects, whether we and our software compute it or not! And this metric is enormously helpful whenever we are seeking places to compress our schedule! (Many clients have employed me over the years to use this technique to recover schedule.)

So what about the definition of a project that I use in my books?

“A project is an investment in work to create a product, service or result.”

First, is there anyone (apart from the gentleman from the LinkedIn group) who would argue that projects are not investments?

  • Investment: “1 The action or process of investing money for profit or material result;.. 1.2 An act of devoting time, effort, or energy to a particular undertaking with the expectation of a worthwhile result.”

http://www.oxforddictionaries.com/us/definition/american_english/investment

I believe we would all agree that every project is undertaken only if its probability-weighted value is expected to be greater than the cost (i.e., the invested amount). If we need a definition for value, the very first definition from the same source seems applicable:

Value: “1 The regard that something is held to deserve; the importance, worth, or usefulness of something”

http://www.oxforddictionaries.com/us/definition/american_english/value

A project’s value may be:

  • Revenues from a new product or service;
  • Future cost savings;
  • The opportunity to keep a plant open instead of being forced by the government to close it;
  • Avoiding fines;
  • Garnering votes;
  • Prosecuting criminals;
  • Saving lives; or
  • Any other of dozens of efforts intended to create a valuable result.

So every project is definitely an investment. But what might be the benefits of staring to recognize them as such?

  1. Project management would start to focus on the quantified aspects of those things that impact the value of the investment: the Golden Triangle of the integrated value/cost of scope, time and resource usage.
  2. Project managers would work harder to align the scope of the project with the benefits wanted by the sponsor/customer through the collaborative development and implementation of a value breakdown structure (VBS) and other techniques. (The failure to actually deliver the benefits for which a project is undertaken is a big issue in many circles, and this would help to solve the problem.)
  3. The value/cost of time on a project, which is currently almost always left as an unquantified externality and therefore rarely managed in terms of its actual impact on the investment, would suddenly be recognized for its importance. Many scheduling techniques that experienced PMs have mastered, like critical path analysis and resource leveling, would therefore suddenly be fully appreciated.
  4. Both drag cost and the true cost of work could be easily computed, meaning that activities on the critical path would be evaluated not only on the basis of their resource costs, but also their drag costs in terms of how much their drags are reducing the value of the investment. (True cost = resource costs plus drag cost.)
  5. Decisions across the Golden Triangle would be quantified in terms of investment value. Should we employ an additional resource costing $10,000 on a critical path activity? Well, will it reduce the drag cost by more than $10,000? Or would we be better off jettisoning that activity because its true cost will be greater than its value-added?
  6. We will be able to track each project during performance not just on the basis of earned value cost and schedule metrics, but on the basis of investment metrics: the expected project profit (EPP) of the project as tracked through the DIPP and the DIPP Progress Index.

All of these are just a sample of the benefits that would accrue if we start dealing with projects as investments. I believe that practitioners would rapidly develop new metrics and techniques to do an even better job of measuring and ensuring greater project investment value.

But perhaps the most important benefit would be for our profession: the value of project managers and project management techniques and contributions would become clearly measurable in value/cost terms. Instead of being looked upon as “overhead on cost centers” project managers would become valuable contributors to the organization’s bottom line.

Surely this would only help PMI to market its ideas and techniques to senior managers who know little about projects, but who care a great deal about investments!

Fraternally in project management,

Steve the Bajan

Weekend Puzzler: Computing the Value/Cost of Time on an Enabler Project

The past several blog articles have been discussing the value breakdown structure (VBS). We still have a bit more to cover on that topic, and I’ll get to that next week.

However, the weekend is upon us, and several readers emailed me that they really enjoy the Weekend Puzzler exercises. So I have put together one on a topic that we will get to soon: the value, and the value/cost of time, of enabler projects.

Identifying enabler projects and computing their true value is extremely important for any organization, and especially for a project manager who is trying to justify the resources that they know they will need. We will explore the important topic of projects in the coming weeks – but for now, and for your weekend puzzling, here is an exercise, with answers below, that should get across some important concepts.

If you want to learn more about managing enabler projects (and indeed, about pretty much everything in my blog!), try my two new books, Managing Projects as Investments: Earned Value to Business Value and Total Project Control: A Practitioner’s Guide to Managing Projects as Investments.

Two Projects in a Program: The Values of Project Steel Donkey and Project Rock Stone

(Among the questions below, the most important information for a project team to understand is in Question #7: the value/cost of time on an enabler project! It is crucial that business analysts provide this analysis for project teams!)

