Successive Cost Estimation - Revision history

Felixx: Replaced content with " moved to new page"

2022-03-04T21:20:08Z

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Felixx: /* Limitations and Critical Reflection */

2022-03-04T21:11:02Z

Limitations and Critical Reflection

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	Although the experiences from applying of the Successive Principle are prosperous, the method brings some limitation, which will be critically reflected here. The first limitation is based on the group formation, which opens the question, if a different group composition would also lead to a different analysis result. A group – or single members could be very optimistic or pessimistic and the result therefore drift into one direction. The Successive Principle tries to tackle this with the triple estimates, which bring another problem: The range between the minimum and maximum value can differ a lot between the estimations, which must be dealt with. <ref name="LIC2016" />		Although the experiences from applying of the Successive Principle are prosperous, the method brings some limitation, which will be critically reflected here. The first limitation is based on the group formation, which opens the question, if a different group composition would also lead to a different analysis result. A group – or single members could be very optimistic or pessimistic and the result therefore drift into one direction. The Successive Principle tries to tackle this with the triple estimates, which bring another problem: The range between the minimum and maximum value can differ a lot between the estimations, which must be dealt with. <ref name="LIC2016" />

	The ~~Method~~ is capable of handling human error avoiding the many pitfalls in risk management. It can open the blind spot for opportunities, which is a major difference to commonly used methods. But the opportunities still need to be detected and exploited proactively, supported by the successive principle. This is exactly the treatment of risk suggested by the standard ISO:21502, which includes not only the handling of threat, but also of opportunities. The identification, assessment and treatment of risks requested by the standard are fulfilled by the principle. <ref name="ISO21502" />. Furthermore, a suggested establishment of reserves on top of estimated costs in the standard is covered by the principle as well. <ref name="LIC2000" /> Uncertainty can be handled in early stages of the project, while it usually is addressed too late. However, it does not include the environment of the project, client and possible future developments clearly. <ref name="LIC2016" /> As the scope of the analysis is clearly defined, the possible exclusion of major risks like war and natural catastrophes causes uncertainty, that is not covered at all.		The method is capable of handling human error avoiding the many pitfalls in risk management. It can open the blind spot for opportunities, which is a major difference to commonly used methods. But the opportunities still need to be detected and exploited proactively, supported by the successive principle. This is exactly the treatment of risk suggested by the standard ISO:21502, which includes not only the handling of threat, but also of opportunities. The identification, assessment and treatment of risks requested by the standard are fulfilled by the principle. <ref name="ISO21502" />. Furthermore, a suggested establishment of reserves on top of estimated costs in the standard is covered by the principle as well. <ref name="LIC2000" /> Uncertainty can be handled in early stages of the project, while it usually is addressed too late. However, it does not include the environment of the project, client and possible future developments clearly. <ref name="LIC2016" /> As the scope of the analysis is clearly defined, the possible exclusion of major risks like war and natural catastrophes causes uncertainty, that is not covered at all.
	A major challenge is the implementation of the principle into well established companies because it requires change and specific circumstances. The company should support modern management and be open to innovation because the principle is unconventional. Criticism is often based on the Bayesian theory, which differs from the classical statistics, but makes the handling of subjective uncertainty possible. The section explaining the procedure shows the importance of the preparation before the workshop and that an experienced facilitator in group dynamics, statistics and the principle itself is needed, who could be hard to find. <ref name="LIC2015" /> Moreover, the establishment of an optimal group needs to be possible as well as a willingness to face the true uncertainties of the project. All of this makes an involvement and commitment of senior management necessary. <ref name="LIC2016" />		A major challenge is the implementation of the principle into well established companies because it requires change and specific circumstances. The company should support modern management and be open to innovation because the principle is unconventional. Criticism is often based on the Bayesian theory, which differs from the classical statistics, but makes the handling of subjective uncertainty possible. The section explaining the procedure shows the importance of the preparation before the workshop and that an experienced facilitator in group dynamics, statistics and the principle itself is needed, who could be hard to find. <ref name="LIC2015" /> Moreover, the establishment of an optimal group needs to be possible as well as a willingness to face the true uncertainties of the project. All of this makes an involvement and commitment of senior management necessary. <ref name="LIC2016" />
	The Successive Principle fits to processes suggested by the standards, which will be explained by some examples. Furthermore, it extends and interconnects all factors of the project “including subjective factors, hidden assumptions, and especially areas of uncertainty or potential change”, to get an holistic perspective on the project. <ref name="ARC2016" />. The PMI Standard for risk management requests an identification of risks before the project or phase is authorized. <ref name="PMI2019" /> This exactly is addressed by the Successive Principle because it even when applied early in a project, tries to assess all uncertainties. It can be contextualized to the planning process group in the knowledge areas project schedule and cost management and therefore fits into risk management in context of project management, defined by the PMI standard. <ref name="PMI2019" />. The PMI standard also names six key factors for Risk Management success, two of the factors are highly emphasized by the Successive Principle: Recognizing the value of risk management and open and honest communication, which is explained in the section about the theory and procedure. The challenge of including senior management is in fact a key success factor according to the PMI standard, namely organizational commitment. <ref name="PMI2019" />		The Successive Principle fits to processes suggested by the standards, which will be explained by some examples. Furthermore, it extends and interconnects all factors of the project “including subjective factors, hidden assumptions, and especially areas of uncertainty or potential change”, to get an holistic perspective on the project. <ref name="ARC2016" />. The PMI Standard for risk management requests an identification of risks before the project or phase is authorized. <ref name="PMI2019" /> This exactly is addressed by the Successive Principle because it even when applied early in a project, tries to assess all uncertainties. It can be contextualized to the planning process group in the knowledge areas project schedule and cost management and therefore fits into risk management in context of project management, defined by the PMI standard. <ref name="PMI2019" />. The PMI standard also names six key factors for Risk Management success, two of the factors are highly emphasized by the Successive Principle: Recognizing the value of risk management and open and honest communication, which is explained in the section about the theory and procedure. The challenge of including senior management is in fact a key success factor according to the PMI standard, namely organizational commitment. <ref name="PMI2019" />

