APPENDIX I. Project Cost

Transcription

1 Mississippi River Ship Channel Gulf to Baton Rouge, LA Integrated General Reevaluation Report And Supplemental Environmental Impact Statement Appendix I APPENDIX I Project Cost Final Integrated GRR and SEIS April 2018

2 Mississippi River Ship Channel Gulf to Baton Rouge, LA Integrated General Reevaluation Report And Supplemental Environmental Impact Statement Appendix I Annex 1 Cost and Schedule Risk Analysis Report April 2018

3 US Army Corps Of Engineers Mississippi River Ship Channel Gulf to Baton Rouge, LA Cost and Schedule Risk Analysis Report Prepared by: U.S. Army Corps of Engineers Cost Engineering, New Orleans District July 2017

4 Mississippi River Ship Channel Gulf to Baton Rouge, LA TABLE OF CONTENTS Contents EXECUTIVE SUMMARY... 1 MAIN REPORT PURPOSE BACKGROUND REPORT SCOPE Project Scope USACE Risk Analysis Process METHODOLOGY / PROCESS Identify and Assess Risk Factors Quantify Risk Factor Impacts Analyze Cost Estimate and Schedule Contingency KEY ASSUMPTIONS RESULTS Risk Register Cost Contingency and Sensitivity Analysis Sensitivity Analysis Sensitivity Analysis Results Schedule and Contingency Risk Analysis MAJOR FINDINGS/OBSERVATIONS/RECOMMENDATIONS Major Findings/Observations Recommendations APPENDIX A... 1 ES i

5 Mississippi River Ship Channel Gulf to Baton Rouge, LA LIST OF TABLES Table 1. Construction Contingency Results... 1 Table 2. Construction Cost Contingency Summary... 7 Table 3 - Schedule Duration Contingency Summary... 9 Table 4. Construction Cost Comparison Summary (Uncertainty Analysis) Table 5. Construction Schedule Comparison Summary (Uncertainty Analysis) LIST OF FIGURES Figure 1 Cost Sensitivity Analysis... 8 Figure 2 Schedule Sensitivity Analysis ES ii

6 Mississippi River Ship Channel Gulf to Baton Rouge, LA EXECUTIVE SUMMARY The US Army Corps of Engineers (USACE), New Orleans District, presents this cost and schedule risk analysis (CSRA) report regarding the risk findings and recommended contingencies for the Mississippi River Ship Channel, Gulf to Baton Rouge, LA General Reevaluation Report. In compliance with Engineer Regulation (ER) CIVIL WORKS COST ENGINEERING, dated September 15, 2008, a Monte-Carlo based risk analysis was conducted by the Project Development Team (PDT) on remaining costs. The purpose of this risk analysis study is to present the cost and schedule risks considered, those determined and respective project contingencies at a recommended 80% confidence level of successful execution to project completion. MRSC, Gulf to Baton Rouge, LA, project is a deep draft navigation channel, providing deep draft navigation access to ports located along the Mississippi River in Southeast Louisiana. The project area begins near Baton Rouge, Louisiana beginning at river mile (RM) Above Head of Passes (AHP) and extends to the Gulf of Mexico ending at RM 22 Below Head of Passes (BHP). The channel services four of the top ten ports in the United States: the Port of Greater Baton Rouge (Port of Baton Rouge), the Port of South Louisiana, the Port of New Orleans, and the Plaquemines Port, Harbor and Terminal District (Port of Plaquemines). The Port of South Louisiana is the largest port in the nation in terms of tonnage. The non-federal sponsor (NFS) is the Louisiana Department of Transportation and Development (LaDOTD). The current project base cost estimate for the construction part, pre-contingency, approximates $156M. Based on the results of the analysis, the Cost Engineering Mandatory Center of Expertise for Civil Works (MCX located in Walla Walla District) recommends a contingency value of $35.9M or approximately 23% of the remaining construction cost at an 80% confidence level of successful execution. The most likely constant dollar program year (First Cost at FY18 price level) is estimated at approximately $195.4M, including a total contingency value of $36.5M. Cost estimates fluctuate over time. During this period of study, minor cost fluctuations can and have occurred. For this reason, contingency reporting is based in cost and percent values. Should cost vary to a slight degree with similar scope and risks, contingency per cent values will be reported, cost values rounded. Civil Works Work Breakdown Structure Table 1. Construction Contingency Results ESTIMATED COST PROJECT FIRST COST (Constant Dollar Basis) TOTAL PROJECT COST (FULLY FUNDED) WBS Civil Works COST CNTG CNTG TOTAL ESC COST CNTG TOTAL INFLATED COST CNTG FULL NUMBER Feature & Sub-Feature Description ($K) ($K) (%) ($K) (%) ($K) ($K) ($K) (%) ($K) ($K) ($K) A B C D E F G H I J L M N O 02 RELOCATIONS $60,074 $18, % $78, % $61,189 $18,969 $80, % $66,931 $20,749 $87, CHANNELS & CANALS $95,937 $29, % $125, % $97,718 $30,293 $128, % $111,206 $34,474 $145,680 CONSTRUCTION ESTIMATE TOTALS: $156,011 $35,883 $191, % $158,894 $36,546 $195, % $177,906 $40,918 $218,824 ES 1

