The following abstracts have been submitted for consideration for the 2014 Annual Meeting in New Orleans, LA. The final program will consist of approximately 100 tracks.
(RISK-1498) Construction industry struggles with Integrated Project Delivery contracts insurance requirements
Primary Author: Mr Darrell Mercer
Abstract: Integrated Project Delivery compels collaboration between owners, designers, and constructors by using a single contract. Research finds that this delivery system is not as widely used now as was originally expected and in fact is somewhat falling behind to LEAN construction methods. IPD was intended to become more widely utilized to reduce wasted cost in construction. From a rise about a decade ago, IPD has hit a stalemate as a preferred delivery system in the construction industry. Key participants are not ready for a multi-party single contract with a no-claim clause, which a true IPD project would adapt. The contracts drafted today are not able to assure that contracts of that magnitude has a place in construction in a time where the industry has been hit with hard times. Cost engineers are having difficulties with the contracts being used that have risk protection because the true cost of the project is not known until the project is well on the way or not until it is completed.
(RISK-1504) Critical Decision Making for Project Planners and Controllers
Primary Author: Mr Frank Parth PMP Project Auditors LLC
Abstract: In project management we make decisions on a daily basis. Most relatively unimportant, some will cause the project serious problems To ensure we make rational, unbiased decisions, critical decision-making requires you to:
-Obtain unbiased data
-Examine your logic and your premises
-Be aware of your motivations
-Think through implications
-Know your own limits
-Be comfortable with uncertainty
Most of us consider ourselves competent decision makers based on making reasonable decisions in past projects. Yet there is a great deal of recent neurological research that indicates our brains are not normally logical, most decisions are made emotionally and later justified if questioned by the rational portion of our brains. Once the average person has made a decision, they search for data to support that decision rather than the other way around.
How can you ensure that critical project decisions are the best possible? During this seminar we will look at the most common flaws in decision-making:
(RISK-1520) Integrating Risk and Performance Management
Primary Author: Mr Michael Debiak EVP PSP HNTB Corporation
Abstract: Risk comes in all shapes, sizes, and sources, some will detract from our projects while others may help to improve them. Each of these risks has some element of cost and/or schedule impact that are key factors in the success of any project. Yet risk handling is often the most poorly understood, and more often poorly integrated, element of a projects schedule and budget. Knowing how to handle risk effectively is essential to successful integrated performance management and EVM. In this interactive session, participants will learn first-hand how the risk management process works and how to size and integrate risk based contingencies into their budgets. Attendees will experience the risk management process through all its stages by participating in a mock risk workshop, developing the risk management plan, completing a risk register, and assigning the risk based contingency. All participants will receive a risk register template that they can use to assess their projects risks and help in the understanding of risk-based contingency.
(RISK-1522) Construction Risk Estimation and Management
Primary Author: Mr Daniel Holzman CCP MOCASystems
Abstract: Construction risk estimation and management should be a critical part of every project, integral to project controls. The authors experience in government and private practice indicates that comprehensive risk analysis and management is unfortunately rarely undertaken. Risk is often ignored, or handled on an ad hoc basis, because of the perceived difficulty in estimating risk, and widespread confusion about how to understand and utilize the results of risk analysis.
This paper presents a graded series of approaches to estimating project risk, ranging from simple methods appropriate for small projects, to complex probabilistic methods appropriate for the largest projects. The methods are illustrated on real world examples from the authors experience on projects for the Department of Energy, Duke Energy, and the Army Corps of Engineers. Benefits and limitations of each approach are presented, and a framework for understanding and applying the results of the risk analysis to cost estimating and risk mitigation is presented.
(RISK-1523) Estimating Risk
s Primary Author: Dr Ovidiu Cretu PE Washington State DOT
Co-author(s): Mr Vlad Cretu Cretu Group, LLC
Abstract: The paper summarizes the authors research and practice on estimating risks (cost and schedule) of construction projects. It advocates for a scalable project risk assessment and presents an algorithm that captures the significant aspects of projects uncertainties. The authors elaborate on risk based estimate (risk assessment) as an integral component of risk management cycle. The pitfalls and windfalls of the projects risk assessment are presented in the context of the battle between the professional sophistication (PS) and the keep it short & simple (KISS) approaches. The KISS approach advocates for assessing: (1) of only significant risks (risks that through their consequences may significantly alter the project objectives) and (2) of the risks conditionality (dependency & correlation). Finally it presents an excel tool that may facilitate the integrated cost and schedule risk assessment. The conclusion of the paper is summarized by keep the risk assessment in proportion with the data available.