Felixx: /* Theory and Principles */

2022-03-04T21:09:26Z

Theory and Principles

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	The Successive Principle makes use of the Subjective Probability Theory (also Bayesian statisitical theory), to be able to calculate uncertainty with subjective estimations of experts. This theory allows subjective estimations as an input and an application of the classical statisitical rules. Through splitting the problem into independent elements the influence of statistical dependency and co-variances (dependant variances) is decreased significantly.		The Successive Principle makes use of the Subjective Probability Theory (also Bayesian statisitical theory), to be able to calculate uncertainty with subjective estimations of experts. This theory allows subjective estimations as an input and an application of the classical statisitical rules. Through splitting the problem into independent elements the influence of statistical dependency and co-variances (dependant variances) is decreased significantly. <ref name="LIC2000" />

	== Procedure of the Method ==		== Procedure of the Method ==

Felixx: /* Quantitative Phase */

2022-03-04T21:09:09Z

Quantitative Phase

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	'''Quantification and successive specification:'''		'''Quantification and successive specification:'''

	The quantitative phase begins with running through successive cycles, to reduce uncertainty. In each circle, beginning with the overall influences, now called items are detailed using the “Hierarchical work breakdown structure.” Therefore, each item gets split into sub items in each circle. The calculation of the uncertainty is based on the ~~“subjective~~ probability ~~theory” (also "Bayesian~~ theory") <ref name="LIC2000" /> For each item, triple estimates are made, which consist of the estimated extreme minimum and maximum values and a most likely value. A mean value of these is build, while the most likely value is multiplied with the factor 3.		The quantitative phase begins with running through successive cycles, to reduce uncertainty. In each circle, beginning with the overall influences, now called items are detailed using the “Hierarchical work breakdown structure.” Therefore, each item gets split into sub items in each circle. The calculation of the uncertainty is based on the subjective probability theory. <ref name="LIC2000" /> For each item, triple estimates are made, which consist of the estimated extreme minimum and maximum values and a most likely value. A mean value of these is build, while the most likely value is multiplied with the factor 3.

Felixx: /* Theory and Principles */

2022-03-04T21:08:33Z

Theory and Principles

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	It also differs from traditional project management methods in three further points. <ref name="ARC2016" /> While typically the areas of large uncertainty are not tackled because of subjectivity, the Successive Principle picks exactly these for detailing and is able to be more precise than a traditional approach, considering more, but less subjective items. Furthermore, the new principle prioritizes the items with highest uncertainty and thus seeks diving into the most difficult items to estimate, which again differs from the traditional approach. Another change is made in the treatment of interrelated areas. The management of schedules, cost, resources and technical issues is now combined, specialists from each area are working together and thus interrelated areas are treated together, in order to not deflect the holistic view on the project. <ref name="ARC2016" />		It also differs from traditional project management methods in three further points. <ref name="ARC2016" /> While typically the areas of large uncertainty are not tackled because of subjectivity, the Successive Principle picks exactly these for detailing and is able to be more precise than a traditional approach, considering more, but less subjective items. Furthermore, the new principle prioritizes the items with highest uncertainty and thus seeks diving into the most difficult items to estimate, which again differs from the traditional approach. Another change is made in the treatment of interrelated areas. The management of schedules, cost, resources and technical issues is now combined, specialists from each area are working together and thus interrelated areas are treated together, in order to not deflect the holistic view on the project. <ref name="ARC2016" />


