The plans practice I: plan levels, planning steps and estimating

The purpose of the plans practice is to facilitate communication and control by defining the means of delivering the products: where and how, by whom, and estimating when and how much. A plan is not just a schedule. In PRINCE2 a plan describes what products will be delivered, how they will be delivered, the activities and resources needed, the timescale, the costs, the quality approach, the tolerances and the risks. Plans are the basis of control because progress can only be judged against something; they are also a communication tool, telling everyone involved what is expected of them.

This lesson covers the levels of plan in PRINCE2, the steps of planning and the techniques used to estimate effort, duration and cost. Lessons 8 and 9 cover product-based planning, the technique at the heart of PRINCE2 planning, and lesson 10 connects plans to stages, tolerances and exception plans.

Why plan at several levels

No single plan can serve every audience. The business layer and the board need to see the whole project at a level of detail that supports investment decisions. The project manager needs a detailed plan for the current stage. Team managers need detailed plans for their work packages. PRINCE2 therefore uses several levels of plan, each with its own audience, level of detail and time horizon.

Team plans are optional in the sense that PRINCE2 does not prescribe their format; a supplier may use its own planning tools and methods. The project manager needs only to be confident that the team plan can deliver the work package within its tolerances. Exception plans replace the plan they modify; they are not extra plans layered on top.

Planning horizons

A central idea of the plans practice is that it is impossible to plan an entire project in detail at the start with any confidence. The planning horizon, the period over which accurate planning is possible, is usually short. PRINCE2 deals with this by planning the whole project at a high level and only the next stage in detail. When that stage nears its end, the next stage is planned in detail, using everything learned so far. This is one of the main reasons for management stages, and it links the plans practice directly to the principle of managing by stages.

The steps of planning

PRINCE2 recommends a consistent approach to producing any plan. In plain terms, the steps are: design the plan, which means deciding its format, tools, estimating methods and level of detail; define and analyze the products using product-based planning; identify the activities and dependencies needed to deliver the products; prepare estimates of effort and duration; prepare the schedule; and analyze the risks to the plan. The plan is then documented with its budget, tolerances and assumptions. Steps are often revisited, because analyzing risks may change the activities or the schedule.

Putting product definition before activity identification is distinctive. Many planning methods start with a list of activities; PRINCE2 starts with the products and derives the activities from them. That ensures every activity contributes to a defined product, and that each product has quality criteria by which it can be accepted. Lessons 8 and 9 develop this in detail.

Estimating

An estimate is a forecast of the effort, duration or cost of an activity or product. Every estimate is uncertain, and good planning makes that uncertainty visible rather than hiding it behind a single number. Several techniques are commonly used, and plans often combine them.

Parametric estimating suits much of Ridgeline Water's work. If a crew can install about 24 meters a day in a typical residential district, 60,000 meters need about 2,500 crew-days. With ten crews working 220 days a year, that is a little over a year of installation, before allowing for difficult sites, access refusals and weather. The rate must come from evidence, ideally from the pilot stage, and the plan should record it as an assumption.

Three-point estimates and ranges

Three-point estimating asks for an optimistic estimate (O), a most likely estimate (M) and a pessimistic estimate (P). A common way to combine them, from the PERT technique, weights the most likely value four times as heavily as the extremes, and gives a rough standard deviation as one sixth of the range.

When several uncertain activities are combined, simple addition of most likely values tends to understate the total, because delays in one activity are rarely offset by gains elsewhere. A simulation shows the effect. The code below draws random durations for three sequential work packages from triangular distributions and reports the chance of finishing within various targets. The random seed is fixed so the result is reproducible.

import random
rng = random.Random(130)
packages = {                      # (optimistic, most likely, pessimistic) days
    "data platform":       (30, 40, 70),
    "billing integration": (60, 80, 130),
    "customer portal":     (25, 35, 60),
}
most_likely_total = sum(m for _, m, _ in packages.values())
pert_total = sum((o + 4 * m + p) / 6 for o, m, p in packages.values())
runs = 20000
totals = sorted(sum(rng.triangular(o, p, m) for o, m, p in packages.values()) for _ in range(runs))
print(f"sum of most likely values: {most_likely_total} days")
print(f"sum of PERT expected values: {pert_total:.1f} days")
for target in (155, 170, 185, 200):
    share = sum(t <= target for t in totals) / runs
    print(f"chance of finishing within {target} days: {share:.0%}")
print(f"80th percentile: {totals[int(0.8 * runs)]:.0f} days")

sum of most likely values: 155 days
sum of PERT expected values: 165.8 days
chance of finishing within 155 days: 12%
chance of finishing within 170 days: 39%
chance of finishing within 185 days: 69%
chance of finishing within 200 days: 88%
80th percentile: 193 days

The sum of the most likely values is 155 days, but the simulation gives only about a 12 % chance of finishing that quickly, and even the PERT total of about 166 days is met less than half the time. The 80th percentile, about 193 days, is the duration the team would meet four times in five; a project manager might use something like it for the schedule, and set time tolerance to cover the range the board is willing to accept. The simulation does not make the estimates more accurate; it makes the consequences of their uncertainty visible, which is the information the board needs to set tolerances.

Who estimates

PRINCE2 expects estimates to come from the people who will do the work, wherever possible. Team managers estimate the work packages they will deliver, and the senior supplier confirms that the supplier side can achieve them. The project manager assembles the estimates, challenges them and adds management activities such as reviews and reporting. An estimate imposed from above without the agreement of those doing the work is a target, not an estimate, and it tends to produce exceptions later.

Budgets within a plan

A plan's budget is more than the sum of activity costs. PRINCE2 guidance describes several components that a project budget may include: the cost of the planned work, a risk budget for responding to risks, a change budget for approved changes, and cost tolerance. Keeping these separate makes it clear which money is for planned work, which is for known risks and changes, and which is the board's allowance for variation.

Separating these amounts protects the plan. A project manager who uses the change budget to cover overruns on planned work hides a performance problem; one who uses cost tolerance to fund changes hides scope growth. Reporting each component separately in highlight reports lets the board see what is really happening.