TCMFramework_SM.gif (5258 bytes)TCM Framework: An Integrated Approach to Portfolio, Program and Project Management
(Rev. 2012-01-09)
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III. PROJECT CONTROL PROCESS - CHAPTER 10 - PROJECT CONTROL PERFORMANCE ASSESSMENT

10.2 Forecasting

10.2.1 Description

    Forecasting is the process of evaluating project control plans and control baselines in consideration of assessments of ongoing project performance. The forecasting process should be performed in a proactive, systematic way on an established evaluation schedule, rather than being performed in reaction to performance problems because problems often become apparent only through forecast evaluations.

    The forecasting process is used to assess each applicable element of the project control plan (i.e., scope, schedule, budget, resources, and risks) that is affected by a deviation, trend, change request, or opportunity. The inputs to the process include plans, performance and progress assessments, and change management information. The primary forecasting process outputs are "forecasts" (i.e., best predictions) for the performance and outcome of each control plan element. These forecasts should be reported in a way that highlights performance variances and issues that need project management attention.

    The forecasting methods and tools used are the same as those used in the project control planning processes (Chapter 7). However, during forecasting, the methods are applied in the context of a project that is progressing while demanding quick (or at least expeditious) and effective project control decisions.

    The first objective of forecasting is to support the identification of efficient means (i.e., corrective actions), with acceptable risks, for the project to achieve its objectives when past and/or current performance is at variance with baseline plans. Secondarily, opportunities to improve future performance are evaluated, even when performance conforms with baseline plans. Finally, forecasting incorporates the results of the evaluations of performance data and opportunities into control plans by communicating the forecasted (i.e., predicted) cost, schedule, and resources to complete the project or achieve specific milestones. At the start of the project, the approved control baseline plans and forecasts are the same; they will differ as the project progresses because the baseline was made from estimates of future performance.

    Forecasting also supports the change management process (Section 10.3) in that it is used to evaluate not only deviations and trends, but requests for changes to the project scope definition or plan. The forecasting process provides the mechanism to bring all deviation, trend, and change information together, allowing for a comprehensive analysis and perspective when considering individual changes.

10.2.2 Process Map for Forecasting

    Figure 10.2-1 illustrates the process map for forecasting. The forecasting process applies the project control planning processes in the context of a project in progress (i.e., integrated with the performance assessment and change management processes).

Figure10.2-1.jpg (101553 bytes)

Figure 10.2-1 Process Map for Forecasting
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    The following sections briefly describe the steps in the forecasting process.

.1 Planning for Forecasting

    The forecasting process starts with planning. Initial planning starts with development of the execution strategy and work packages during scope development (Section 7.1) and continues through development of control accounts during project control plan implementation (Section 8.1). Because forecasting applies many of the methods of integrated project planning, the basis or description of how those planning methods were initially applied must be documented at the time of control plan implementation.

    Planning for forecasting establishes the timing of forecasts, how forecasts are communicated or reported, methodologies and systems/tools to be used, and specific roles and responsibilities for forecasting. Forecasts should be prepared and issued on an established schedule that is appropriate for the pace of work on the project (e.g., a round-the-clock plant turnaround will require more frequent evaluations). The forecasting schedule is often linked to when accounting systems can provide current and accurate historical data, but accounting should not drive forecasting if there is a need for more frequent evaluations. Communication or reporting of forecasts needs to consider the audience and how actionable information is best provided to decision-makers and project stakeholders.

    Another aspect to plan is the use of tools and systems for forecasting (e.g., scheduling software). For example, forecasting is facilitated if the software used for, and the files and databases from, the initial planning process are available for use. In addition, the interaction/interface of the owner, suppliers, and contractors in forecasting, if any, must be addressed in forecasting plans.

    Forecasting, like other aspects of performance assessment, is generally a function performed by cost engineers in a project control role supporting the project manager. However, those responsible for the work packages affected by forecasts, and the project team as a whole, should be included in the forecast assessment effort as appropriate.

    After the forecasting effort is planned and measurement processes or systems have been initiated, the use of forecasting methods begins.

.2 Assess Remaining Scope of Work

    Forecasting of any aspect of the control plan (i.e., cost, resources, schedule, etc.) starts with an assessment of the current status of the work scope. The scope development process (Section 7.1) established the original scope as reflected in the project WBS. Physical progress measurements methods (Section 9.2) establish the scope that has been completed. If no changes to the scope have been identified by the change management process (Section 10.3), then the remaining scope is simply defined as the WBS components not completed or in-progress.

    The change management process (Section 10.3) defines the scope of any changes that have been identified. The forecasting process then assesses the scope definition of the proposed change in consideration of the scope of the planned remaining scope.

.3 Identify Plan Alternatives

    The change management process may initially identify alternative actions to implement changes and to modify performance deviations and trends (including process improvements). These are generally simple action statements (e.g., "revise preferential schedule logic"). The forecasting process develops the proposed action statements into actionable control plan alternatives for further assessment (e.g., "complete activity B before activity A"). Additional alternative actions may be identified in this process.