(RISK-1544) Risks Associated with Concession-Based Contracts in Lagos State, Nigeria
Primary Author: Mr Godwin Jagboro Obafemi Awolowo University
Co-author(s): Mr Gabriel Akindoyin Sanni Obafemi Awolowo University; Ms Grace Kehinde Ojo Obafemi Awolowo University; Mr Opawole Akintayo Obafemi Awolowo University
Abstract: Concession contracts became pronounced in Nigeria after the return to democratic governance in 1999. However peculiarity of risks associated with concession-based project has not been adequately investigated in Nigeria. The objective of this paper was to investigate risks inherent in concession-based projects. The Murtala Mohammed Airport Terminals 2 and the Lekki-Epe Expressway projects formed the basis for this study. Data were collected from stakeholders using structured questionnaire covering issues such as likelihood of occurrence, impact, mitigation and allocation of risks. These were analyzed using factor analysis (FA). The findings showed that financial risk had the highest likelihood of occurrence while inadequate experience in concession contracts had the highest impact on delivery cost and time. Risks mitigating techniques were found to be retention, transfer, avoidance, reduction and sharing. Delay in project approval/permit, unstable government and land acquisition encumbrances were preferred to be allocated to the public sector. Revenue shortage and inflation risks were proffered to be shared between the public and private sectors.
(RISK-1574) Managing Risks in Supplier Design Integration
Primary Author: Mr Richard C Plumery EVP URS
Abstract: In the lean Engineering, Design, Procurement and Construction project world, the current trend is for Engineering and Design Contractors to push more design work to suppliers, necessitating a greater reliance on the integration process of the supplier design information for the completion of their design work. However, this integration process has proven to be problematic due to: multiple submittal iterations, sub-tier supplier involvement, poor change control management, market conditions, shop space availability, and late/discrepant supplier submittals. At best, these issues result in wasted time, money, and energy. At worst, these issues can derail an entire project. These risks grow exponentially on lean projects where time is of the essence and the disproportionate desire for greater value and less waste. Many projects treat such issues as un-actionable, since they appear to be outside of the Engineering and Design Contractors control. However, this paper will not only discuss these major issues and risks in greater detail, but will offer proven strategies and methods that may be employed to mitigate or even eliminate those risks.
(RISK-1584) Risk Analysis at the Edge of Chaos
Primary Author: Mr John K Hollmann PE CCP CEP DRMP Validation Estimating, LLC
Abstract: Empirical studies show that the distribution of actual/estimate cost data has a very long tail on the high side. Actual p90 values are often triple the values we are estimating traditional risk analyses fails to predict long tails. The paper hypothesizes that the tail reflects the outcome of chaos. Borrowing from chaos and complexity theory, the author developed a practical risk analysis method that warns management when a projects risks threaten to push project behavior over the edge into chaos and the long tail. Complexity theory is a mature project management topic (re: Agile, Lean Construction, etc.) however, it has not found practical application in risk quantification, in part because chaotic system behavior is unpredictable. The paper highlights the need for better methods, reviews chaos and complexity theory (e.g., complex adaptive systems and the edge of chaos) and how they relate to project cost performance, and finally presents a method that brings the understanding of chaos into a practical risk quantification toolset.
(RISK-1587) Bracket Budgeting
Primary Author: Mr Michael W Curran DRMP Decision Sciences Corp
Abstract: Annual budgeting is a way of life in most organizations. Planning and control, the two phases of operational budgeting, receive considerable attention at all levels of management. All too often, however, the actual profit differs significantly from the target. This difference is generally attributed to the vagaries of modem business, and rightly so. But this is simply an admission that conventional budgeting is often incapable of coping with business realities.
