T ECHNICAL A RTICLE

Cost-Time-Risk Diagram: Project Planning and Management

Dr. Peerapong Aramvareekul, PSP EVP and Daniel J. Seider, PE
ABSTRACT: This article presents the integration of cost and time performance measurement with project risk analysis into one diagram, called the Cost-Time-Risk diagram (CTR). The author believes the presented CTR diagram is a revolution in earned value analysis. It plots the total brainstorming of project cost-time planning versus actual production. It also integrates evaluation of internal risks, external risks, and project specific risks. The steps to prepare and to operate the CTR diagram are explained. The article also illustrates, with graphical movement, decision-making information that many project managers struggle in developing. KEY WORDS: Costs, earned value, planning, and project risk analysis

both project cost performance and project time performance on the same time diagram, which is important for cost-time tradeoff decision-making. Besides the tradeoff between cost and time, the CTR diagram also provides risky and healthy boundaries at each period of time during the project life cycle. The risky and healthy boundaries are evaluated and used in the CTR diagram to ensure that projects will be delivered on time and within the budget. Earned Value Analysis : Fundamental Method of Cost-Time-Risk Diagram Earned value analysis (EVA), a process of earned value management (EVM), is a fundamental method for project management and for the cost-time-risk diagram (CTR). The CTR diagram is an integration of earned value analysis with risk management. Risk management is an aspect of quality assurance, using basic analysis techniques and performance measurement to ensure that risks are properly identified, evaluated, and managed [15]. Prior to discussing the use of the costtime-risk diagram, it is first necessary to understand some of the basic concepts of the earned value analysis method. The key to the practice of earned value analysis and cost-time-risk diagram is the concept of the work breakdown structure (WBS). Earned value analysis is an industry standard method to measure a projects progress, to forecast its completion date and final cost, and to provide project schedule and cost variances along the way [3]. With the integration of three measurements, it provides consistent numeric indicators, which can be evaluated, for project performance. The three measurements that are calculated from the time period summation of planned and actual costs associated with each work package include the following. budgeted cost of work scheduled (BCWS) or planned value; budgeted cost of work performed (BCWP) or earned value; and actual cost of work performed (ACWP) or actual cost of accomplished work, as illustrated in figure 1.

he idea of good project management is to ensure that projects will be completed on time, on budget, and to meet clients satisfaction. Standard project management processes and techniques, such as project task list and Delphi technique, are the tools for project managers. The Cost-Time-Risk diagram (CTR) is presented in this article as a revolutionary project planning and management technique. The authors believe that CTR will help project managers consider project risk issues while monitoring and controlling their project schedule and cost performance in one diagram. Managing projects involves planning, scheduling, risk analysis and identification, performance monitoring, quality control, and solution making [14]. Planning and managing projects is challenging. Projects are unique and temporary [16]. Unique means that the product or service and the clients expectations are different from project to project [16]. Temporary means that a start date and a finish date are always required for every project [16]. Projects bring together many groups of people within and outside of an organization. Each of these groups have different responsibilities and expectations. Managing a project is like managing expectations and responsibilities of various groups. Examples can include project managers, project team members, executives, subcontractors, suppliers, and clients [5]. Although each party has different goals and responsibilities, the ultimate

project goals are on time, on budget, right product or service, and good quality. This article presents the integration of cost and time performance measurement with project risk analysis in one diagram, called the Cost-Time-Risk diagram (CTR). The authors consider the CTR diagram to be a revolution in earned value analysis. They believe, it plots the total brainstorming of project cost-time planning versus actual production. It also integrates evaluation of internal risks, external risks, and project specific risks. This CTR diagram is a project management tool that supports the successful control of project cost and schedule. The CTR diagram also supports proactive management for better productive outcome. The steps to prepare and operate a CTR diagram are explained. The article illustrates, with graphical movement, decision-making information that many project managers struggle to develop. For example: what is going on in your project, is there anything unexpected happening, what should the project manager do to recover the performance?

