Project Decision Analysis Process
Modeling the Situation
A mathematical model helps the analysis and estimation of future events. During the modeling stage, project managers rely on heuristics or rules of thumb to make estimations and create the model. Under many circumstances, heuristics lead to predictably faulty judgments or cognitive biases.
a. Creating Models for Each Project Alternative
Project managers constantly create mathematical models of projects, in most cases this is the project schedule. Sometimes, more elaborate models are required. For example, in the analysis of a complete product lifecycle, comprehensive models will include not only product development, but also marketing and sales efforts.
In our example, it is possible to create three simple slightly different project schedules associated with each scenario identified at the decision-framing stage: “do nothing”, add a resource from another project team, and hire an external contractor.
b. Quantifying the Uncertainties
The uncertainties, identified through the decision framing process should be quantified. One of the ways to quantify uncertainties is defining ranges for parameters. For example, define low (optimistic), base (expected), and high (pessimistic) duration estimates for each task.
Another way to define uncertainties is to list all the potential events, which could affect the project schedule and quantify their probabilities and impact. In our software development example, there is a 50% chance that external consultant will not be familiar with subject area for the software project, which may delay the development by 20%.