			The Successive Principle makes use of the Subjective Probability Theory (also Bayesian statisitical theory), to be able to calculate uncertainty with subjective estimations of experts. This theory allows subjective estimations as an input and an application of the classical statisitical rules. Through splitting the problem into independent elements the influence of statistical dependency and co-variances (dependant variances) is decreased significantly.

	== Procedure of the Method ==		== Procedure of the Method ==

Felixx: /* Quantitative Phase */

2022-03-04T17:46:46Z

Quantitative Phase

← Older revision		Revision as of 17:46, 4 March 2022
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	'''Quantification and successive specification:'''		'''Quantification and successive specification:'''

	The quantitative phase begins with running through successive cycles, to reduce uncertainty. In each circle, beginning with the overall influences, now called items are detailed using the “Hierarchical work breakdown structure.” Therefore, each item gets split into sub items in each circle. The calculation of the uncertainty is based on the “subjective probability theory.” <ref name="LIC2000" /> For each item, triple estimates are made, which consist of the estimated extreme minimum and maximum values and a most likely value. A mean value of these is build, while the most likely value is multiplied with the factor 3.		The quantitative phase begins with running through successive cycles, to reduce uncertainty. In each circle, beginning with the overall influences, now called items are detailed using the “Hierarchical work breakdown structure.” Therefore, each item gets split into sub items in each circle. The calculation of the uncertainty is based on the “subjective probability theory” (also "Bayesian theory") <ref name="LIC2000" /> For each item, triple estimates are made, which consist of the estimated extreme minimum and maximum values and a most likely value. A mean value of these is build, while the most likely value is multiplied with the factor 3.

Felixx: /* Quantitative Phase */

2022-03-04T13:51:02Z

Quantitative Phase

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	Through successively detailing the uncertainties, the global standard deviation will decrease, which is shown in the example in the next section. The process should be continued, until the global value of the standard deviation does no longer improve through specification or a more precise specification of the remaining items is not possible. Usually, 8-12 cycles are conducted, which means, that about 80-90% of the uncertainty are covered by the analysis. The priority for further detailing is given by the variance of each item after each successive step. ~~During each~~ specification ~~step~~ it is ~~also~~ important to identify possible opportunities next to the risks. This process description only gives an overview of the real process. Here correction factors are applied and each time the analysis breaks down, and an additional uncertainty for the breakdown must be added. <ref name="LIC2000" />		Through successively detailing the uncertainties, the global standard deviation will decrease, which is shown in the example in the next section. The process should be continued, until the global value of the standard deviation does no longer improve through specification or a more precise specification of the remaining items is not possible. Usually, 8-12 cycles are conducted, which means, that about 80-90% of the uncertainty are covered by the analysis. The priority for further detailing is given by the variance of each item after each successive step. Because the specification is very detailed, it is important to identify possible opportunities next to the risks during each specification step to be able to utilize them and create a competitive advantage. This process description only gives an overview of the real process. Here correction factors are applied and each time the analysis breaks down, and an additional uncertainty for the breakdown must be added. <ref name="LIC2000" />

	'''Action plan:'''		'''Action plan:'''

Felixx: /* Quantitative Phase */

2022-03-04T13:46:49Z

Quantitative Phase

← Older revision		Revision as of 13:46, 4 March 2022
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	Through successively detailing the uncertainties, the global standard deviation will decrease, which is shown in the example in the next section. The process should be continued, until the global value of the standard deviation does no longer improve through specification or a more precise specification of the remaining items is not possible. Usually, 8-12 cycles are conducted, which means, that about 80-90% of the uncertainty are covered by the analysis. The priority for further detailing is given by the variance of each item after each successive step. This process description only gives an overview of the real process. Here correction factors are applied and each time the analysis breaks down, and an additional uncertainty for the breakdown must be added. <ref name="LIC2000" />		Through successively detailing the uncertainties, the global standard deviation will decrease, which is shown in the example in the next section. The process should be continued, until the global value of the standard deviation does no longer improve through specification or a more precise specification of the remaining items is not possible. Usually, 8-12 cycles are conducted, which means, that about 80-90% of the uncertainty are covered by the analysis. The priority for further detailing is given by the variance of each item after each successive step. During each specification step it is also important to identify possible opportunities next to the risks. This process description only gives an overview of the real process. Here correction factors are applied and each time the analysis breaks down, and an additional uncertainty for the breakdown must be added. <ref name="LIC2000" />