What is Cost-Time-Risk Diagram? Cost-Time-Risk diagram (CTR) is a diagram that illustrates current project cost and time performance status associated with evaluated risks. The CTR diagram is an advanced graphical analysis of earned value Definitions of these three management (EVM). The CTR diagram is measurements can be listed as follows. like a project health-monitoring map. It helps project managers make better Budgeted cost of work scheduled decisions in problem solving during the (BCWS)Planned cost of the total project life cycle. Project managers will see

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Figure 1 Earned Management Terms

amount of work scheduled to be performed within given time period or by the milestone date. Budgeted cost of work performed (BCWP)The planned (not actual) cost to complete the work that has been done at that time period. Actual cost of work performed (ACWP)The actual costs incurred in accomplishing the work performed within a given time period.

Work Breakdown Structure (WBS) Work breakdown structure (WBS) was initially developed by the US Defense Establishment. As described in the Military Standard (MIL-STD) 881B (25 Mar 93), work breakdown structure (WBS) is a product-oriented tree diagram that contains all work of a project in an organized format [18]. It is often portrayed graphically as a hierarchical tree, as shown in figure 2; however, it can also be a tabular list of element categories and tasks, or the indented task list that appears in a Gantt chart schedule, as shown in figure 3.

Work breakdown structure (WBS) is considered the foundation of project plans. It is not a to do list of every possible thing that needs to be done in the project. Rather it is the assignments that hold project team members accountable for delivering. As a result, developing an effective work breakdown structure requires a great amount of thinking and organizing effort, not just writing down every single thing that needs to be done in the project.

Figure 2 WBS Hierarchical Tree

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Figure 3 WBS Gantt Chart

Monitoring And controlling A Project With The CTR Diagram The CTR diagram is a project management tool and technique for project managers to use for monitoring their projects. In the CTR diagram, a revolution in earned value analysis, graphs present current project schedule and cost performance against integrated evaluation of risk at each period of time. Risk evaluation is an important means of planning and controlling projects, improving project decision-making, and reducing uncertainty. If risk is not proactively managed, projects may be seriously threatened by unplanned

events, which could result in cost overruns, schedule delays, quality issues, and/or failing to meet project objectives [12]. The CTR diagram also supports proactive management for better decision-making especially for the time-cost tradeoff. Setting Up And Plotting CTR Diagram The CTR diagram is plotted from the cumulative data of percentage of work completed and percentage of cost over-run or under-run at each time period of the monitoring point. Both the percentage of work completed and the percentage of cost

over-run or under-run are products from the earned value analysis (EVA) calculation. Setting up the CTR diagram starts from preparing three measurements of earned value analysis: BCWS, BCWP, and ACWP. The first thing is to develop the work breakdown structure (WBS). Then, a performance measurement baseline (PMB) is prepared by cumulatively summing value of all work packages from the start to each monitoring time period, as shown in figure 4, as BCWS at each time period. Budgeted cost of work performed (BCWP) is obtained from updating how much work has been completed up to that

Figure 4 Budgeted Cost of Work Scheduled (BCWS)

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monitoring time period, and actual cost of work performed (ACWP) is obtained from updating how much money has been spent on the project up to that monitoring time period, as shown in figure 5.

When preparing performance measurement baseline (PMB), risk analysis should also be integrated into it. For instance, project risks in general are categorized into three groups: external risks,

internal risks, and project specific risks. Risk analysis is an ongoing activity throughout the project, and will involve all members of the project organization [12]. External risks are risk factors that come from outside the

Figure 5 Budgeted Cost of Work Scheduled (BCWS), Budgeted Cost of Work Performed (BCWP), Actual Cost of Worth Performed (ACWP)

Figure 6 Cost Time Risk Diagram (CTR)

