AI-Powered Project Counterfactual Analysis

Project Counterfactual Analysis

Executive Summary

Project PBA-087 concluded with a 28-day schedule delay and a cost overrun of $235,951, resulting in a severely reduced expected margin of 1.22%. This outcome was primarily driven by unmitigated external supply chain issues (material constraints, delayed orders) and reactive issue management, which eroded milestone slack and increased project delay. This counterfactual analysis explores three “what if” scenarios to quantify alternative outcomes had key events unfolded differently. The scenarios demonstrate that proactive risk mitigation, efficient issue resolution, and timely financial adjustments could have significantly improved schedule performance, reduced costs, and preserved a greater portion of the project’s original profitability. The quantified impacts underscore the critical importance of enhancing organizational risk management maturity and financial foresight to address systemic risks.

Counterfactual Scenario 1: Proactive Supply Chain Risk Mitigation

Scenario Definition and Baseline:

• Factual Baseline: The project experienced severe schedule slippage (28 days total delay, -17 days milestone slack) and cost overruns due to prevalent material constraints, delayed purchase orders, and delayed production orders. Cost Variance was $235,951, and Final Cost was $2,469,536.
• Counterfactual Premise: What if the project team had proactively identified and mitigated the supply chain risks, preventing them from escalating significantly? Assume the impact of material constraints and delayed orders was halved compared to the actual outcome.

Projected Counterfactual Analysis: With proactive supply chain risk mitigation, the severe erosion of milestone slack would have been significantly lessened. The project would have maintained better schedule control, minimizing the downstream impacts of stalled work and re-planning. This would lead to improved cost performance as well, with fewer instances of inefficient resource utilization. Schedule delay is projected to be reduced to 10 days, and Cost Variance to $111,679, reflecting a 5% overrun.

Quantified Outcome Comparison:

Metric	Actual Outcome	Projected Counterfactual Outcome
Completion Date	2025-09-28	2025-09-10
Final Cost	$2,469,536	$2,345,264
Schedule Variance	28 days delay	10 days delay
Cost Variance	$235,951	$111,679

Strategic Insights and Lessons Learned:

• Strategic Lesson 1 (Enterprise Risk Management): The project’s vulnerability to external supply chain issues highlights a systemic gap in enterprise-level supply chain risk management. The organization should invest in establishing a centralized supply chain intelligence function, implementing early warning systems for material constraints, and developing standardized contingency plans for critical dependencies across all projects.
• Strategic Lesson 2 (Procurement Integration): There appears to be a disconnect between project planning and procurement’s capabilities to manage complex supply chains. Future projects require tighter integration between project management and procurement, fostering joint risk assessments and collaborative solution development from project inception.

Counterfactual Scenario 2: Effective Issue and Risk Resolution

Scenario Definition and Baseline:

• Factual Baseline: The project struggled with high Milestone Risk Rating (66.61%), high Risk Exposure (49%), 7 Severe Issues, and 16 Active Issues, indicating reactive and inefficient issue/risk resolution. This contributed to the 28-day delay and $235,951 cost overrun.
• Counterfactual Premise: What if the project team had been significantly more effective at resolving identified issues and mitigating active risks, preventing their negative impacts from escalating? Assume the schedule delay due to internal issues was halved.

Projected Counterfactual Analysis: More efficient issue resolution would have prevented many of the internal obstacles that contributed to schedule deterioration and cost overruns. While some external supply chain impacts might have remained, the project’s internal resilience would have limited their knock-on effects. This would lead to a modest improvement in CPI and a reduction in both Schedule and Cost Variance. Schedule delay is projected to be 15 days, and Cost Variance $178,687.

Quantified Outcome Comparison:

Metric	Actual Outcome	Projected Counterfactual Outcome
Completion Date	2025-09-28	2025-09-15
Final Cost	$2,469,536	$2,412,272
Schedule Variance	28 days delay	15 days delay
Cost Variance	$235,951	$178,687

Strategic Insights and Lessons Learned:

• Strategic Lesson 1 (Risk & Issue Management Maturity): The project’s high volume of unaddressed issues and risks highlights a need for an organization-wide uplift in risk and issue management maturity. This includes training on proactive risk identification, a more robust risk mitigation planning process, and streamlined issue resolution protocols with clear ownership and deadlines.
• Strategic Lesson 2 (Project Manager Empowerment): The persistent issues and risks suggest that project managers might lack the authority or resources to effectively address significant impediments. The organization should review and, if necessary, enhance the empowerment of project managers to make timely decisions, allocate contingency resources, and escalate critical issues more effectively.

Counterfactual Scenario 3: Timely Budget Adjustment and Margin Recalibration

Scenario Definition and Baseline:

• Factual Baseline: The project’s initial 20% quoted margin eroded to 1.22% by completion, driven by the $235,951 cost overrun. Budget adjustments and margin recalibration occurred too late, leading to significant stakeholder disappointment and a loss of profit.
• Counterfactual Premise: What if the project’s budget and margin had been proactively adjusted and expectations recalibrated when early signals of cost overruns and margin erosion became clear (e.g., in early June, when VARP consistently rose above 5% and MARP began its significant decline)? Assume the overrun was limited to 7% due to proactive intervention.

Projected Counterfactual Analysis: While this scenario might not have eliminated the underlying cost overruns caused by external factors (thus schedule delay remains 28 days), it would have established more realistic financial expectations for stakeholders. Crucially, early recognition and recalibration would have triggered timely cost-control measures or potentially revenue re-negotiations (e.g., change orders for increased material costs), mitigating the severity of the margin decline. The Cost Variance is projected to be $156,351, leading to a 4.4% margin.

Quantified Outcome Comparison:

Metric	Actual Outcome	Projected Counterfactual Outcome
Completion Date	2025-09-28	2025-09-28
Final Cost	$2,469,536	$2,389,936
Schedule Variance	28 days delay	28 days delay
Cost Variance	$235,951	$156,351

Strategic Insights and Lessons Learned:

• Strategic Lesson 1 (Financial Transparency & Forecasting): The project’s substantial margin erosion highlights a need for greater financial transparency and more frequent, accurate forecasting. The organization should implement a policy requiring mandatory monthly or bi-weekly EAC and MARP updates, with triggers for senior management intervention when critical thresholds are breached.
• Strategic Lesson 2 (Proactive Contract Management): The unmanaged cost increases point to a deficiency in proactive contract management and the use of change orders. The organization should develop and enforce a standard operating procedure for identifying, costing, and proposing change orders for external factors (like increased material costs) that impact the project’s scope or cost baseline, ensuring margin protection.