	'''Action plan:'''		'''Action plan:'''

Felixx: /* Limitations and Critical Reflection */

2022-03-04T13:38:52Z

Limitations and Critical Reflection

← Older revision		Revision as of 13:38, 4 March 2022
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	Although the experiences from applying of the Successive Principle are prosperous, the method brings some limitation, which will be critically reflected here. The first limitation is based on the group formation, which opens the question, if a different group composition would also lead to a different analysis result. A group – or single members could be very optimistic or pessimistic and the result therefore drift into one direction. The Successive Principle tries to tackle this with the triple estimates, which bring another problem: The range between the minimum and maximum value can differ a lot between the estimations, which must be dealt with. <ref name="LIC2016" />		Although the experiences from applying of the Successive Principle are prosperous, the method brings some limitation, which will be critically reflected here. The first limitation is based on the group formation, which opens the question, if a different group composition would also lead to a different analysis result. A group – or single members could be very optimistic or pessimistic and the result therefore drift into one direction. The Successive Principle tries to tackle this with the triple estimates, which bring another problem: The range between the minimum and maximum value can differ a lot between the estimations, which must be dealt with. <ref name="LIC2016" />

	The Method is capable of handling human error avoiding the many pitfalls in risk management. It can open the blind spot for opportunities, which is a major difference to commonly used methods. This is exactly the treatment of risk suggested by the standard ISO:21502, which includes not only the handling of threat, but also of opportunities. The identification, assessment and treatment of risks requested by the standard are fulfilled by the principle. <ref name="ISO21502" />. Furthermore, a suggested establishment of reserves on top of estimated costs in the standard is covered by the principle as well. <ref name="LIC2000" /> Uncertainty can be handled in early stages of the project, while it usually is addressed too late. However, it does not include the environment of the project, client and possible future developments clearly. <ref name="LIC2016" /> As the scope of the analysis is clearly defined, the possible exclusion of major risks like war and natural catastrophes causes uncertainty, that is not covered at all.		The Method is capable of handling human error avoiding the many pitfalls in risk management. It can open the blind spot for opportunities, which is a major difference to commonly used methods. But the opportunities still need to be detected and exploited proactively, supported by the successive principle. This is exactly the treatment of risk suggested by the standard ISO:21502, which includes not only the handling of threat, but also of opportunities. The identification, assessment and treatment of risks requested by the standard are fulfilled by the principle. <ref name="ISO21502" />. Furthermore, a suggested establishment of reserves on top of estimated costs in the standard is covered by the principle as well. <ref name="LIC2000" /> Uncertainty can be handled in early stages of the project, while it usually is addressed too late. However, it does not include the environment of the project, client and possible future developments clearly. <ref name="LIC2016" /> As the scope of the analysis is clearly defined, the possible exclusion of major risks like war and natural catastrophes causes uncertainty, that is not covered at all.
	A major challenge is the implementation of the principle into well established companies because it requires change and specific circumstances. The company should support modern management and be open to innovation because the principle is unconventional. Criticism is often based on the Bayesian theory, which differs from the classical statistics, but makes the handling of subjective uncertainty possible. The section explaining the procedure shows the importance of the preparation before the workshop and that an experienced facilitator in group dynamics, statistics and the principle itself is needed, who could be hard to find. <ref name="LIC2015" /> Moreover, the establishment of an optimal group needs to be possible as well as a willingness to face the true uncertainties of the project. All of this makes an involvement and commitment of senior management necessary. <ref name="LIC2016" />		A major challenge is the implementation of the principle into well established companies because it requires change and specific circumstances. The company should support modern management and be open to innovation because the principle is unconventional. Criticism is often based on the Bayesian theory, which differs from the classical statistics, but makes the handling of subjective uncertainty possible. The section explaining the procedure shows the importance of the preparation before the workshop and that an experienced facilitator in group dynamics, statistics and the principle itself is needed, who could be hard to find. <ref name="LIC2015" /> Moreover, the establishment of an optimal group needs to be possible as well as a willingness to face the true uncertainties of the project. All of this makes an involvement and commitment of senior management necessary. <ref name="LIC2016" />
	The Successive Principle fits to processes suggested by the standards, which will be explained by some examples. Furthermore, it extends and interconnects all factors of the project “including subjective factors, hidden assumptions, and especially areas of uncertainty or potential change”, to get an holistic perspective on the project. <ref name="ARC2016" />. The PMI Standard for risk management requests an identification of risks before the project or phase is authorized. <ref name="PMI2019" /> This exactly is addressed by the Successive Principle because it even when applied early in a project, tries to assess all uncertainties. It can be contextualized to the planning process group in the knowledge areas project schedule and cost management and therefore fits into risk management in context of project management, defined by the PMI standard. <ref name="PMI2019" />. The PMI standard also names six key factors for Risk Management success, two of the factors are highly emphasized by the Successive Principle: Recognizing the value of risk management and open and honest communication, which is explained in the section about the theory and procedure. The challenge of including senior management is in fact a key success factor according to the PMI standard, namely organizational commitment. <ref name="PMI2019" />		The Successive Principle fits to processes suggested by the standards, which will be explained by some examples. Furthermore, it extends and interconnects all factors of the project “including subjective factors, hidden assumptions, and especially areas of uncertainty or potential change”, to get an holistic perspective on the project. <ref name="ARC2016" />. The PMI Standard for risk management requests an identification of risks before the project or phase is authorized. <ref name="PMI2019" /> This exactly is addressed by the Successive Principle because it even when applied early in a project, tries to assess all uncertainties. It can be contextualized to the planning process group in the knowledge areas project schedule and cost management and therefore fits into risk management in context of project management, defined by the PMI standard. <ref name="PMI2019" />. The PMI standard also names six key factors for Risk Management success, two of the factors are highly emphasized by the Successive Principle: Recognizing the value of risk management and open and honest communication, which is explained in the section about the theory and procedure. The challenge of including senior management is in fact a key success factor according to the PMI standard, namely organizational commitment. <ref name="PMI2019" />

