Definition of Schedule Risk Analysis

A schedule risk analysis uses statistical techniques to predict a level of confidence in meeting a program’s completion date. This analysis focuses on uncertainty and key risks and how they affect the schedule’s activity durations. Because each activity has an uncertain duration that depends in part on uncertainties about effort and resources, the entire duration of the overall program schedule is also uncertain. Therefore, unless a statistical simulation is run, calculating the completion date from schedule logic and duration estimates in the schedule tends to underestimate the overall program critical path duration.

Estimates of activity durations should be viewed as forecasts based on the best information available at the time. Assumptions regarding resource availability and productivity, required effort, and availability of materials, among other things, allow for the determination of the most likely activity durations. However, there is inherent uncertainty about the most likely duration estimate that can cause activities to shorten or lengthen. Activity duration estimates include inherent uncertainty, estimating error, and, perhaps, estimating bias. For instance, if a conservative assumption about labor productivity was used in calculating the duration of an activity and during the simulation, a better labor productivity is possible, then the activity will shorten, at least for that iteration. However, schedule underestimation is more pronounced when the schedule durations or schedule logic include optimistic bias. Activity durations and logic in a CPM schedule may be overly optimistic if there is pressure from the customer or instruction from management to finish earlier than the unbiased duration estimates imply.