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company such as suppliers, weather, clients, etc. Internal risks are risk factors that come from the team within the company such as worker levels, material, communication process, etc. Last but not least, project specific risks are risk factors that occur only for that type of project such as technical process, quality control process, evaluation process, etc. All of these risks must be evaluated and integrated into the projects PMB, starting from project planning phase and continuing until the project is finished The next step after setting up PMB and updating BCWP and ACWP is to run calculations for variance, performance index, revised time-cost estimate and so on. Two numbers from the calculation, which will be used to plot the CTR diagram, are percentage of work completed and percentage of cost over-run or under-run, as shown in figure 6. Evaluating and Determining Risky and Healthy Area To determine healthy area, it depends on project managers and/or project management officers to evaluate safety boundaries for both schedule performance and cost performance. The healthy area is like a safety net for project schedule and cost performances. When CTR - schedule performance line (CTR-S) and CTR - cost performance

Figure 7 CTR Schedule and Cost Matrix

line (CTR-C) are progressing within the healthy area, the project manager and/or project management officer have a certain amount of time and budget to solve problems when they occur during the project duration. The closer the project finished date comes, if the CTR-S and CTR-C are still progressing within the healthy area, it is a sign of possibly earning extra profit at the end of the project. For example, as shown in this article, 10 percent ahead of schedule for time performance and 10 percent under budget for cost performance at each period of time are set up to be the healthy area, as shown in figure 6 (green color/healthy area). Some factors can be used to evaluate and determine what the risky areas are, including the following: the type of project,

milestones, holidays, schedule and work to be finished, resources capacity, project teams work-load and milestones from other projects, etc. As shown in figure 6, a risk level of CTR-S is set at 85 percent at the start of the project. This means that, the project team has up to 15 percent for performing below the performance measurement baseline (PMB) of 100 percent, at the project start. But this is not recommended, This under-PMB allowable area becomes smaller as the time gets closer to the project finished date, This is shown in the risk area (all colors except green color) of figure 6. To determine the risk level of CTR-C, as used in this article, a sample is set up of five percent allowable for over budget

Figure 8 Sample of CTR Diagram Implementation

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performing at the period of project start and CT-4: CTR-S is increasing while CTR-C is continuing until almost the last period of the stable. This indicates that project time performance is increasing while effort is project duration, as shown in figure 6. stable. This can happen when a project Reading and Analyzing Information From team is highly productive and/or successfully uses value engineering. A CTR Diagram The goal of the project manager is to keep the schedule performance line (CTR- CT-5: CTR-S is stable and CTR-C is also S) and the CTR - cost performance line stable. This indicates that project time (CTR-C) moving forward. To accomplish performance and cost performance are this, areas of risk need to be avoided or stable. However, this can be positive or mitigated. Both CTR-S and CTR-C,at the negative, depending upon where or at what time of project start, can be experiencing risk percentage levels the two lines run issues. If not, risk issues can develop during horizontally. the project. To avoid these becoming a problem, the team can use fast-tracking, CT-6: CTR-S is decreasing while CTR-C is crashing, etc., to bring the CTR-S and the stable. This indicates that project time CTR-C out of risk problems. The best performance is decreasing while effort is solution is to have both lines of the CTR stable. This generally happens when a project team performs at a low level of diagram running within the healthy area. productivity. Normally, CTR-S and CTR-C should be progressing in the same direction; for example, if CTR-S is increasing, CTR-C will be also increasing, which means that the team puts out more effort to get more work done. For the ideal case, if a project is progressing exactly as planned, CTR-S and CTR-C will be parallel, running at the at the 100 percent and 0 percent levels respectively. In this article, there are nine moving directions of the CTR diagram, as presented in a matrix table in figure 7. CT-1: CTR-S is increasing and CTR-C is also increasing. This indicates that project time performance is increasing by means of increased effort. An example of this is overtime, such as when a project manager has the project team spend more time to catch up a project time performance baseline. CT-2: CTR-S is stable while CTR-C is increasing. This is an indication that project time performance is stable while effort is increasing. This can happen when a project team performs low productivity and/or works on tasks that are out of scope. It most likely shows a low productivity performance. CT-3: CTR-S is decreasing while CTR-C is increasing. This indicates that project time performance is decreasing despite the fact that effort is increasing. This can happen when a project team performs at a seriously low level of productivity and/or works on tasks that are out of scope. Generally it is caused by working on tasks that are not listed in the project scope of work. CT-7: CTR-S is increasing while CTR-C is decreasing. This indicates that project time performance is increasing but with less effort. This can happen when a project team performs at an extremely high level of productivity and/or can be a result of excellent value engineering. However, when this happens, the project manager must pay high attention to quality control to ensure that there will not be a need for redoing work later on. CT-8: CTR-S is stable while CTR-C is decreasing. This indicates that project time performance is stable while effort is decreasing. This can happen when a project team performs at a high productivity level and/or has success with value engineering. CT-9: CTR-S is decreasing and CTR-C is also decreasing. This indicates that project time performance is decreasing with decreasing effort. This can happen when a project manager decides to have the project team spend less time catching up on project cost performance baseline items. Another possibility is that the project manager decides to let some of project team work on other projects during this duration period because his/her project is not ahead of schedule. An Example of Implementing CTR Diagram to Decision-Making The following example is from a project that used EVM concepts and implemented a CTR diagram to manage the project and to help decision-making.

