The Successive Principle
A way to manage Project Risks
The Successive Principle Method
A method to calculate project cost, make the risk analysis and establish action plans – at the same time
There is a need to make reliable calculations for projects in spite of the fact that there are large uncertainties about cost items and the surrounding project conditions. This is particularly true in early stages of a project when the detailed knowledge is low. In addition to this it is essential to get a view of where the largest uncertainties are in order to focus future work on the most important issues.
The “Successive Principle Method” is a result from the Technical Institute in Denmark during the 1960-ies. The method has been further developed and is today a complete and efficient management tool that is used in many different types of projects, organisations and lines of business. It can also be used as a planning tool. The below presentation is based on the cost application, Successive Calculation.
The purpose of the method is twofold:
- To get the best possible basis for decision that the current knowledge allows
- To increase the possibility to succeed with the project (cost and/or delivery date)
When is the method used ?
The method is best suited in situations when the project differs from what the organisation “is used to” i e because of it’s size, complexity, contents, time schedule or need of coordination. Another situation is when the project conditions are very unclear or likely to change over time. In many organisations it is used as a tool that is prescribed in the project management manual. In those cases no important decisions are made unless the result from such an analysis is available together with the project management action list for the largest risks/uncertainties.
Difference compared to traditional calculation methods
The analysis is performed by an analysis group led by a “neutral” process leader. Within the group all necessary competencies must be represented. The analysis is performed in a step-wise process and it is based on the theory of probabilities. The main characteristics of the method are:
- uncertainty, where we acknowledge the fact that we normally cannot describe a future cost in exact figures and that future outcomes can vary within certain intervals
- assessment techniques, for each cost item a triple estimate is given (minimum, probable and maximum figures)
- top-down, the project is structured in a small number of high level cost items that together represent the whole project. The step-wise process is initiated by applying the minimum, probable and maximum estimates. The method then guides us to, step by step, further detail the most uncertain items.
- general conditions, all project conditions that can influence the final cost are identified and assessed in the same way as the cost items. The conditions are identified using brainstorming techniques. A simple way to explain “general conditions” is that they represent possible “excuses afterwards”.
The goal for the analysis is:
- a clear and mutually agreed description of the project deliverables
- a probable project cost
- the possible interval of the project cost (best case – worst case)
- the largest cost uncertainties identified in order of precedence
- actions to manage the largest uncertainties
An additional bonus with the analysis is:
- overview and consensus within the group
- information hand over
Successive Time Analysis
The same successive principle can be applied to Project Time Schedules. The method is called Successive Time Analysis. The cost items are then exchanged for activities. The Work Breakdown Structure (WBS) is replaced by a logical network of activities and their interdependencies.
In the time analysis the so called Monte Carlo-simulation gives us the best possible view of the projects delivery date. The random acess generator of a powerful computer shows all possible future outcomes. You “live through” your project in advance over and over again, each time with a new set of conditions that gives a new result. It is like making thousends of “what-if-scenarios” at the same time.
It may sound as if this extra information will complicate the decisionmaking. In reality it is exactly the other way around. One of the advantages of the method is the simple communication. All risks are presented graphically. You can easily understand the graphic presentation and it is easy to explain it to others.
Referencies: 780 billion SEK and 475 years
The summarized value of the calculations I have been involved in exceeds 780 billion SEK.
The summarized project durations exceeds 475 years.