This Chapter deals with risks associated with resources

1. UCLA Extension Risk Analysis & PM
Winter 2014 POLA 1
Chapter 5
Identifying Project Resource
Risk

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Project Resource Risk
Definition of Resource: people, equipment,
money, building, infrastructure, software,
etc. required for project execution
We all want the best skills, best
equipment, best resources for in our
projects.
Resource Risks are THIRD in
Importance/Prevalence after Scope and
Schedule

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Desirable Resource Traits
Reliable
Efficient
On-time
Cheap
Makes Lots of Money
Best Equipment
Best Building
Highest Attention
Fastest Partners in a Relay Race
Etc.

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Winter 2014 POLA
Sources of Resource Risk
The major sources are:
 Human Resources
 Outsourcing
 Money

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Winter 2014 POLA
Human Resource Risks
People:
 Motivation – loss of team interest, cohesion
 Late Start – staff not available when needed, e.g.
due to delayed finish or early start of another
project
 Loss – permanent staff loss due to resignation,
death, termination, etc.
 Queuing – slip due to bottleneck; waiting to use
equipment or to receive service
 Temporary Loss – temporary staff loss due to
illness, hot site, Jury Duty,…

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Outsourcing Risks
Late and/or Poor Output
Turn-over: Unhappy Employees
Requires Extensive Supervision
Delayed Start – no control over this; other
commitments;
 Solution:
Service Level Agreement (SLA)
Build Penalty (liquidated damages) into Contracts
Pay more for expedited/better results

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Money
Limited – what can this cause?
 Prioritization: delay/abandon some projects
Excessive – can be mismanaged
Currency Changes –can affect budget
Funds Transfer: can be delayed

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Resource Planning
Determine:
 Resource Requirements
 Types of Skills
 Number of Skills
 Backup
 Holidays: consider these in schedules
 Consider Religious Practices
 Can use Histogram Analysis to plot
hours/dates of availability

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Staff Acquisition
Before Acquiring Project Staff, Determine:
 Skill Requirements – know what you need
 Staff Ability
 Staff Availability
 Project Environment
 Acquisition Circumstances; etc.
Sources of Staff:
 Outsourcing: Hire from outside, from another
Division; Could be Temporary or Permanent

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Procurement Process
Decide to Make or Buy
Know your Company’s Process and
Follow it – Procurement Department
Observe Lead Times
PMP: Plan Procurement, Conduct
Procurement, Administer Procurement,
Close Procurement

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List of Procurement Process Steps
(Generic: variations by City Department)
THINK OF THE RISKS INVOLVED IN EACH of
the FOLLOWING PROCESSES!
 Develop Specification of Materials and/or Services
Required
 Develop RFP
 Get Approval for RFP
 Get Approval to Publish/Advertize RFP
 Advertize RFP
 Hold Bidders Conference
 Issue Addendums/Addenda if Needed
 Receive Proposals

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List of Procurement Process Steps
(Generic) contd.
Evaluate Proposals
Select Vendor/s
Negotiate Contract
Recommend Award of Contract
Obtain Approval to Award Contract
Execute Contract
Manage Contract/Procurement
Close Contract/Procurement
Conduct Lessons Learned

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Money
Cost Estimating MUST be:
 Bottom-up using WBS & Historical Information
(best)
 Parametric Estimation
 Verify with Quotations from Contractors
 and/or other realistic methods.

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Developing a Project Budget
Start with WBS at Work Package Level
Estimate the Cost for the Work
Roll-up the Costs (add them up: WBS Aggregation)
Determine (Estimate) Other Costs:
 Staffing and Outsourcing
 Leases (Building, Equipment, Software)
 Other Equipment, Building, Software Costs
 Travel
 Telephone (all forms of Communications)
 Other Overhead Costs: Networking, Electricity, Water, etc.
 Training
 Upgrades, Promotions,
 Overtime, etc.

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Developing a Project Budget contd.
Perform Cost Budgeting: Accumulate ALL
the Cost Estimates for the Project
Review your Budget Constraint and
Determine the Risk Level
Determine the Required Contingency
Fund/Reserve
Determine Required Management
Reserve

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Summary and Risk Situations
Know these Risk Situations:
Required Skills Lacking Committed Staff
Resource Over-commitments
All Activities with Insufficient Resources
Uncertain Activity Effort / Duration
Estimates
Uncertain Activity Cost Estimates

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Summary and Risk Situations
contd.
Understaffed Activities
Contract Risks
Unique Resources Needs and the
Availability of the Resources
Part-time Participants (Team, workers,
stakeholders, government agencies..)
City Lead-times for Plan Checks,
Inspections, Approvals, Corrections, etc

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Summary and Risk Situations
contd.
Long Distance Team Members
Impact of the Work Environment: Unions,
Government Laws, etc.
Budget Requirements that Exceed the
Project Budget Constraint

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Summary and Risk Situations contd.
Outsourcing of Work
Late Funding Requests for Required
Training, Equipment Purchases, Travel,
Leases, etc.
Determine ALL Project Costs and
Resource Needs
Roll-up (Accumulate) ALL Project Costs
Determine and Include Contingency
Reserves and Management Reserves

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Summary and Risk Situations contd.
Determine and Cost all Known Future
Changes that will affect Resources
(people and money)
Use Right Estimation Methods and
Resources: Historical Information, Expert
judgment, Rule of Thumb, WBS, the
People who will DO the work, etc.
Obtain Approval
Obtain SIGNED Budget

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Homework Due in-class when we meet again
List 3 ways to deal with QUEUING
problem associated with Resource Usage
List 3 Reasons for Outsourcing and List 3
Disadvantages of Outsourcing
Either make a list or provide no more than
once sentence for each response.

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End of Chapter 5