7 Mississippi River Ship Channel Gulf to Baton Rouge, LA KEY FINDINGS/OBSERVATIONS RECOMMENDATIONS The PDT worked through the risk register on January That period of time allowed improved project scope definition, investigations, design and cost information, and resulted in reduced risks in certain project areas. The key risk drivers identified through sensitivity analysis suggest a cost contingency of $205M and schedule risks adding a potential of 11.6 months to the schedule, both at an 80% confidence level. Cost Risks: From the CSRA, the key or greater Cost Risk items of include: CA-1: Limited Competition Since only one dustpan dredge is commercially owned, all work with that dredge must be negotiated instead of being competitively bid for the crossings. Lack of competition foregoes the lowest bid process and hinders achieving the lowest cost to the government in the bar channel and southwest pass. PR-1: Fuel Price Volatility Fuel is a volatile cost and can greatly affect the cost of this project. ET-1: Production Rates The production rate would be affected greatly if there was a small face if the maintenance contract were to happen before the construction of the new channel was underway. Schedule Risks: The high value of schedule risk indicates a significant uncertainty of key risk items, time duration growth that can translate into added costs. Over time, risks increase on those out-year contracts where there is greater potential for change in new scope requirements, uncertain market conditions, and unexpected high inflation. The greatest risk is: REG-1: Emissions from Construction - Environmental concerns can occur with the construction emission limits in the Baton Rouge Area. The limit is 100 Tons per year. Therefore for construction of these crossings we will assume an additional 2 years of construction duration for the project as a result. Since mobilization to the crossings will occur during the maintenance cycle it is a negligible impact to cost but a significant impact to the schedule. PM-3: Funding Funding is subject to being appropriated by Congress. Corps has no control over the amount appropriated. Appropriations received for new construction has been significantly decreasing in recent years. PM-5: O&M Funding Fiscal law requires that any portion of the dredging attributed to maintenance should be paid with O&M funding. Therefore, in order to award dredging contract, O&M funds must be in place to pay for the maintenance portion. Timing of contract award will be coordinated between PM and OM to optimize the timing. ET-1: Production Rates If maintenance material has been removed previous to the construction of the new channel depth, there could be a very small face which would lower the production rate. ES 2

8 Mississippi River Ship Channel Gulf to Baton Rouge, LA Recommendations: As detailed within the main report, include the implementation of cost and schedule contingencies, further iterative study of risks throughout the project life-cycle, potential mitigation throughout the remaining construction and proactive monitoring and control of risk identified in this study. ES 3

