Forecasting

last edited by: Aejaz Shaikh on Feb 21, 2017 4:49 AM login/register to edit this page

Contents
1 Instructions
2 References

Project Forecasting consists of taking the project status information and extrapolating the current project performance to the end of the project. Forecasts can be made with respect to project duration, overall project cost, performance/quality level of project deliverables, or any combination of these.

A key element in forecasting is to review the risk events that occurred and the remaining risk triggers. A caution when doing forecasting, ensure you have adequate information to realistically forecast performance. A general rule of thumb is to wait until an activity, phase, or deliverable is at least 25% - 40% complete before trying to forecast. Prior to that point one should stick with the original estimate, modified by any appropriate risk mitigation activities that have occurred.

Forecasting arms the project manager with valuable knowledge enabling proactive project and resource management. It creates confidence in meeting client demands and allows thoughtful consideration for outsourcing. Embracing a more proactive philosophy may just inspire others to follow the lead.

Instructions

Time

When forecasting project duration, the key is to understand the schedule performance and schedule risk of the activities on the critical path. Those activities will be the ones that drive the project completion date. On a resource constrained project, or a project with unpredictable resource availability, this can be very difficult because the lack of resources causes the critical path to vary. It generally comes down to expert judgment and gut feel. When it is vital for the project to be completed by a certain date, a suggestion is to convert the schedule tracking to a countdown mode where everything is measured in terms of how many days before project completion. Also, holding meetings more frequently in order to quickly assess when it is falling behind is a good option.

Cost

When forecasting total project cost, it is good to rely on forecasting methods that are embedded in the Earned Value Management system. Unfortunately, many organizations do not have the financial systems in place that enable earned value management. When that is the case, the project manager should rely on trend forecasting - which is sometimes called "straight-line" forecasting. Trend forecasting takes the current project spending and extrapolates that rate of spending until the end of the project. This provides a rough forecast, but it does not take into account the effect that different activities may require resources that spend at different levels. The resources that perform the remaining activities may be higher or lower cost than the preceding resources. Also, it does not take into account that the project may be ahead or behind schedule. If the project is ahead of schedule, the spending done to achieve that condition inflates the extrapolated value of the project final cost. If the project is behind schedule, the lack of spending creates an extrapolated value of total project cost that is too low.

Quality

When forecasting the performance or quality of project deliverables, the project manager could rely on prototypes and preliminary analysis. When the project does not have these, the risk that the project will not achieve the desired performance or quality established at the time of project planning is higher. If performance is the most important attribute of the project deliverables, then the risk of missing the forecast project duration or cost is much higher. The principle involved is the "Rule of Ten's." According to this principle, the cost to correct a technical issue goes up by a factor of 10 as the project moves from one phase to the next. Therefore it is imperative that performance issues be identified as early as possible.

References

  1. Project Management Monitoring and Controlling Tools & Techniques. Project Management Guru website. http://www.projectmanagementguru.com/controlling.html
  2. Forecasting: principles and practice. Rob J Hyndman. OTexts Publishers, October 17, 2013.
  3. Forecasting Methods and Applications 3rd Edition. Steven C Wheelwright. WSE Publishing, 2008.
  4. http://www.cellaconsulting.com/blog/project-managers-role-forecasting/


last edited by: Aejaz Shaikh on Feb 21, 2017 4:49 AM login/register to edit this page


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