Tuesday, September 15, 2020

Projecting the past



Some people live in fear because they project the past into the future
Anonymous

Now, to put that in project terms, some PM's may see fear in the future because they project (extend) troublesome project history into the future. The poster child for this are the two common cost metrics:
  • What is it going to take to finish this thing? and
  • What is going to cost when it's all done?
Your project analyst may know them as:
  • "estimate to complete ETC"
  • "estimate at completion EAC"
How are these calculated?
Two common methods, and each will give a different answer:
  1. First method: From cost history, extend (that is, project) the historic trend into the future
  2. Second method: Take cost history in account, but simply re-estimate the remaining work
Both methods have their fear factors.

Trend line
Simply projecting .. or extending .. a trend line assumes that the future is some predictable function of the past. If this is true, then such a "predictable function" can be described with an algorithm more or less of this form: Y = aX + b
  • Where Y is some future cost figure, X is some past cost figure, and "a" is the velocity or slope with which X marches toward Y.  And "b" is some past sunk cost that predates X; "b" is often zero. (*)
But fear not! If you don't like Y as an outcome, then don't accept "a" as a given for the future. To wit: force a discontinuity in what is otherwise smooth trend line, making a break between the trend of the past and the direction of the future.

Discontinuous trend
You deal with fear by forcing a discontinuity in the trend line.
“The best way to predict the future is to to create it.”
A. Lincoln

To wit: "a" before you act becomes "A" after you act.

What to do to make "A" different from "a":
  • The PM can reallocate resources; retrain existing resources; evaluate remaining scope differently; change the environment; bring in different relationships among users, sponsors, and developers; in short: the PM can markedly make the future look different from the past, nullifying the trend line.
Simply estimate
Now, having set new conditions in place at the discontinuity, estimate the new baseline. The trend will probably be an equation of this form: y = Ax + B, where:
  • y is the new target, replacing the historic Y
  • A is the new velocity, replacing a
  • x replaces X
  • B is the sunk cost of the history. B = aX + b at the point of discontinuity.

All clear? Excellent!

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For those with an understanding of algebra, it's necessary to keep everything dimensionally correct. Thus, if Y is dimensioned in dollars, then so must be aX and b. X is dollars, so that requires that "a" be dimensioned as dollars per dollars, or dollars/dollars. Consequently, "a" is an expression of efficiency, meaning so many dollars of cost per so many dollars of budget.




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