The reason for this deficiency is fundamental. With conventional budgeting, the forecast of each element in the budget must ultimately be represented as a single number, even though management may know beforehand that thousands of other values are possible. If there are more than a few such elements, the number of possible ways in which they can combine and their effects cascade to the bottom line defies analysis. Bracket budgeting, an analytical procedure that complements conventional budgeting techniques, overcomes this serious inadequacy. This methodology is a synergistic combination of basic concepts in modeling, simulation, and heuristics that gives management an unequaled understanding of the future.
(RISK-1589) Developing Incentive Contract Model to Balance Project Performance & Risk Sharing
Primary Author: Mr Trian Hendro Asmoro ST CCP PT Medco E&P Indonesia
Co-author(s): Mr Autie Minati Putri PT Medco E&P Indonesia
Abstract: Current market situations in Indonesia, i.e. the increase of new major projects and limited major contractor availability have shifted the power of negotiation. This condition pushes companies to revisit their risk and offer an attractive payment scheme. Good contracting strategy and reasonable risk allocation between company & contractor will become key factor that determine the entire project performance
As a result, the optimum combination of schedule and cost shall be selected as part of contracting strategy to lower the project risks in terms of project delay and cost overrun that will certainly impact project target. The incentive amount should be enough to encourage contractors to accelerate their schedules while, at the same time, making up for any cost incur when doing so.
Incentive is basic part of construction contract and it promotes an attitude of motivation in the contractual relationship. This paper concludes that incentive contract is one of best solutions to balance the risks between company and contractor in executing the project. Furthermore, the result will be proposed as a model of incentive contract implementation in Indonesia oil and gas industry.
(RISK-1594) The Flaw of Averages and the Use of Statistical Tools in Project Environment
Primary Author: Mr Thiago Henriqe Rezende Medeiros Vale
Co-author(s): Mr Rafael Gonalves Monteiro Deloitte Touche Tohmatsu Consulting
Abstract: Using averages to set parameters of interest is a quite common practice in project management, ranging from simple trade off studies to complex economic and financial models. In this context, the expectation is that whenever arithmetic means values are used as inputs in a process, the outputs would be an average of the possible results. In fact, this does not occur due to the so called Flaw of Averages. In order to evaluate these kinds of problems, this article presents two examples to illustrate the significant impact that this flaw can have in estimating key parameters. For one of these two examples, the authors demonstrate how the pragmatic use of probability distributions can diminish or even eliminate errors. Finally, a survey was performed in Brazilian companies aiming to bring out the use of statistical tools in project environment, what are the main points for those who do not use and also to support proposals of improvement in performing such statistical analyses.
(RISK-1615) A systematic approach to early stage option screening
Primary Author: Mr Richard Ossei Genesis Oil and Gas
Co-author(s): Ms Tina Sara Thomas Premier Oil
Abstract: It is generally accepted that sound decision-making early in a project's life has the greatest influence on project outcomes. However it is at the early stages of a project that project definition is at its lowest, uncertainty at its greatest and sound decision-making most difficult. Therefore many important decisions at this stage are therefore taken by "gut feel" by project managers and other senior stakeholders. However modern research into cognitive and motivation biases has concluded that such approaches to decisionmaking are consistently flawed and very likely to lead to poor outcomes. With the immense complexity of modern deepwater developments that are beyond most project managers to fully understand and the immense costs involved, a more rigorous and scientific approach to early-stage decision-making is required. A system of qualitative early stage option screening is presented that is suitable for the most complex deepwater developments. A system for mathematically describing development options, decision criteria and option attributes is presented and a method of deciding between competing options under uncertainty using statistical methods is demonstrated.
(RISK-1626) Uncertainty assessement of business plans using Monte Carlo Simulations
Primary Author: Mr Antoine de Chillaz EDF
Co-author(s): Mr Bruno N. Rodrigues EDF
Abstract: Economic analysis, such as business plan, provides valuable data regarding investment decisions for industrial projects, however it is inherently subject to uncertainty (construction cost, operability of asset, cost of utilities). A common technique to address uncertainty is to carry out a sensitivity analysis for input variables of the business plan. This paper introduces a probabilistic approach based on Monte Carlo simulations which aims at providing a quantitative picture of the range of the possible financial outcomes of a project. This method provides a better insight of risks both regarding investment decisions and assessment of different technical solutions. The paper illustrates the benefits of this general approach with examples of thermal power plants projects. It also describes a methodology of EDFs teams regarding a practical use of business plans for project management purpose.