NOTE: For this exercise, all dollars are in current dollars.

You have been put in charge of Project Steel Donkey, a 12-month-long effort to develop and implement the Steel Donkey enterprise-wide system, which is expected to improve efficiency and reduce our organization’s overhead costs by $200,000 per month over the next three years. The budget for the project is $5 million.

One of the advantages of the Steel Donkey system is that, once implemented in its basic form, it can be extended.

The key planned extension is a real-time data communication system for our field personnel that should accelerate decision-making. Such an extension is expected to increase annual revenues. Our business analysts have estimated the probabilities of increase to be as follows:

  • 50% chance of $1 million/month for two years after the extension is put in place.
  • 25% chance of increase of $500,000/month.
  • 25% chance of no change.

The enhancement project, named Project Rock Stone, is expected to take 12 months, and will have a budget of $6 million.

But such an enhancement project cannot start until immediately after Project Steel Donkey is over and the overall system is operating.

  1. What is the total savings, just in overhead costs, expected for the three years after Project Steel Donkey is completed? A. $200,000   B. $720,000   C. $7.2M   D. $36.0M   E. None of the above
  1. What is the average monthly increase in expected revenue for the two years after Project Rock Stone (i.e., three years after Project Steel Donkey) is completed, if Project Rock Stone is completed on schedule? A. $13.5M   B. $15.0M   C. $24.0M   D. $27.0M   E. None of the above
  1. What would be the two-year expected project profit (EPP) of Project Rock Stone if completed on budget in 12 months? A. $4.5M   B. $10.0M   C. $18.0M   D. $21.0M   E. None of the above
  1. What is the three-year expected monetary value (EMV) of Project Steel Donkey if completed in 12 months? A. $7.0M   B. $12.2M   C. $16.2M   D. $22.2M   E. None of the above
  1. What would be the three-year expected project profit (EPP) of Project Steel Donkey if completed on budget in 12 months? A. $2.2M   B. $7.2M   C. $10.2M   D. $11.2M   E. None of the above
  1. What would be the impact on two-year revenues of finishing Project Rock Stone one month earlier or later? A. $625,000   B. $825,000   C. $7.2M   D. $11.2M   E. None of the above
  1. What would be the acceleration premium or delay cost (i.e., change in EMV) for finishing Project Steel Donkey one month earlier or later? A. $200,000   B. $825,000   C. $7.2M   D. $11.2M   E. None of the above
  1. What would be the DIPP at the start of Project Rock Stone, with a budget of $6 million and a schedule of 12 months? A. 1.50   B. 2.00   C. 2.50   D. 3.70   E. None of the above
  1. What would be the DIPP at the start of Project Steel Donkey, with a budget of $5 million and a schedule of 12 months? A. 1.50   B. 2.44   C. 3.05   D. 3.24   E. None of the above
  1. What would be the expected project profit (EPP) and DIPP be for the entire program? A. $0.2M & 1.01   B. $11.2M & 2.02   C. $22.2M & 2.02   D. $33.2M & 3.01   E. None of the above

Written down your answers? Now scroll down for the answers and explanations.

Answers to the Weekend Puzzler: Value/Cost of Time on an Enabler Project

  1. What is the total savings, just in overhead costs, expected for the three years after Project Steel Donkey is completed? A. $200,000   B. $720,000   C. $7.2M   D. $36.0M   E. None of the above

Answer: C. $7.2M.

Explanation: 36 months * $200,000 = $7.2M

  1. What is the average monthly increase in expected revenue for the two years after Project Rock Stone (i.e., three years after Project Steel Donkey) is completed, if Project Rock Stone is completed on schedule? A. $13.5M   B. $15.0M   C. $24.0M   D. $27.0M   E. None of the above

Answer: B. $15.0M.

Explanation: The expected monetary value (EMV) of potential revenues = the probability of them occurring times the value of the revenues.

The probability of generating revenues of $1M/month = 50%.

EMV = 50% * (24 months * $1M) = 50% * $24M = $12M.

The probability of generating revenues of $0.5M/month = 25%.

EMV = 25% * (24 months * $500,000) = 25% * $12M = $3M.

Total EMV of Project Rock Stone over two years = $12M + $3M = $15M.

  1. What would be the two-year expected project profit (EPP) of Project Rock Stone if completed on budget in 12 months? A.$4.5M   B. $10.0M   C. $18.0M   D. $21.0M   E. None of the above

Answer: E. None of the above.