This project was a water system design project. The first phase of the project was the environmental study, survey, and basemapping phase. The duration of this phase was approximately four months. Time management was very important for this phase to be finished on time in order to start the next phase, as planned in a project master schedule. This first phase is a schedule-driven phase. This first phase was planned on an aggressive schedule from the start. The project team had a good start with ahead of schedule and under-budget performances, until approximately the 20 percent milestone point of the phase, as shown in Figure 8. at MP-1. At the MP-1, the project schedule performance dropped down below an 80 percent work-completed level. This indicated an area of risk. The project manager evaluated information. It showed that the project team was doing very well on project cost performance at that monitoring period. The project was approximately 50 percent under-budget. The project manager decided to have the project team work overtime for the next three weeks. This was to bring the project schedule performance or CTR-S line above the area of risk. As seen in figure 8, at MP-2, executive management was satisfied with the project managers decision to use overtime, although it seemed to be too early to spend overtime funds. As the result of the overtime decision, the team was able to increase the project schedule performance to almost the 100 percent work complete level at the 50 percent milestone point. The project cost performance was at approximately 35 percent under-budget, as shown in figure 8, at MP-2. A short time period later, a CT-3 situation was found, as shown in figure 8, at MP-3. The project manager evaluated the information and found that the project team was working on tasks that were not listed in the original scope of this phase. The project schedule performance was dropped to a level of below 90 percent work completed level. Project cost performance was approximately 20 percent under-budget. The project manager decided to implement a value-engineering method to stop the problem. After solving the CT-3, the project manager evaluated the project cost performance, and then decided to add one