(RISK-1639) Building an Enterprise Risk Management Program
Primary Author: Mr David Huter Texas Department of Transportation (TxDOT)
Co-author(s): Michael Thomas Watry ; Mr Ruben Anchodo Texas Department of Transportation (TxDOT); Ms Kate Wiginton Texas Department of Transportation (TxDOT)
Abstract: The Texas Department of Transportation (TxDOT) has traditionally performed project risk assessments to ensure that project specific goals, such as on-time and on-budget performance, are met. TxDOTs significant project portfolio, currently exceeding 18,500 projects, includes several large design-build and concession projects that are in various stages of development. The risks associated with these projects not only pose budgetary and scheduling impacts, but also have the potential to impact the portfolios allocation of resources and the agencys ability to achieve its goals. In response, TxDOTs Project Management Office is developing an Enterprise Risk Management (ERM) Program that takes a more holistic view of risk management and not only addresses risks with impacts to project cost and time, but also to the larger portfolio and to the agency at large. By addressing risks beyond those particular to cost and time, TxDOT can align project execution with attainment of the agencys larger goals. This paper explains the key components of the ERM Program and how TxDOT plans to use the program to more effectively manage projects.
(RISK-1662) Using Stochastic Optimization to Improve Program Planning
Primary Author: Mr Eric Druker Booz Allen Hamilton
Co-author(s): Mr Blake Boswell Booz Allen Hamilton; Mr Brandon Herzog Booz Allen Hamilton
Abstract: Minimizing the cost of complex programs is critical for government agencies trying to meet their missions in todays fiscal environment and private organizations striving to satisfy their customers while realizing a healthy profit margin. Today, identifying cost-savings measures is a manual procedure where an analyst must make an educated guess as to what actions will have the greatest effect in reducing cost and schedule growth and then test their hypothesis by running the new plan through a risk analysis model. This process is manual, slow, and must be iterated many times in order to arrive at a solution which may or may not be the optimal solution. This paper will outline a methodology, piloted on real-life programs, for using the emerging field of stochastic optimization to automate the identification of cost-savings measures on complex programs. With this operations research-based methodology, users will define their fiscal and resource constraints. The stochastic optimization model will then identify specific changes to the program whose implementation would enable the program to meet its mission at budget and on schedule.
(RISK-1675) Application of the Project Risk Analysis and Management Model (PRAM) on an Urban Project in Brazil
Primary Author: Eng Jonathan Ferreira de Araujo Compass Consultoria
Abstract: The paper presents the application of the Project Risk Analysis and Management Model (PRAM) in the largest urban intervention plan ever designed in Brazil by the public sector.
The PRAM is used to measure the impact of technical, economical, political and social risks related to the specific urban plan which is a long term project (15 years) with a complex relationship between the stakeholders, mainly the residents and the local merchants.
The base model is the Project Risk Network (PRN) which is derived from Project Activity Network (PAN) relationship between the activities. The result of the analysis is a risk profile for each risk and a Total Project Risk Profile (TPRP) for the whole project. The project was stopped 3 times because of lawsuit filed by the residents' association against the government on charges of not allowing public participation in project design.
In January 2013, the mayor of So Paulo city after meeting with the consortium responsible for the project estimated that it was financially feasible and should be turned into a public-private partnership
(RISK-1684) Schedule reviews based on the risk model for pipeline projects
Primary Author: Mr Gregory J. Whiteside CCP Fircroft, contracted to Chevron Pipe Line
Abstract: The purpose of the schedule is to put forth a plan for the order and timing of project tasks. The goal of a schedule review is to ensure the feasibility of the risk model for the project. It will also ensure understanding and alignment between project team members and the project sponsors who must approve the project. The schedule must not only accurately reflect primary execution activities but also include assessment of how primary risks will affect the schedule from the perspective of various subject matter experts.
