Transcript Mn/DOT Cost Estimation Process Improvement and

NCHRP 8-60
Risk Analysis Tools and
Management Practices to Control
Transportation Project Costs
Distribution for Total Project Costs
(Current $)
Continuous Distribution:
Lognormal
Probability
Probability
Continuous Distribution:
Normal
0.020
Mean = 499.57
0.015
Cost or Duration
Cost or Duration
0.010
Continuous Distribution:
Triangular
Discrete Distributions
Probability
Probability
0.005
0.000
400
5%
Cost or Duration
Cost or Duration
500
600
90%
437.98
700
5%
566.93
Keith R. Molenaar, PhD
Stuart D. Anderson, PhD, PE
Transportation Estimators Association
Annual Conference
Saratoga Springs, New York
October 4, 2008
NCHRP 8-60
Research Team
Keith R. Molenaar
University of Colorado
Principal Investigator
Stuart Anderson
James Diekmann
Cliff Schexnayder
Ted Ferragut
Texas Trans. Institute
Co-principal Investigator
University of Colorado
Co-principal Investigator
Arizona State University
Consulting Investigator
TDC Partners, Inc.
Implementation Leader
Agenda
• Objective
• Motivation
• Process
• Methods and Tools
• Implementation
• Conclusions
Research Objective
To develop a comprehensive
guidebook on risk-related analysis
tools and management practices for
estimating and controlling
transportation project costs
Background
Risk Strategy
Identify risks,
quantify their
impact on cost,
and take actions to
mitigate the impact
of risks as the
project scope is
developed.
Published Project Risk Management
Policy or Procedures
47 of 52 State Agencies
Yes
9%
No
91%
Published Definition for Contingency
48 of 52 State Agencies
Yes
19%
No
81%
Cost Estimate at Any Phase
Total Project Estimate = Base + Contingency
Risk-related analysis tools
and management practices
Basic Framework
Monitor
and
Control
Identify
Risk
Management
Process
Assess/
Analyze
Allocate
Mitigate
and
Plan
Scalable for Project Complexity
Adaptable to Project Development Phases
Risk Definitions and Tools
• Risk Identification
• Risk Assessment and Analysis
• Risk Mitigation and Planning
• Risk Communication
In a Nutshell:
Risk Identification
Identification, categorization and
documentation of comprehensive, nonoverlapping set of:
– “risks” (potential problems)
– “opportunities” (potential improvements)
Events that might occur, which could change
project cost or schedule
Risk Identification - Tools
• Brainstorming
• Scenario planning
• Expert interviews
• Delphi methods
• Influence or risk diagramming
• Risk checklists
• Red flag lists
Risk Identification - Checklists
DOE
Caltrans
ACEC/AGC
WSDOT
Washington State
Department of Transportation
In a Nutshell:
Risk Assessment and Analysis
Process of adequately describing, assessing
and analyzing the risks
– Risk frequency
– Risk severity
Results in a set of ranked risks or quantified
risks for inclusion in risk register
Risk Assessment and Analysis - Tools
• Qualitative Assessment Tools
– Probability-Impact Matrices
• Quantitative Assessment Tools
– Expected Value Methods
– Three-Point Estimate Methods
– First Order Second Moment Methods
– Monte Carlo Simulation Methods
Probability-Impact Matrices
ASSESSMENT GUIDE
Likelihood
A
Remote
B
Unlikely
C
Likely
D
Highly Likely
E
Near Certainty
High (Red)
Likelihood
Level
RISK ASSESSMENT
E
M
M
H
H
H
D
L
M
M
H
H
C
L
L
M
M
H
B
L
L
L
M
M
A
L
L
L
L
M
a
b
c
d
e
Consequence
Unacceptable. Major disruption
likely. Different approach required.
Priority management attention
required
Moderate (Yellow)
Some disruption. Different
approach may be required.