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Management Journal, XXXI (1), 2000, The CTR diagram provides important pp. 32-43. information for projects, so it helps project managers for better decision-making with 12. Kerzner, H., Project Management: A Systems Approach to Planning, faster reaction. The CTR diagram, a Scheduling, and Controlling, John revolution of earned value analysis, is a Wiley & Sons, New York, New York, project management tool that supports the Seventh Edition, 2001. successful control of project cost and schedule. The CTR diagram also supports 13. Kim, E.H., A Study on the Effective Implementation of Earned Value proactive management for better productive Management Methodology, outcome. Opinions and Feedback from End Users: Unpublished Doctoral Dissertation, Project Manager The George Washington University, The CTR diagram is another tool in a REFERENCES Washington, DC, 2000. 1. Abba, Earned Value Management: project managers project management Reconciling Government and 14. Lewis, J.P., Project Planning, toolbox. Based on experience in using the Scheduling, and Control: A HandsCommercial Practices, presented at CTR diagram over the last few years, the On Guide to Bringing Projects In On Project Management Institute 27th author believes it is the most important tool. Time and On Budget, McGraw-Hill, Annual Seminar & Symposium, Though extensive calculations are New York, New York, Third Edition, Boston, Massachusetts, USA, Oct. 7-9, necessary to develop the diagram, the end 2001. 1996, pp. 1-6. result can give a project manager an 2. Anbari, F.T., Applications and 15. Meredith, J.R., and S.J. Mantel, Jr., instantaneous reading on how the project is Project Management: A Managerial Extensions of the Earned Value Analysis doing. It provides valuable information on Approach, John Wiley & Sons, New Method. presented at Project burn rate so the project manager can see Management Institute Seminars & York, New York, Forth Edition, 2000. how the project team is generating revenue Symposium, Nashville, Tennessee, 16. Project Management Institute (PMI), in relation to the level of effort. It also USA, Nov. 1-10, 2001. A Guide to the Project Management indicates the rate at which the project is 3. Anbari, F.T., Quantitative Methods Body of Knowledge, Project developing against the project budget and for Project Management, Second Management Institute, New Town schedule. The CTR diagram allows the Edition, International Institute of Square, Pennsylvania, 2000. project manager to make quick, intelligent Learning, New York, New York, USA, 17. Slemaker, M.S., The Principles and decisions on how to proceed with the 2002. Practice of Cost and Schedule project and the project team based on the 4. Barr, Z., Earned Value Analysis: A Control Systems, Petrocelli Books, current and projected level of effort. Case Study, PM Network, X (12), Princeton, New Jersey, 1985. The CTR diagram is also a valuable 1996, pp. 31-37. 18. Tausworthe, The Work Breakdown tool for project managers when discussing Structure in Software Project their portfolio with superiors. The entire 5. Crabo-Ljungman, L., Multifunction Project Management: A New Management, Journal of Systems and project history, current status, and projected Profession, International Journal of Software, Vol. 1, No. 3, 1980, pp. 181status are on one page, providing for a Technology Management, XIII (7/8), 186. valuable discussion tool for individuals that 1997, pp. 853-864. may not be involved with the project on a 6. Department of the Navy, Cost and ABOUT THE AUTHORS day to day basis. Schedule Control Systems Criteria Dr. Peerapong Aramvareekul, PSP Joint Implementation Guide, EVP, is the manager of development schedn order to run business profitably, Assistant Secretary of the Navy (S&L) uling with Land Capital Group of Park City, executives need the latest and most Pamphlet NAVSO P3627, Washington, UT. He is a member of AACE International accurate facts on project health and DC, Oct. 1, 1987. and he can be contacted by sending e-mail performance. 7. Farid, F. and Karshenas, S., Cost and to: apeerapong@yahoo.com. As project teams become more Schedule Control Systems Criteria Daniel J. Seider, PE, is employed by dispersed, project managers need to Under Inflation, Project Management Wendel Duchscherer A&E of Amherst, NY. communicate effectively, to share Journal, XIX (5), Nov. 1988, pp. 23-29. He can be contacted by sending e-mail to: information, and capture feedback with 8. Fleming, Cost Schedule Control dseider@wd-ae.com accurate project performance analysis in a Systems Criteria, The Management timely manner. Project delivery is critical to Guide to C/SCSC, Probus Publishing Technical Articles - Each month, Cost business success. Nowadays projects are Company, 1992. Engineering journal publishes one or more peerincreasing in complexity and constraints are 9. Heize, K., Cost Management of reviewed technical articles. Unless noted becoming tighter. Everyone needs access to Capital Projects, Marcel Dekker, otherwise, these articles go through a blind peer the right information and the means to review evaluation prior to publication. Experts in Inc., New York, New York, 1996. model that information to maximize the subject area judge the technical accuracy of the 10. Ibbs, W.C. and Y.H. Kwak. articles, advise the authors on the strengths and performance and minimize risk. Benchmarking Project Management weaknesses of their submissions, and what changes A CTR diagram and EVM concepts Organizations, PM Network, XII (2), can be made to improve the article before help focus managements interests on publication. 1998, pp. 49-53. projects that need more attention and that 11. Ibbs, W.C. and Y.H. Kwak. Assessing can be used to support prioritization of Project Management Maturity, Project projects within a project portfolio. more worker to increase the project teams productivity, until this phase was finished. Finally, this project phase was completed about on schedule and approximately six percent under budget. Everyone on the project team was satisfied with the final result and the client was happy with the timing and quality of work.

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