Explanation: EPP = EMV – expected project cost

= $15M – $6M = $9M

  1. What is the three-year expected monetary value (EMV) of Project Steel Donkey if completed in 12 months? A. $7.0M   B. $12.2M   C. $16.2M   D. $22.2M   E. None of the above

Answer: C. $16.2M.

Explanation: EMV of an enabler project = the EMV of the project itself plus the EPP of all projects it enables.

Therefore the EMV of Project Steel Donkey = its own EMV + the EPP of Project Rock Stone

= $7.2M + $9M = $16.2M

  1. What would be the three-year expected project profit (EPP) of Project Steel Donkey if completed on budget in 12 months? A. $2.2M   B. $7.2M   C. $10.2M   D. $11.2M   E. None of the above

Answer: D. $11.2M.

Explanation: EPP = EMV – expected cost of Project Steel Donkey =

$16.2M – $5.0M = $11.2M

  1. What would be the impact on two-year revenues of finishing Project Rock Stone one month earlier or later? A. $625,000   B. $825,000   C. $7.2M   D. $11.2M   E. None of the above

Answer: A. $625,000.

Explanation: Impact = the gain or loss of expected monthly revenues for one month = $15M / 24 months = $625,000/month.

  1. What would be the acceleration premium or delay cost (i.e., change in EMV) for finishing Project Steel Donkey one month earlier or later? A. $200,000   B. $825,000   C. $7.2M   D. $11.2M   E. None of the above

Answer: B. $825,000.

Explanation: Impact = the gain or loss in expected monthly savings + revenues for one month on both Project Steel Donkey AND on the enabled Project Rock Stone = $200,000 + $625,000 = $825,000.

  1. What would be the DIPP at the start of Project Rock Stone, with a budget of $6 million and a schedule of 12 months? A. 1.50   B. 2.00   C. 2.50   D. 3.70   E. None of the above

Answer: C. 2.50.

Explanation: EMV = $15.0M. Budget = $6.0M.

Starting DIPP = $15.0M / $6M = 2.50

  1. What would be the DIPP at the start of Project Steel Donkey, with a budget of $5 million and a schedule of 12 months? A. 1.50   B. 2.44   C. 3.05   D. 3.24   E. None of the above

Answer: D. 3.24

Explanation: EMV = $16.2M. Budget = $5.0M.

Starting DIPP = $16.2M / $5.0M = 3.24

  1. What would be the expected project profit (EPP) and DIPP be for the entire program? A. $0.2M & 1.01   B. $11.2M & 2.02   C. $22.2M & 2.02   D. $33.2M & 3.01   E. None of the above

Answer: B. $11.2M & 2.02

Explanation: For Project Steel Donkey, the DIPP acts as a tracking mechanism for project performance. Project Steel Donkey’s the EPP (and thus the numerator of the DIPP) include all of its equity: its expected savings AND the probability-weighted increase in revenues from Project Rock Stone. However, the cost responsibilities and authority of Project Steel Donkey are limited to the costs of that project only, or $5M. That determines its value/cost of time, and those are the metrics against which it should be measured and tracked.

However, the program as a whole includes the EMVs and budgets of BOTH projects. Thus the program EPP would be:

($7.2M + $15.0M) – ($5.0M + $6.0M) = $22.2M – $11.0M = $11.2M

The Starting DIPP would be EMV divided by program budget, $22.2M / $11.0M

= $22.2M / $11.0M = 2.02

So how many did you get correct?

Fraternally in project management,

Steve the Bajan

Ten Amendments to the Current Practice of Project Management

I believe that project management is, in many ways, failing in what should be its purpose: to provide a valuable return to the investor(s) who provide the resources/money for the project effort and who hope to reap the benefits. But I don’t happen to feel that we need a whole new methodology. The basic tools in our toolbox (WBS, critical path analysis, resource leveling, activity-based resource assignments, earned value tracking) are wonderful techniques, and are being efficiently applied by many project managers.But in many other cases, projects are generating much less value than they should.

I do believe that some of the tools, as valuable as they are, need what I’d call “amendments”: sharpening, enhancing or re-shaping for wider utilization – such as the routine incorporation of the drag metric as a standard part of critical path analysis. But the major flaws, I believe, are not so much in the tools as in how they are being misunderstood and misapplied.

I‘ve been thinking for some time about preparing a list of “Amendments to Current Project Management Methods”. Below is a pretty barebones outline, without getting into a huge amount of explanation (because I just wrote a 255-page book that pretty much provides that!), which lays out some of the techniques and modifications that I feel would significantly improve the way we do projects.