    If no deviations, trends, or changes or have been identified, this process step is skipped because the plan for the remaining work is still valid and remains unchanged.

.4 Analyze Plans

    Forecasting applies the methods of integrated project planning (Chapter 7) in the context of a project that is progressing. As such, the descriptions here make extensive reference to the Chapter 7 sections.

Forecasted Cost

    Cost forecasting begins with the current status of commitments and expenditures for the work packages or cost accounts being updated (to reflect actual amounts as of the date of the forecast). Performance assessments (Section 10.1) provide current productivity and other useful information for forecasting. In the change management process (Section 10.3), any cost performance deviations and variances are assessed as to whether they are trends (i.e., non-random). Also, performance improvement opportunities may have been identified as potential changes.

    If changes or trends have been identified, the cost of the work scope remaining is then estimated using the methods of the cost estimating and budgeting process (Section 7.3). The total project cost forecasted then is the expended amount for completed work plus the estimated cost for the remaining work scope. The forecasted estimate must consider the performance to date, any improvement or correction actions proposed, and risk factors (as would any project estimate).

    An alternate, quick, but simplistic method for estimating the cost of the work scope remaining is to use the cost performance index (CPI) as computed in an earned value management system (i.e., budgeted cost of work performed/actual cost of work performed or BCWP/ACWP). In this method, the cost of work remaining is estimated by simply dividing the budgeted cost of work remaining (i.e., total budget minus the BCWP) by the CPI. However, it should be kept in mind that more often than not, the remaining work scope will occur at a different rate than that experienced to date due to learning curve, closeout, miscellaneous punch list work, and so on.

    Cost forecasts are developed for each plan alternative that has been identified. Cost forecasts, as with baseline planning, should be prepared in an integrated manner with schedule and resource forecasts. The alternate forecasts (along with associated schedule, resource, and other forecasts) are inputs to the change management process during which a decision will be made on a selected course of action. If no changes or trends have been identified, the cost forecast is simply the actual cost of work performed plus the budgeted cost of work remaining.

Forecasted Schedule

    Schedule forecasting starts with the statused network schedule (Section 10.1). The schedule statusing will also have identified if the logic for the remaining work is still valid (e.g., is the actual performance now out of sequence). In the change management process (Section 10.3), any schedule performance variances are assessed as to whether they are trends (i.e., non-random). Also, performance improvement opportunities may have been identified as potential changes.

    If changes or trends have been identified, the plan and schedule for the work scope remaining is then developed using the methods of the schedule planning and development process (Section 7.2). The project schedule forecast is then revised reflecting the current status integrated with the schedule for the remaining work scope. The revised schedule must consider the performance and productivity to date, resource allocation, any improvement or correction actions proposed, and risk factors. Creating a revised schedule entails of the schedule development steps, and therefore is done only infrequently when conditions invalidate the planned schedule because it can no longer be attained.

    Schedule forecasts are developed for each plan alternative that has been identified. Schedule forecasts, as with baseline planning, are prepared in an integrated manner with cost and resource forecasts. The alternate forecasts (along with associated cost, resource, and other forecasts) are inputs to the change management process during which a decision will be made on a selected course of action. If no changes or trends have been identified, and the project status is as planned, the schedule forecast is simply the existing schedule.

Forecasted Resources

    Resource forecasting begins with the current status of material procurement and labor expenditures. In the change management process (Section 10.3), any resource performance variances are assessed as to whether they are trends (i.e., non-random). Also, performance improvement opportunities may have been identified as potential changes. Variances in labor hour performance often result from labor productivity differing from the plan. Assessments of labor productivity should be carefully analyzed to determine crafts and/or trades impacted by the productivity variances and to apply trends associated with specific trades to those trades alone and not uniformly across all future labor.

    If changes or trends have been identified, the resources for the work scope remaining are then estimated using the methods of the resource planning process (Section 7.4). The total resource forecast then is the expended resources for completed work plus the estimated resources for the remaining work scope. The forecasted estimate must consider the performance to date, any improvement or correction actions proposed, and risk factors (as would any project estimate).

    Resource forecasts are developed for each plan alternative that has been identified. Resource forecasts, as with baseline planning, are prepared in an integrated manner with schedule and cost forecasts. The alternate forecasts (along with associated cost and schedule forecasts) are inputs to the change management process during which a decision will be made on a selected course of action. If no changes or trends have been identified, the resource forecast is simply the actual resource expenditures or use on work performed plus the resource planned for work remaining.

.5 Analyze Risks and Contingency

    Each forecast alternative is evaluated using the risk management process (Section 7.6). That process evaluates and quantifies the impact of any risk factors inherent to the alternative plan(s). The quantification includes estimating the contingency required for the remaining work. Contingency must be forecast like any other cost account.