Additional management attention
may be need
Low (Green)
Level
Schedule
and/or
Cost
a
Minimal or no impact
Minimal or no impact
b
Additional resources
required; able to meet
<5%
c
Minor slip in key milestones;
not able to meet need date
5-7%
d
Major slip in key milestone or
critical path impacted
7-10%
e
Can’t achieve key team or
major program milestone
>10%
Minimum impact. Minimum
oversight needed to ensure risk
remains low
Three Point Estimate Tools
Most Probable Cost (m)
Probability
Average Cost (always >m)
Highest Credible Cost (p)
Cost
Lowest Possible Cost (o)
The average cost of the item is (o+4m+p)/6
Monte Carlo Simulation Models
Activity A
Activity B
cost
End
Start
Activity C
schedule
Monte Carlo Simulation Models
80% of the values are
equal or less than 5.2
50
49
48
47
46
45
44
43
42
41
40
39
38
37
36
35
34
33
32
31
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
Iteration
4.4
4.6
4.8
5.0
5.2
5.4
5.6
Risk Analysis Process
Risk Assessment to Identify Contingency
Most Likely
Estimate
Contingency
Ranking of Risks
Contribution to Total Mean Risk (Additional Cost in 2007 $M)
Risk Event
0
100
200
300
400
500
600
Total Mean Cost Risk
C3. Labor shortage or material procurement issues during construction
79.6
S4.1. Other additional scope required - Bangerter
78.8
C1.2. Market conditions at time of bid
68.2
D25. Uncertainty in pavement design
67.0
C13. Additional overhead costs resulting from delays (pre-construction and construction)
41.2
D23. MVC designated as a lifeline facility
36.4
R2. Additional cost due to accelerating development within the proposed corridor
32.8
Identified Minor Risks (aggregate)
29.2
Unidentified Risks (aggregate)
29.2
S1. Uncertainty in transit component
23.4
C11. Damage to adjacent properties or facilities due to construction activity
20.0
E5. Challenge to ROD
18.0
D16. Uncertainty in required ground improvement (excluding surcharging)
15.0
S3. Additional mitigation required
14.0
S2. Additional aesthetic treatment / elements required
13.0
D18. Uncertainty in required noise walls
10.8
Xxx
D2. Change alignment near ATK
10.8
D15. Other uncertainty in earthwork
Similar for
Opportunities
10.0
C4. Difficult ground conditions during construction
…
642.1
7.5
R4. Other issues acquiring ROW
7.2
D12. Cannot re-use as much material as assumed
6.2
D8.1. Uncertainty in TS&L for other bridge structures - additional bridges
5.0
U8. Mt. Timpanogas - water treatment plant
5.0
S4.2. Other additional scope required - other
5.0
R1. Relocate Hillside Elementary
3.7
D14. Uncertainty in embankment consolidation
3.0
0
10
20
30
40
50
60
70
80
Contribution to Total Mean Risk (% of Total)
90
100
In a Nutshell:
Risk Mitigation and Planning
Risk Mitigation and Planning
• Assigning responsibility/ownership for
risks
• Developing plans to address risks
Monitor
and
Control
Identify
Risk
Management
Process
Allocate
Mitigate
and Plan
Assess/
Analyze
Risk Mitigation and Planning - Tools
• Red Flag Lists
• Risk Registers
• Risk Management Plans
• Risk Information Systems
Risk Registers
PROJECT RISK MANAGEMENT PLAN
Functional
Assignment
(5)
Threat/Opportunity Event
(6)
SMART Column
(7)
Risk Trigger
(8)
Active
PID
Impact
(11)
Risk Matrix
(12)
Schedule
Residents will want a higher
Environmental
soundwall than needed to
Analysis
mitigate noise.
3c
Probability
(10)
VH
8/7/2002
1
Type
(9)
The height of the proposed soundwall is
Risk is occuring if the Revised Noise
2 meters. Residents who live next to
Study indicates the additional wall
the freeway have expressed a desire
height is warranted.
for a 5 meter high wall.
High
Cost
High
Probability
Date Identified
ID # Project Phase
(3)
(4)
X
H
M
L
VL
VL
L
M H VH
Impact
VL
L
M H VH
Impact
VL
L
M H VH
Impact
VH
Probability
(1)
Status
(2)
Qualitative Analysis
H
M
L
VL
VH
Probability
Priority
Identification
H
M
L
VL
Risk Registers
PROJECT RISK MANAGEMENT PLAN
OPTIONAL
Quantitative Analysis
Qualitative Analysis
Type
(9)
Probability
(10)
Impact
(11)
Probability
(%)
(13)
Risk Matrix
(12)
Impact
($ or
days)
(14)
Response Strategy
Effect
($
or days)
Strategy
(15) =(13)x(14)
(16)
Response Actions including
advantages and disadvantages
(17)
Monitoring and Control
Affected WBS
Tasks
(18)
Responsibilty
(Task Manager)
(19)
Status Interval or
Milestone Check
(20)
VH
X
H
M
70%
L
VL
VL
L
M H VH
Impact
VL
L
M H VH
Impact
VL
L
M H VH
Impact
VH
Probability
Cost
High
H
M
L
VL
VH
Probability
High
Probability
Schedule
H
M
L
VL
100,000
70,000
Mitigation
Earmark $70,000 in the 6-page estimate
for this risk. Add in an additional 250
hours in WBS 165 for an additional noise
study to analyze 5 meter high wall at this
location.
WBS 165 Perform
Environmental
Studies and
Joe Envr. Manager
Prepare Draft
Environmental
Document (DED)
Two Months
Date, Status and Review
Comments
(21)
Risk
Communication
Tools
Project Components and
Benefits:


I-74 would be reconstructed and widened
to six lanes (three lanes in each direction)
from south of the 23rd Avenue interchange
in Illinois to the U.S. 6 interchange in
Iowa.
I-74 would be realigned in the vicinity of
the Mississippi River, and the existing
Mississippi River bridge will be replaced
with basket-handle configuration, and
match the proposed roadway
improvements.