The paper will develop:
- Set up schedule risk model using @Risk and Microsoft Project
- Common mistakes in modelling
-Risk assessment of task durations
- Logic ties
- @Risk correlations in developing the model
- Which team members should be present and the scope of their input to the process
(RISK-1694) Running the Risk: Improved Risk Mitigation through Global Sensitivity Analysis
Primary Author: James Blake Boswell Booz Allen Hamilton
Co-author(s): Mr Eric Druker Booz Allen Hamilton
Abstract: In constrained budget environments, it is critical for Project Managers to develop risk mitigation strategies that minimize the negative impacts of risk. To assist risk management efforts, the Total Cost Management Framework describes an iterative process of restructuring cost and schedule plans to account for the occurrence of unforeseen events, thereby enhancing a programs ability to absorb the impacts of risk without exceeding budget expectations. Conventional applications of iterative risk mitigation processes involve analysis of isolated risk factors that do not account for interdependencies among risk occurrences. However, by ignoring the relationships between risks, valuable insight into the root cause of risk is lost.
In this study, we explore the application of Global Sensitivity Analysis (GSA) to the development of risk mitigation strategies. GSA, popular for model validation in engineering and life sciences, is a process for measuring the overall contribution of uncertain model inputs to variation in model outputs. Within project management, GSA can provide greater insight into the causes of project risks, allowing for the development of more effective mitigation plans.
(RISK-1697) Joint Analysis Cost & Schedule (JACS): A True Integration of Cost, Schedule, & Risk
Primary Author: Mr Darren Elliott Tecolote Research, Inc.
Co-author(s): Mr Razza Samia Tecolote Research, Inc.
Abstract: As risk management becomes increasingly important in todays project management environment, it is critical for CMs and PMs to have the necessary insight to manage and control project costs. A major challenge for managing costs on programs is the lack of an integrated perspective on how cost, schedule, and risk impact a project. Although many organizations incorporate these disciplines into their program management/control process, it is rare when the cost estimates, schedules, and risk registers are fully integrated. Joint Analysis of Cost and Schedule (JACS) is a business process and software application developed to support highly complex projects (including NASA, USAF, Construction, and Oil & Gas), to completely integrate cost, schedule and risk. JACS allows projects to immediately determine the cost impacts of schedule growth and what risk or activities are the major drivers for the schedule. Through the use of stochastic simulation, the risk-adjusted cost estimate and schedule are generated allowing program managers to budget and plan using statistical confidence levels.
(RISK-1698) Integrating with Project Schedule Risk Improves Analysis of Cost Risk
Primary Author: Dr David T. Hulett Hulett & Associates, LLC
Abstract: The main benefits of integrated cost-schedule risk analysis are in its (1) improvement of the estimates of cost risk and (2) identification of the main risks to cost for mitigation purposes. Schedule risk is important in itself, but when time-dependent resources are at work longer than scheduled the cost will also increase. Technical, external, regulatory and even project management risks (think of biased estimates of activity durations) may affect the projects cost through resources working longer to get the job done. Mitigating risks to schedule may reduce the cost contingency needed because of individual activities being shorter and the marching armys marching for less time. The main focus will be on (1) estimating the cost contingency needed and (2) identifying risks to cost, which may be dependent on schedule or independent of schedule, so we can understand the reasons for holding cost reserves. New simulation software developed within the last 2 3 years will be used to illustrate these points.
(RISK-1721) Variability in Accuracy Ranges for Estimates in the Canadian Hydropower Industry
Primary Author: Mr John K Hollmann PE CCP CEP DRMP Validation Estimating, LLC Co-author(s): Mr Raminder S Bali P.Eng. Manitoba Hydro; Mr John M Boots P.Eng. BC Hydro; Ms Chantale Germain P.Eng. Hydro Quebec; Mr Michel Guevremont P Eng, MSc PSP Hydro-Quebec; Mr Oleg Kantargi PEng, PMP CCP PSP Ontario Power Generation; Mr Kelman Kai-man Ng P Eng BCHydro
Abstract: This paper presents a study of the variability in accuracy ranges for cost estimates in the Canadian hydropower industry. The study sought to improve the participants understanding of risks and estimate accuracy for their projects. It also sought to verify the theoretical accuracy curves in Figure 1 of AACE Internationals Recommended Practice 69R-12: Cost Estimate Classification System As Applied in Engineering, Procurement, and Construction for the Hydropower Industry. The study team collected and analyzed actual and phased estimate cost data from 24 projects with actual costs from 50 million to 3.6 billion (2012$CAN) completed from 1974 to 2014. Greenfield, brownfield and revamp impoundment and hydropower generation facility projects from across Canada were included (power transmission projects were excluded.) The study found that the range bandwidth (uncertainty) in Figure 1 is understated. Further, because actual contingency estimates are biased too low, the actual range curves are biased very high relative to Figure 1. The accuracy ranges and the underestimation of contingency are similar for hydropower and process industry projects.