    After an alternative course of action is decided upon, the risk management plan is updated as appropriate and the contingency cost account is managed through the change management process.

.6 Establish and Report Forecast

    The forecasting process results in projections of the performance and outcome for each control plan element. The forecasts for the scope of work, including approved changes, result in a revised project control baseline against which performance will be measured and assessed (Section 10.1) for the remaining project until such time that the forecasting process results in a further revised project control baseline.

    However, performance trends cannot always be corrected or mitigated. Therefore, the forecasts for the scope of work, including both approved changes and trends, that could not be corrected are reported so that management is always aware of the most accurate projected project outcome. Additional funding approvals may have to be obtained if the forecasted cost exceeds delegated authority limits. Approvals to obtain additional labor or material resources may also have to be obtained.

    It is also a project control responsibility to keep those responsible for work packages appraised of the approved control baselines and current forecasts. As previously mentioned, communicating the forecast information is critical to its successful use and will facilitate input from project team members during the forecast preparation.

    At the close of the process, actual project information, including experiences and lessons learned about forecasting practices, is used to improve forecasting tools such as software, procedures, roles and responsibilities, and so on.

10.2.3 Inputs to Forecasting

.1 Project Implementation Basis. (See Section 4.1). This defines the basis asset scope, objectives, constraints, and assumptions, including basic assumptions about forecasting approaches.

.2 Project Control Plans. The project control plan (Section 8.1) describes specific systems, policies, procedures, and approaches to be used in project control, including forecasting (and all other aspects of measurement and assessment).

.3 Scope of Changes. (See Section 10.2.2.2).

.4 Scope Definition. (See Section 10.2.2.2).

.5 Physical Progress. (See Section 10.2.2.2).

.6 Trends. Trends, as identified in the change management process (Section 10.3), must be considered in any plan alternatives and forecast analyses.

.7 Corrective Actions (Alternatives and Selected). The change management process (Section 10.3) initially identifies possible corrective actions. Later, based in part on forecasting outcomes, corrective actions are selected.

.8 Planning Information. Forecasting applies the methods of integrated project planning (Chapter 7) in the context of a project that is progressing.

.9 Project Control Basis. Forecasts must be developed in consideration of the current control baseline plans as well as changes and trends.

.10 Approved Scope. The forecasts for the scope of work, including approved changes, become the revised project control baseline. The approved scope of changes is determined in the change management process (Section 10.3).

.11 Historical Project Information. Successful past forecasting approaches are used as future planning references and to help improve forecasting methods and tools.

10.2.4 Outputs from Forecasting

.1 Project Control Plans. Forecasting plans are considered in overall project control planning (and all other aspects of measurement and assessment planning).

.2 Planning Information. Forecasting applies the methods of integrated project planning (Chapter 7) in the context of a project that is progressing (i.e., planning during forecasting must consider the project status).

.3 Corrective Action Alternatives. The change management process (Section 10.3) initially identifies possible corrective actions. Forecasting may identify other alternative actions as well.

.4 Alternative Forecasts. The change management process (Section 10.3) considers and decides upon alternative actions based in part on forecasting outcomes.

.5 Project Control Basis. The cost, schedule, and resource forecasts for the scope of work, including approved changes, become the revised project control baseline (Section 8.1).

.6 Historical Project Information. The project’s forecasting approaches are used as future planning references and to help improve forecasting methods and tools.

10.2.5 Key Concepts for Forecasting

    The following concepts and terminology described in this and other chapters are particularly important to understanding the forecasting process of TCM:

.1 Forecast. The project team’s estimate of the most likely outcome for a given element of the project plan (e.g., cost forecast, schedule forecast, etc.).

.2 Forecasting. (See Section 10.2.1). The process of evaluating project control plans and control baselines in consideration of assessments of ongoing project performance. The result of the process is a forecast.

.3 Trend. Non-random variance of actual asset or project performance from that which was planned. Analysis of performance measurements is required to determine if an observed performance variance is a trend (i.e., predictable), or a random outcome (i.e., unpredictable), and that determination will influence subsequent control actions and forecasts.

.4 Variance. An empirical difference between actual and planned performance for any aspect of the project control plan.

.5 Change Management. (See Section 10.3). A process to control any change to a scope of work and/or any performance trend from or change to an approved or baseline project control plan. The process includes the identification, definition, categorization, recording, tracking, analyzing, and disposition of trends and changes.

.6 Change. Alteration or variation to a scope of work and/or any other approved or baseline project control plan (e.g., schedule, budget, resource plans, etc.).

.7 Corrective Action. A task or activity performed or direction given with the intent to mitigate or otherwise address a variance from planned project performance (i.e., to recover performance or improve or restore control).

Further Readings and Sources

    The forecasting process is covered in most project management and control texts. The following references provide basic information and will lead to more detailed treatments.

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