Calculated Risks and Allowing Slips

12 February, 2012 08:22AM · 3 minute read

No one can tell the future. For those reading this that are clairvoyants, you should stop reading now.

Given that the future is unknown we try to plan our projects and our days, hours and minutes based on estimates of our past experiences. How long does it take to design a building of this size, shape in similar locations? How long does it take to write a block or object and how many blocks are there to write?

When we schedule, those more experienced understand that inclement weather, illness, floods, earthquakes and mass hysteria do happen and so program a contingency into the project plan to allow for some slip. Assuming the team members are performing well and we’ve estimated well the project runs smoothly (yeah, maybe that’s what happens on some projects…). So in reality people resign, they make mistakes, work needs to be reworked, work reported as being complete isn’t complete, time and money is lost and most projects start to slip.

There are two ends of the slip spectrum: the position that all slips are unacceptable no matter the reason, and the alternate position is that if something goes wrong, it’s okay to leave it until tomorrow - never setting a hard deadline and never really finishing. The truth is somewhere in the middle however when a project goes bad and slips so far to the right the former position becomes the reality on those projects.

Even the best project planners understand that some risks are worth keeping money in the budget for, and others aren’t. Employing someone specifically to handle specific (catastrophic) issues that arise seldom works, as this person becomes a “free resource” to the project and is usually dragged into other aspects of the project. When the catastrophic event occurs and they are they needed, they are unavailable and that contingency plan falls apart.

Holding a person outside the project (possibly a contractor) on retainer in the event of a catastrophic event during the project could be a worthwhile investment even though they cost more to keep on retainer and have higher rates the total cost is less than the internal option.

If a catastrophic event stops the project dead and days of productivity are lost (on some projects this could be measured in the millions or dollars a day) then spending a few thousand dollars to keep a fix it person on retainer seems like a great investment in retrospect. This sort of calculated risk is what good project planners are paid to account for but my observations are that this is rare. In the end justifying the additional costs in the budget ahead of the event is impossible when dealing with short sighted management who want to “win the job” at the bid stage.

So often it’s those contingencies that are removed, and when they could have been of benefit their absence causes so much pain and suffering later in the project and almost always it’s not the people that made the cuts to the schedule that feel that pain.

The reality is that thoughtful and realistic planning with calculated risks and contingencies are what make projects look professionally executed with significantly less stress for all concerned. Those people that cut out the contingencies and ignore the calculated risks to save a few dollars up front are usually the same people that insist there shall be no slips when the inevitable disruptions occur.

Fight to keep your contingencies and calculate the true costs of your risks and keep them in your plan and life in your project will be just that little bit better.