This list will probably evolve over the months ahead (and I’m certainly willing to entertain other suggestions), but the Ten Amendments below ain’t bad for a start:

  1. Get agreement from everyone (team members to senior management and customers) that projects are investments.
  2. Get them to agree that investments should be undertaken for the value they are expected to generate.
  3. Get them to understand that the value/benefit they expect from the project will be based on its scope (mostly product scope) and that therefore the specifics of the product scope should designed with those benefits in mind. [This should lead to the creation of a value breakdown structure (VBS)].
  4. Get them to agree that the results of all investments are not guaranteed, but rather involve estimates, uncertainty and risk. Explain that “deadlines” and fixed cost caps (“budgets”) are arbitrary strictures that are far more likely to cause negative behaviors (e.g., Parkinson’s Law, or secretively cutting quality to meet deadline/budget, or simply taking unwarranted risks when pushed for time/cost adherence) than to have magically made an accurate prediction of what the project would really require. Suggest instead getting the organization used to the terms “target date” and “target cost”.
  5. Get everyone to agree that, the vast majority of the time, project delivery date has a big impact, positive or negative, on the expected value of that scope. This should lead NOT to a deadline, but to an estimate of the value/cost of each unit of time earlier OR later than the target date. And this quantified estimate should be a part of the initiation documentation of every project! And any contract for a project should include clauses establishing incentives (positive and negative) for schedule performance, aligning as much as possible the potential benefits to customer and contractor.
  6. Show everyone how, with the expected value of scope, the value/cost of time, and resource usage all quantified in monetary terms, the three sides of the “Iron Triangle” are now all integrated and monetized so that it has become the Golden Triangle. Any variance in any side will have a quantified impact on the integrated value of the project as measured by expected project profit (EPP) and the DIPP. Show how this now provides a single metric against which project performance can be tracked, with better performance being measured not just in schedule or cost terms, but in what should matter to everyone and particularly to those funding the project: investment value, or ROI, or expected project profit!
  7. Ensure that everyone understands that every project, no matter how it is scheduled, will be precisely as long as its longest path of activities, logical constraints, resource constraints, delays, rework, sprints, and stumbles! And therefore no matter how it has been scheduled, critical path analysis that includes drag, drag cost, and true cost (TC = drag cost plus resource costs) computation must be performed, seeking opportunities to reduce drag costs and thus accelerating the schedule where greater project profit can be generated. Everyone should also understand that the value/cost of time on enabler projects (i.e., those that enable other projects to generate value) go through a multiplier effect, and thus identify such enabler projects and their elevated value/cost of time.
  8. Ensure that both time-limited and resource-limited resource leveling is performed on each project, and on all projects (and especially prospective new projects!), within the portfolio of a multiproject organization. The data regarding the cost of delays caused by insufficient availability of each specific type of resource should be analyzed on an organizational basis at least quarterly, with Pareto charts assembled to identify and quantify the project delay costs to the organization of resource insufficiencies on the critical paths, and to improve efficient levels of staffing for each resource type and functional department.
  9. Ensure that everyone understands that earned value is not about project value, but about project cost, i.e., resource usage! The term has been the source of persistent confusion. Even to a contractor, project value almost always includes value drivers that are not part of the price/budget. On a medium sized project in an organization without robust financial tools, earned value planning and tracking can be performed adequately on the basis of planned and actual labor hours. (Indeed, CPI-Labor should be an important metric in any EVM system.) Everyone also should know that earned value is inadequate for schedule tracking, at least in the way it is customarily applied, and can lead to incentives for out-of-sequence and noncritical work. Schedule must be tracked through critical path tracking and/or by developing a separate earned value baseline for schedule tracking that takes into account the critical path by being scheduled on the late dates.
  10. Ensure that project postmortems are performed on all significant projects (not just on those that went badly!) and that the as-built critical path (ABCP) is presented as one of the key artifacts for lessons learned, particularly in identifying causes of project delay with their quantified costs. And that every postmortem sets a future date on which the data on the mature final product can be analyzed with greater knowledge and objectivity so that current assessments of quality, durability, and value (including revenues/savings) can be updated.

Okay, so at least that’s a start. And I think implementing these would make a huge difference. So anyone have additional suggestions?