50% likelihood
cost < $1.08 Billion
10% likelihood
cost < $875 Million
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Overall Project Cost (YOE $M)
For the Full Build
Alternative,
Baseline Funding
Scenario:
90% likelihood
Completion before
May 2023
50% likelihood
Completion before
Dec 2022
10% likelihood
completion before
Aug 2022
Existing interchanges at 23rd Avenue, 7th
Avenue, River Drive, State Street/Grant Street,
Kimberly Road, Middle Road, U.S. 6 (Spruce
Hills Road/Kimberly Road), and 53rd Street
would be improved to update the design and
enhance access to adjacent communities.
Key Assumptions:
Full Build, Baseline Funding
Full Build, Funding Scenario 2
Phased Full Build
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
The current configuration of roadways and
bridges along I-74 does not provide consistent
travel times along this major transportation
corridor. Traffic incidents and maintenance
activities on the narrow Mississippi River
bridges impede traffic flow. Therefore,
improvements to the I-74 corridor are needed to
enhance the movement of persons and goods
between Iowa and Illinois, and serve the
transportation needs for continued economic
development in the Quad Cities region.
90% likelihood
cost < $1.35 Billion
Cost Range:
Completion Date Range:
Full Build, Baseline Funding
Full Build, Funding Scenario 2
Phased Full Build
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Dec 2021
Jun 2022
Dec 2022
Jun 2023
Dec 2023
Jun 2024
Dec 2024
Jun 2025
Dec 2025
Jun 2026
Dec 2026
Jun 2027
Dec 2027
Jun 2028
Dec 2028
Jun 2029
Dec 2029
Jun 2030
Dec 2030
Jun 2031
Dec 2031
Jun 2032
The I-74 corridor provides a vital link between
Iowa and Illinois, and an important gateway to
the Quad Cities region. Growing population and
employment over the past several decades has
led to increasing traffic volumes.
For the Full Build
Alternative,
Baseline Funding
Scenario, in year-ofexpenditure YOE)
dollars:
Cumulative Probability
or Percentile
Project Description:
Cumulative Probability or Percentile
Risk
Communication
Tools
Overall Project Completion Date
Note: For any given funding scenario, range in completion
dates is constrained by funding availability
Project Risks and Opportunities:
The estimated cost range above includes
uncertainty in the annual construction-cost
inflation rate, and assumes several discrete
funding scenarios.
The main project risk is timing of full funding for the project. As shown by comparing the
curves above, uncertainty in the timing of funding creates a large range in project
completion dates and cost. For example, the 90th percentile cost could range over $380
million (mostly due to increased inflation costs) and the 90th percentile completion date
could range over 7 ½ years.
Construction sequencing and phasing is preliminary at this stage of project development.
The Full Build alternative could potentially be accelerated by up to 24 months with an
increase in direct cost of about $10 million. However, an accelerated schedule could save
indirect (overhead) costs and reduce inflation costs significantly.
Numerous design and right-of-way issues that need to be resolved as the project design is
finalized. These could add to the project cost.
Level of
Project Design:
Low
Medium
High
July 2007
Implementation
• A Complexity-Based Solution
– Type I – Risk Identification and
Contingency Percentage
– Type II – Qualitative Risk Analysis and
Identified Contingency Items
– Type III – Quantitative Risk Analysis and
Contingency Management
Estimate Contingency
Actions to Perform
Type II Risk Analysis
1. Red Flag Items or Rank risks (PxI matrix)
2. Choose % contingency from allowable range
Maryland Sliding-Scale Contingency
Contingency
Project Phase
Planning
35-40%
Programming and Preliminary Design
25-35%
Final Design
0-25%
Type I - Example
Ohio DOT Design Completion Contingency
Guidelines for Cost Estimating of Major Projects
Estimate Contingency
Actions to Perform
Type II Risk Analysis
1. Rank risks (PxI matrix)
2. Estimate Expected Value for top 20% of
risks
3. Choose % contingency from allowable
range
4. Use additional contingency if warranted
by the top risks
Estimate Contingency
Actions to Perform
Type III Risk Analysis
1. Rank risks (PxI matrix)
2. Develop a risk-based cost and schedule
model
3. Choose appropriate contingency
Agenda
Objective
Motivation
Process
Methods and Tools
Implementation
• Conclusions
Conclusions
 The simplest
representations often
work best
 While the analysis may
be supported by a
complex, rigorous, and
probabilisticallysophisticated model, it is
of little value if it is overly
complicated in their
representation
http://www.fhwa.dot.gov/programadmin/contracts/cmetg.cfm
Conclusions
Other Related Initiatives
• FHWA Expert Task Group
– Guide to Risk Assessment and Allocation
– “Train-the-Trainer” Workshops
• NHI Course on Risk Management
• NCHRP SHRPII R-09 Guide for the
Process of Managing Risk on Rapid
Renewal Projects
Question, Answers and Discussion!
Thank You!
Study Help
•
•
•
•
Examine Sliding Scale Contingency
Use Delphi Technique
Capture expert opinion
Series of questions using an Excel
Spreadsheet
• Assess contingency ranges for different
project complexities and stages in project
development
• Requesting your help!