(RISK-1733) Simplified Schedule Risk Analysis
Primary Author: Mr Nap Allan Garcia Gonzales Jr CCP PSP Suncor Energy Services Inc
Abstract: The Program Evaluation and Review Technique (PERT) is a simplified technique to analyze schedule impact of risks and opportunities. Combined with the mathematical, statistical and graphical capabilities of MS Excel, PERT offers an alternative technique to Monte Carlo in performing schedule risk analysis.
This presentation focuses on the use and application of PERT in schedule risk analysis of construction projects. The deterministic schedule is modeled and time analyzed. Risks are identified, categorized and arrayed against the activities in the form of Activity-Risk Matrix. The PERT network is time analyzed using activity mean durations. Network statistics are calculated for critical activities. The resulting critical path statistics are applied in deriving cumulative probability distribution and degrees of confidence for various schedule completion dates. The results are arranged in both tabular and graphical format for clarity of presentation.
Although the results of schedule risk analysis using PERT are comparable to the results derived from Monte Carlo simulation of complex schedule networks, there are limitations in PERT such as calculation of criticality index and changing critical paths which will necessitate further follow-up work.
(RISK-1737) Metro Atlanta Transit Project Delivery Assessment and Cost Estimate Review
Primary Author: Mr George Marshall Hitchcock III PE Hatch Mott MacDonald
Abstract: The Georgia General Assembly passed the Transportation Investment Act of 2010 (TIA) which provided the opportunity to fund an investment list of transportation and transit projects in each of 12 regions over 10 years. Regional Roundtables, composed of local elected officials and responsible for a fiscally constrained project list, collaborated with GDOT Director of Planning to select projects. Under TIA, the Georgia Regional Transportation Authority (GRTA) is given the responsibility for managing the budget, schedule and delivery of the transit for the metropolitan Atlanta region. Three major factors were considered when selecting the transit projects for the list: project schedule, project cost, and economic impact. GRTA conducted an analysis of the first two factors. The Transit Delivery Assessment and Cost Estimate Review involved risk assessment, program schedule development, PERT and Monte Carlo risk analysis, FTA SCC cost estimate and contingency evaluation. GRTA evaluated 87 transit applications with a sponsor cost of $13 billion dollars which included major capital projects (heavy rail, light rail, and streetcar), BRT, state-of-good repair and operations assistance.
(RISK-1763) Planning and Estimating Risky Projects: Oil and Gas Exploration
Primary Author: Mr Colin H. Cropley Risk Integration Management Pty Ltd
Co-author(s): Mr Matthew D. Dodds Risk Integration Management Pty Ltd; Mr Grant Christie Talisman Australasia Pty Ltd
Abstract: Talisman Energy has been exploring Papua New Guineas Western Province with JV partners since 2009, with several gas discoveries. Talisman plans to continue a seismic and drilling program through to 2015 to build an LNG project in challenging weather and terrain.
Deterministic planning and estimating in this environment have previously led to unachieved optimistic schedules and cost estimates. Risk Integration Management offered their Integrated Cost & Schedule Risk Analysis (IRA) methodology to Talisman, who adapted the approach to develop generic cost-loaded schedules for the following exploration sub-projects:
Site preparation and Well Pad construction and
Moving and assembling the Drilling Rig.
By examining schedules for each for time and cost uncertainties and mapping in risk events, realistic time and cost distributions were able to be produced and drivers identified for risk optimisation. And by linking each repetitive sub-project at several probabilistic levels, gaps due to resource bottlenecks appeared, enabling their resolution to minimise delays and costs. Outcomes have confirmed the value of this now standard planning and estimating approach for campaign approvals.