Fraternally in project management,

Steve the Bajan

Weekend Puzzler: Earned Value & the DIPP Exercise

Most project management people are familiar with the basics of earned value. But as I plan to blog about this topic in the next few weeks, I thought I’d introduce it with some fairly simple multiple choice questions for the weekend. (These are the sorts of questions my graduate students are asked on tests.)

You can see the answers by scrolling down beyond the test.

Have a great weekend!

Fraternally in project management,

Steve the Bajan

***

For Project Steel Donkey, the budget is $12 million and the expected monetary value (EMV) is $20 million if completed in 50 weeks, generating and expected project profit (EPP)of $8 million. Every week or part thereof later will reduce the EMV by $500,000 and every full week earlier will increase the EMV by $200,000.

At the end of Month 6, the planned value (PV or BCWS) is $5.0 million. The earned value (EV or BCWP) is $4.5 million. The actual cost (AC or ACWP) is $5.5 million.

  1. What is the schedule variance (SV)? (a) – $1.0M (b) – $0.5M (c) $0.5M (d) $1.0M (e) None of the above
  2. What is the simple schedule performance index (SPI)? (a) .80 (b) .82 (c) .85 (d) .90 (e) None of the above
  3. What is the cost variance (CV)? (a) – $1.0M (b) – $0.5M (c) $0.5M (d) $1.0M (e) None of the above
  4. What is the cost performance index (CPI)? (a) .80 (b) .82 (c) .85 (d) .90 (e) None of the above
  5. What is the critical ratio CPI (CRCPI)? (a) .72 (b) .74 (c) .76 (d) .90 (e) .91
  6. Assuming the SPI is accurate, what is our current estimated schedule overrun? (a) 2.3 weeks (b) 3.4 weeks (c) 4.5 weeks (d) 5.6 weeks (e) 6.7 weeks
  7. Assuming the SPI is accurate, what is our current estimated delay cost? (a) $1.5M (b) $3.0M (c) $4.5M (d) $6M (e) None of the above
  8. Assuming the simple CPI is accurate, what is our current cost estimate-at-completion (EAC)? (a) $12.0M (b) $12.6M (c) $13.5M (d) $14.6M (e) None of the above
  9. Assuming the simple CPI is accurate, what is our current cost estimate-to-complete (ETC)? (a) $6.5M (b) $7.1M (c) $8.0M (d) $9.0M (e) None of the above
  10. Assuming the critical ratio CPI is accurate, what is our current cost EAC? (a) $15.2M (b) $16.2M (c) $17.2M (d) $18.2M (e) None of the above
  11. Assuming the critical ratio CPI is accurate, what is our current cost ETC? (a) $9.7M (b) $10.2M (c) $10.7M (d) $11.2M (e) None of the above
  12. Assuming the simple CPI and SPI are accurate, what is our expected project profit (EPP) at completion? (a) $2.4M (b) $2.6M (c) $2.8M (d) – $2.8M (e) None of the above
  13. Assuming critical ratio CPI and SPI are accurate, what is our expected project profit (EPP) at completion? (a) – $.08M (b) – $0.4M (c) $0.4M (d) $0.8M (e) None of the above
  14. What is our planned DIPP (DIPP = [$EMV plus or minus $acceleration premium or delay cost] divided by $Cost ETC) at the end of Month 6? (a) 1.80 (b) 2.0 (c) 2.40 (d) 2.80 (e) None of the above
  15. What is our Actual DIPP at this point based on the CPI and SPI? (a) 1.80 (b) 1.87 (c) 1.97 (d) 2.07 (e) None of the above
  16. What is our DIPP Progress Index (DPI) at 6 months (DPI = Actual DIPP divided by Planned DIPP)? (a) .65 (b) .75 (c) .85 (d) .95 (e) None of the above

If we identify an activity in our project where spending an extra $1.0M would erase 4 weeks of critical path drag

  1. What would our expected project profit become using the simple CPI and SPI? (a) $0.4M (b) $1.4M (c) $2.4M (d) $3.4M (e) None of the above
  2. What would our expected project profit become using the critical ration CPI and SPI? (a) $1.4M (b) $1.8M (c) $2.2M (d) $2.6M (e) None of the above
  3. What would our current DIPP become using the simple CPI and SPI? (a) 1.68 (b) 1.78 (c) 1.88 (d) 1.98 (e) None of the above
  4. What would our DPI be using the simple CPI and SPI? (a) 0.66 (b) 0.76 (c) 0.86 (d) 0.96 (e) None of the above

