Overcoming Complexity with Project Portfolio Forecasting

Portfolio forecasting, or multi-project forecasting, allows for greater ease in updating forecasts across a wide range a projects. Current software solutions can help you enable this methodology to improve your project performance. Let’s first review why forecasting is so important in projects. Then, we will look in more detail at the benefits of project portfolio forecasting.

Benefits of Forecasting

Creating project forecasts, the process of taking project estimates and status and extrapolating the current project performance to the end of the project, is an essential part of project management and project control. Forecasts are made for project duration, project cost, performance, and quality.

Forecasting provides the Enterprise with knowledge that enables proactive project, resource, and risk management. It creates confidence in meeting stakeholder demands and allows for the optimization of resources. The need for forecasting on large, complex projects is a given. The responsibility often falls to professional Cost Engineers, Project Managers, and those experienced with detailed forecasting. It can be a time consuming process, but is a vital part of their job.

A critical, but often overlooked, component of forecasting is ensuring all programs, projects, and initiatives have cost and resource forecasts. To truly understand resource utilization, organizations must have a full picture of all costs and resources. However, is often a daunting prospect. While the number of large projects may be relatively small – the entire portfolio can consist of a large number of small projects. Additionally, project managers often manage multiple projects at the same time. These smaller projects can have a lower standard for forecasting or resource tracking, and are excluded from enterprise project systems. As a result, there can be a great deal of inconsistent (or missing) information.

Elements of Forecasting

Next, let’s review what makes forecasting complex and time consuming. Here are some of the key elements of the forecasting process:

• Forecasting may be required at a fairly detailed level within a work breakdown structure. Therefore, forecasting against hundreds or even thousands of activities may be necessary in large projects.
• Forecasts must be updated periodically to reflect decisions, resources availability, and the impact on performance or changes. These changes can be scope changes, changes to forecasts based on actual performance, or the impact of risks coming to fruition.
• Forecasts of work to be completed are reduced by recognizing the work completed. This is measured against the original forecasts for the work’s completion.
• Interplay between changes in scope or conditions and the ongoing work can be measured and forecast.

(source PMI)

Organizations often underestimate the necessity and difficulty of achieving all of these. And it only gets more difficult when attempting to update forecasts across multiple projects.

Forecasting screens in leading Enterprise Project Performance (EPP) tools, such as EcoSys, have been overhauled to optimize the user experience. However, complex requirements often require deep and robust functionality to support the many options and approaches used in forecasting. This robust functionality can make even optimized screens complex in the options they provide.

Enterprise Project Performance software typically supports the following processes and approaches:

• Forecasting at any level within a WBS
• Support for multiple forecast methods
• Forecast Base carried over from prior forecasts, changes, budgets, etc.
• Forecast Balances to incorporate actuals, as well as over/underspend in forecast
• Forecast Adjustments to ensure forecasts match value based on method selected
• Forecasting also includes dedicated methods for both forecast balance and forecast adjustments
• Time Phased forecasting

As we can see from the from the elements above, forecasting can be very detailed and complex. Therefore, it is often time consuming.

Benefits and Challenges of Project Portfolio Forecasting

The benefits of forecasting across the entire portfolio, including all projects, programs, and initiatives cannot be understated. Key benefits include:

• Visibility across the enterprise – if the majority of small or medium projects aren’t being forecast in your EPP, you don’t have true visibility into Enterprise resource allocation and therefore may be missing out on opportunities to optimize your resource usage.
• Cost reductions – with razor-thin profit margins, contractors are leveraging technology to cut costs and increase efficiency. Detailed and accurate forecasting of all projects is key in analyzing your business.
• Improved decision support – by leveraging your Enterprise data you will improve your ability to make informed decisions.
• Draw accurate reports in real-time – by capturing forecasts for all activities in a single tool, you will be able to accurately assess your portfolio.
• Unify data for maximum impact.

The challenge is reconciling the complexity of some functionality needed to support complex requirements with a quick and easy method to forecast across multiple projects for already overburdened Project Managers. Simple project forecasting often doesn’t require forecasting at the activity level, nor does it need all the potential options needed for larger projects. Project Managers need a simple screen to update all of their forecasts for all their projects.

The Solution for Project Portfolio Forecasting

EcoSys offers comprehensive and sophisticated project controls capability but often many smaller projects don’t require the level of control and rigor as large projects. For these projects, EcoSys provides forecasting screens for simple projects, where a user can go into one screen and create or update forecasts for many projects in a single screen. This vastly simplifies the task of keeping all projects and activities up to date with accurate forecasts.

Simpler forecasting processes can now be implemented using project attributes (like size/budget, type, portfolio membership, etc.) to define control requirements and set defaults; and project KPIs to set performance thresholds.

New screens within the software platform support the ability to view and manage performance for multiple projects within the same page.

Forecasting across the entire portfolio can provide tremendous returns. The returns come in the form of (1) visibility of resource usage across the Enterprise, (2) insights into spending that offer the opportunity to reduce costs associated with low value initiatives, and (3) the unification of data that allow for real-time and accurate forecast reports. By leveraging a solution that provides the tools to quickly and easily create and update forecasts for smaller initiatives, in addition to supporting the full and detailed requirements of large complex projects, it is possible to realize this objective.

Mark Nelson has been in the Enterprise Project Performance industry for over 15 years. He has worked as a software implementation and business process consultant in helping customers define their processes and leverage best practices for large global organizations. His current role as part of the EcoSys go-to-market team is to identify industry trends, product strategy, and best practices for customer’s Enterprise Project Performance solutions. Mark has experience that spans multiple sectors including Transportation Infrastructure, Construction, High Tech, New Product Development, and IT.