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Progressive Discovery and the Cone of Uncertainty

With most ICT project, there is a process of discovery as a project progresses. Projects start with a high level of uncertainty. As the project moves through its early stages, the uncertainty starts to rapidly reduce and continues to reduce towards zero as the project heads towards completion.

That high level of uncertainty at the outset of a project means that it is only possible to provide a broad range of cost estimates (Estimate Variability in the diagram below). The spread between the “best case” and “worst case” estimates is at its broadest at the start of the project. This broad range of estimates reflects the high-level of risk that comes with the high-level of uncertainty at the outset of a project. 

As projects progress through the initial phases, the QPS will develop a deeper level of detail in understanding of the requirements and of what tasks QPS and PSBA will need to perform to achieve those requirements.  As the project progresses, it will be possible to provide a narrower range of cost estimates as the uncertainty decreases. And as the uncertainty decreases, the Estimate Variability decreases.

This concept can be viewed graphically in the below diagram. The vertical distance between the two red lines reflects the breadth of uncertainty.  The lower parameter of the red line of the cone represents the “most optimistic” estimate of costs. The upper parameter of the red line of the cone represents the “most pessimistic” estimate of costs. As the project progresses, the lower and upper parameters of the cone converge to reflect the reduced level of uncertainty and reduced Estimate Variability. 

This document has endeavoured to provide both an estimate for the next phase of project discovery, as well as an estimate of the whole project.  Both estimates are still indicative, but the next phase will discover more detailed information that will enable the estimate of total project cost to be refined with a greater level of accuracy. At the end of the next phase, whole of project cost estimates will be refined and will be delivered with a greater level of certainty and a reduced level of risk.

For the initiatives that have already been estimated, the existing values have been used.  Two varied estimates had been produced for NCIS, which have been used to provide a hybrid estimate range. For the initiatives where an estimate was produced in preparation of this document, a “most likely” value +/- 80% has been used to indicate the level of uncertainty.

About the Author of

Bullet Dodging

A Risk Management Handbook for ICT Projects

Alan Bergsma is the founder of ALB Consulting.

Alan is no stranger to risk. He’s gone on a solo motorcycle adventure from the highest motorable road in the world in the Indian Himalayas across Eurasia up to the Arctic Circle in Scandinavia. He’s gone on a 5-month solo bicycle journey across Africa. And he has gone paragliding and scuba diving in some of the most exotic locations across the globe.

Alan’s experience in successfully delivering high risk ICT projects spans almost three decades.  He’s successfully delivered programs and projects across multiple industries including banking, insurance, financial regulation, oil & gas, mining, government and national intelligence.

The projects Alan has delivered include relatively modest ICT projects ranging up to enterprise-wide ICT projects with budgets over $450 million.

Alan has managed project risk for blue-chip companies such as Deutsche Bank, JP Morgan Chase Bank, Credit Suisse Bank, Commerzbank, State Street Bank, Barclays Bank, The Prudential Insurance, The Financial Services Authority, Norwich Union/Aviva Insurance, ANZ Bank, Queensland Treasury, BHP Billiton Mitsubishi Alliance, Queensland Department of Education, Royal Dutch Shell, Santos, Brisbane City Council, Origin Energy, and the Australian Criminal Intelligence Commission.

In addition to broad and deep experience in ICT projects, Alan also brings in-depth knowledge of international best practices.  Alan maintains several of the best formal certifications in Project Management including: Project Management Institute – Project Management Professional (PMI-PMP), Project Management Institute – Risk Management Professional (PMI-RMP), Axelos Managing Successful Programmes (MSP), Axelos - Prince 2 Agile Practitioner, and Axelos - Management of Risk (M_o_R).