Transcript 2006 Smith - AASHTO - Subcommittee on Design

The WSDOT Cost Estimate Validation Process®
Risk Based Estimating at WSDOT
CRA and CEVP ®
Ken L. Smith, PE, CVS
Deputy State Design Engineer
Washington State Department of Transportation
2006 AASHTO Sub Committee on Design
June 16, 2006
WSDOT Sectary
Doug MacDonald’s Edict
“Project Delivery and Accountability”
(“On time… on budget!”)
The MacDonald Mantra
“What gets measured…
gets managed.”
Managing the program at the project level
2003 Legislature passed a nickel a gallon gas tax to
fund 102 line item projects
2005 Legislature passed an additional nine and one
half cents a gallon gas tax to fund an additional 274
line item projects
With the programmatic approach, risk events that affect cost and
schedule would often balance across the portfolio of projects within
the contingencies of the entire program.
With line item project delivery we no longer have the flexibility to
transfer dollars between projects to cover over or under runs
WSDOT Construction Expenditure in Billions
3.50
3.00
2.50
2.00
2005 Project Management Executive Order &
On-Line Guide developed
1.50
2004 CEVP’s updated on major projects
2003 Cost Risk Assessment (CRA) workshops on smaller projects
1.00
2003 CEVP’s performed on first 12 mega projects
2002 Developed the CEVP Process
0.50
0.00
1999-01
2001-03
2003-05
2005-07
2007-09
2009-11
2011-13
2013-15
What is CEVP®?
CEVP® is an intense workshop in which a team of top engineers and risk
managers from local and national private firms and public agencies
examine a transportation project and review project details with WSDOT
engineers.
• The CEVP® workshop team uses systematic project review and risk
assessment methods to identify and describe cost and schedule risks.
What is CRA ?
Cost Risk Assessment (CRA) is a term that describes a workshop
process similar but less intense than a Cost Estimate Validation Process
(CEVP®).
WSDOT Policies
CEVP® - all projects in excess of $100 million.
CRA - all projects in excess of $25 million.
Value Engineering – all projects in excess of $10 million
Project Management – A project management plan including a risk
assessment plan on all projects regardless of size
Risk Based Estimating at WSDOT
Cost Risk Assessment and Cost Estimate Validation Process
CRA and CEVP ®
Pre Workshop
Post Workshop
C ost
= outlay, inWorkshop
time and money,
to achieve
Activities
Activities
an objective
• Prep with Project
Team
stimate
=a
• Prep
with Risk/Cost
Leads
• Project Flowchart
E
• Project Info
• Cost Validation
statement
of the
• Risk Elicitation
• Model Built
• Draft Report
approximate
• Final Report cost
and
One Pager
• Risk Management
evidence/authority:
Plan
V alidation
= support with
make more certain
P rocess
= a series of actions or operations
conducing to an end
of
Terminology
Stochastic, risk based, cost risk assessment, CEVP ® generally refer to the
notion of probabilistic estimates that consider uncertainty and variability
Parametric estimating generally refers to the use of relationships between a
project’s known characteristics and known historical references for same or
similar projects and project elements.
Deterministic estimating generally refers to “single-point” estimates that
more or less directly measure the items being estimated.
The Questions
 How much will it cost?
 How long will it take?
The Follow-up Questions
 Why does it cost that much?
 Why does it take that long?
The Answer
An Estimate is not a number
 Projects are subject to many variables that cannot all be known beforehand.
 Cost and schedule estimates represent one possible outcome of multiple
variables.
 These variables are not all directly controllable or absolutely quantifiable.
 Therefore cost and schedule estimating and the validation process must
consider probabilities in assessing estimates and schedules, using a
recognized, logical and tested process.
The Answer continued…
… and an Estimate is still just an Estimate.
Estimate
…to judge tentatively or approximately: to determine roughly the size, extent…
to produce a statement of the approximate cost. Implies a judgment, considered
or casual, that precedes or takes the place of actual measuring…
Assess
…implies a critical appraisal for the purpose of understanding or interpreting, or
as a guide in taking action.
A strike can be in the high or low range of the
strike zone, and it can be near the inside or
outside of the plate.
A strike zone is
not a single point.
…an estimate has a high and low range.
The range is defined by up to 5000 iterations using a
Monte Carlo simulation model
…norestimate
…an
is an estimate
has a high
“a” single
and low
point.
range.
One page
summaries
provide a great
tool for
communication
Project Description
Project benefits
Progress
Cost Range
Project risks
Schedule Range
Key Financial
assumptions
Qualitative Results
 Improved communication with the public.
 Improved team communication.
 Project Managers take action pro-actively to avoid, transfer
or mitigate risk.
 Risks that are accepted are known.
 Risk Management Plans are integral component of project
work plans.
 Potential response strategies, especially pro-active
measures, are identified in the workshop.
Other Points of Interest
Project Engineers/Managers have indicated…
 “One-pagers” are very popular
 Risk register useful for project planning
 Cost and schedule validation an important feature
 Find the expert review very valuable
 The process is scalable
Project
Management
ProjectRisk
Management
is . . . .
“describes
the processes
concerned
with
“…application
of knowledge,
skills, tools,
and techniques
to…
conducting
risk management
a project.”
meet or
exceed stakeholders
needson
and
expectations.”
PMBOK PMBOK
Risk Planning
Manage Risks
Project Risk Management . . .
“describes the processes concerned with
conducting risk management on a project.”
PMBOK
Risk Planning
 Risk Identification
 Qualitative Risk Analysis
Risk Planning
 Quantitative Risk Analysis
 Risk Response Strategy
 Risk Monitoring and Control
Project RISK Management PLANNING
 Risk Identification
 Qualitative Risk Analysis
 Quantitative Risk Analysis
 Risk Response Strategy
 Risk Monitoring & Control
Cost Risk Analysis
CRA & CEVP®
Next Steps
 Investigate Risk Based Estimating for Portfolios/Programs
 Develop Risk Database(s)
 Combining Cost Risk Assessment with Value Engineering
 Improve monitoring and quantification of results
 More fully develop performance measures.
 Make the process even more scalable.
 Explore the use of risk reserves.
Thank-you for your interest.
What are your questions?
"We have, perhaps too often, taken a best case scenario
and then committed to delivering on it, when in order to
deliver on it, we have to have seven or eight miracles occur.
We're going to be a lot more deliberate and a lot more
careful about what we say we can do at what cost and when
we can do it."
-U.S. Deputy Energy Secretary Bruce Carnes on Hanford,
July 2005