Felixx: /* Quantitative Phase */

2022-03-04T11:44:23Z

Quantitative Phase

← Older revision		Revision as of 11:44, 4 March 2022
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	The quantitative phase begins with running through successive cycles, to reduce uncertainty. In each circle, beginning with the overall influences, now called items are detailed using the “Hierarchical work breakdown structure.” Therefore, each item gets split into sub items in each circle. The calculation of the uncertainty is based on the “subjective probability theory.” <ref name="LIC2000" /> For each item, triple estimates are made, which consist of the estimated extreme minimum and maximum values and a most likely value. A mean value of these is build, while the most likely value is multiplied with the factor 3.		The quantitative phase begins with running through successive cycles, to reduce uncertainty. In each circle, beginning with the overall influences, now called items are detailed using the “Hierarchical work breakdown structure.” Therefore, each item gets split into sub items in each circle. The calculation of the uncertainty is based on the “subjective probability theory.” <ref name="LIC2000" /> For each item, triple estimates are made, which consist of the estimated extreme minimum and maximum values and a most likely value. A mean value of these is build, while the most likely value is multiplied with the factor 3.


	<math>Triple \, Estimate \, Mean={Min + 3 \cdot Most \, likely + Max \over 5}</math>		<math>Triple \, Estimate \, Mean={Min + 3 \cdot Most \, likely + Max \over 5}</math>


	The standard deviation and variance are calculated as well. Taking the square route of the sum of the single variances leads to the overall global standard deviation.		The standard deviation and variance are calculated as well. Taking the square route of the sum of the single variances leads to the overall global standard deviation.


	<math> Variance = Standard \, Deviation^2</math>		<math> Variance = Standard \, Deviation^2</math>


	Through successively detailing the uncertainties, the global standard deviation will decrease, which is shown in the example in the next section. The process should be continued, until the global value of the standard deviation does no longer improve through specification or a more precise specification of the remaining items is not possible. Usually, 8-12 cycles are conducted, which means, that about 80-90% of the uncertainty are covered by the analysis. The priority for further detailing is given by the variance of each item after each successive step. This process description only gives an overview of the real process. Here correction factors are applied and each time the analysis breaks down, and an additional uncertainty for the breakdown must be added. <ref name="LIC2000" />		Through successively detailing the uncertainties, the global standard deviation will decrease, which is shown in the example in the next section. The process should be continued, until the global value of the standard deviation does no longer improve through specification or a more precise specification of the remaining items is not possible. Usually, 8-12 cycles are conducted, which means, that about 80-90% of the uncertainty are covered by the analysis. The priority for further detailing is given by the variance of each item after each successive step. This process description only gives an overview of the real process. Here correction factors are applied and each time the analysis breaks down, and an additional uncertainty for the breakdown must be added. <ref name="LIC2000" />