SCROLL DOWN FOR ANSWERS

ANSWERS

  1. What is the schedule variance (SV)? (a) – $1.0M (b) – $0.5M (c) $0.5M (d) $1.0M (e) None of the above ($4.5 – $5.0M = – $0.5M)
  2. What is the simple schedule performance index (SPI)? (a) .80 (b) .82 (c) .85 (d) .90 (e) None of the above ($4.5 divided by $5.0M = .90)
  3. What is the cost variance (CV)? (a) – $1.0M (b) – $0.5M (c) $0.5M (d) $1.0M (e) None of the above ($4.5 – $5.5M = – $1.0M)
  4. What is the cost performance index (CPI)? (a) .80 (b) .82 (c) .85 (d) .90 (e) None of the above ($4.5 divided by $5.5M = .82)
  5. What is the critical ratio CPI (CRCPI)? (a) .72 (b) .74 (c) .76 (d) .90 (e) .91 (.90 * .82 = .74)
  6. Assuming the SPI is accurate, what is our current estimated schedule overrun? (a) 2.3 weeks (b) 3.4 weeks (c) 4.5 weeks (d) 5.6 weeks (e) 6.7 weeks (50 weeks divided by .90 – 50 weeks = 5.6 weeks)
  7. Assuming the SPI is accurate, what is our current estimated delay cost? (a) $1.5M (b) $3.0M (c) $4.5M (d) $6M (e) None of the above (6 * $500,000 = $3.0M)
  8. Assuming the simple CPI is accurate, what is our current cost estimate-at-completion (EAC)? (a) $12.0M (b) $12.6M (c) $13.5M (d) $14.6M (e) None of the above ($12M divided by .82 = $14.6M)
  9. Assuming the simple CPI is accurate, what is our current cost estimate-to-complete (ETC)? (a) $6.5M (b) $7.1M (c) $8.0M (d) $9.0M (e) None of the above ($14.6M – $5.5M = $9.1M)
  10. Assuming the critical ratio CPI is accurate, what is our current cost EAC? (a) $15.2M (b) $16.2M (c) $17.2M (d) $18.2M (e) None of the above ($12.0M divided by 0.74 = $16.2M)
  11. Assuming the critical ratio CPI is accurate, what is our current cost ETC? (a) $9.7M (b) $10.2M (c) $10.7M (d) $11.2M (e) None of the above ($16.2M – $5.5M = $10.7M)
  12. Assuming the simple CPI and SPI are accurate, what is our expected project profit (EPP) at completion? (a) $2.4M (b) $2.6M (c) $2.8M (d) – $2.8M (e) None of the above ($17.0M – $14.6M = $2.4M)
  13. Assuming critical ratio CPI and SPI are accurate, what is our expected project profit (EPP) at completion? (a) – $.08M (b) – $0.4M (c) $0.4M (d) $0.8M (e) None of the above ($17.0M – $16.2M = $0.8M)
  14. What is our planned DIPP (DIPP = [$EMV plus or minus $acceleration premium or delay cost] divided by $Cost ETC) at the end of Month 6? (a) 1.80 (b) 2.0 (c) 2.40 (d) 2.80 (e) None of the above ($20M divided by $7M = 2.88)
  15. What is our Actual DIPP at this point based on the simple CPI and SPI? (a) 1.80 (b) 1.87 (c) 1.97 (d) 2.07 (e) None of the above ($17.0M divided by $9.1M = 1.87)
  16. What is our DIPP Progress Index (DPI) at 6 months (DPI = Actual DIPP divided by Planned DIPP)? (a) .65 (b) .75 (c) .85 (d) .95 (e) None of the above (1.87 divided by 2.88 = .65)

If we identify an activity in our project where spending an extra $1.0M would erase 4 weeks of critical path drag…

  1. What would our expected project profit become using the simple CPI and SPI? (a) $0.4M (b) $1.4M (c) $2.4M (d) $3.4M (e) None of the above  ($19.0M – $15.6M = $3.4M)
  2. What would our expected project profit become using the critical ration CPI and SPI? (a) $1.4M (b) $1.8M (c) $2.2M (d) $2.6M (e) None of the above ($19.0M – $17.2M = $1.8M)
  3. What would our current DIPP become using the simple CPI and SPI? (a) 1.68 (b) 1.78 (c) 1.88 (d) 1.98 (e) None of the above ($19.0M divided by $10.1M = 1.88)
  4. What would be our DPI using the simple CPI and SPI? (a) 0.66 (b) 0.76 (c) 0.86 (d) 0.96 (e) None of the above (1.88 divided by 2.88 = .66)

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