9 MAIN REPORT 1.0 PURPOSE The US Army Corps of Engineers (USACE), New Orleans District presents the results of the cost and schedule risk analysis for Mississippi River Ship Channel Gulf to Baton Rouge, LA General Reevaluation Report. The report includes risk methodology, discussions, findings and recommendations regarding the identified risks and the necessary contingencies to confidently administer the project, presenting a cost and schedule contingency value with an 80% confidence level of successful execution. 2.0 BACKGROUND MRSC, Gulf to Baton Rouge, LA, project is a deep draft navigation channel, providing deep draft navigation access to ports located along the Mississippi River in Southeast Louisiana. The project area begins near Baton Rouge, Louisiana beginning at river mile (RM) Above Head of Passes (AHP) and extends to the Gulf of Mexico ending at RM 22 Below Head of Passes (BHP). The channel services four of the top ten ports in the United States: the Port of Greater Baton Rouge (Port of Baton Rouge), the Port of South Louisiana, the Port of New Orleans, and the Plaquemines Port, Harbor and Terminal District (Port of Plaquemines). The Port of South Louisiana is the largest port in the nation in terms of tonnage. The non-federal sponsor (NFS) is the Louisiana Department of Transportation and Development (LaDOTD). 3.0 REPORT SCOPE The scope of the risk analysis report is to identify cost and schedule risks with a resulting recommendation for contingencies at the 80 percent confidence level using the risk analysis processes, as mandated by U.S. Army Corps of Engineers (USACE) Engineer Regulation (ER) , Engineering and Design for Civil Works, ER , Civil Works Cost Engineering, and Engineer Technical Letter , Construction Cost Estimating Guide for Civil Works. The report presents the contingency results for cost risks for construction features. The CSRA excludes Real Estate, Planning, Engineering and Design, and Construction Management costs and does not include consideration for life cycle costs. 3.1 Project Scope The formal process included extensive involvement of the PDT for risk identification and the development of the risk register. The analysis process evaluated the Micro Computer Aided Cost Estimating System (MCACES), Second Generation (MII), project schedule, and funding profiles using Crystal Ball software to conduct a Monte Carlo simulation and statistical sensitivity analysis, per the guidance in Engineer Technical Letter (ETL) CONSTRUCTION COST ESTIMATING GUIDE FOR CIVIL WORKS, dated 1

10 September 30, The project technical scope, estimates and schedules were developed and presented by the District. Consequently, these documents serve as the basis for the risk analysis. The scope of this study addresses the identification of concerns, needs, opportunities and potential solutions that are viable from an economic, environmental, and engineering viewpoint. 3.2 USACE Risk Analysis Process The risk analysis process for this study follows the USACE Headquarters requirements as well as the guidance provided by the Cost Engineering MCX. The risk analysis process reflected within this report uses probabilistic cost and schedule risk analysis methods within the framework of the Crystal Ball software. Furthermore, the scope of the report includes the identification and communication of important steps, logic, key assumptions, limitations, and decisions to help ensure that risk analysis results can be appropriately interpreted. Risk analysis results are also intended to provide project leadership with contingency information for scheduling, budgeting, and project control purposes, as well as to provide tools to support decision making and risk management as the project progresses through planning and implementation. To fully recognize its benefits, cost and schedule risk analysis should be considered as an ongoing process conducted concurrent to, and iteratively with, other important project processes such as scope and execution plan development, resource planning, procurement planning, cost estimating, budgeting and scheduling. In addition to broadly defined risk analysis standards and recommended practices, this risk analysis was performed to meet the requirements and recommendations of the following documents and sources: Cost and Schedule Risk Analysis Process guidance prepared by the USACE Cost Engineering MCX. Engineer Regulation (ER) CIVIL WORKS COST ENGINEERING, dated September 15, Engineer Technical Letter (ETL) CONSTRUCTION COST ESTIMATING GUIDE FOR CIVIL WORKS, dated September 30, METHODOLOGY / PROCESS The New Orleans District assembled an assigned project delivery team (PDT) to further augment labor, expertise and information gathering. The Cost Engineering representative was Benjamin Salamone and Miguel Ramos. 2

11 Cost Engineering facilitated a risk identification and qualitative analysis meeting with the PDT on January 25, The risk identification and qualitative analysis process did result in some revisions to the estimate. Participants in the risk identification meeting on January 25, 2017 included: Name Marti Lucore/Steve Keen Travis Creel/Jennifer Vititoe Tim Axtamn Judith Gutierrez/Pamela Fischer Richard Boe Rick Broussard/Patrick Grey Lestlie Lombard Valerie Desselles Danny Wiegand Eric Salamone/Miguel Ramos Michelle Kornick Richard Boe/Steve Roberts Frank Vicidomina Representing Project Management Planner Study Manager Real Estate Relocations Engineering & Design Technical Lead Geotech H&H Cost Engineering Operations Environmental VE The risk analysis process for this study is intended to determine the probability of various cost outcomes and quantify the required contingency needed in the cost estimate to achieve the desired level of cost confidence. Per regulation and guidance, the P80 confidence level (80% confidence level) is the normal and accepted cost confidence level. District Management has the prerogative to select different confidence levels, pending approval from Headquarters, USACE. In simple terms, contingency is an amount added to an estimate to allow for items, conditions or events for which the occurrence or impact is uncertain and that experience suggests will likely result in additional costs being incurred or additional time being required. The amount of contingency included in project control plans depends, at least in part, on the project leadership s willingness to accept risk of project overruns. The less risk that project leadership is willing to accept the more contingency should be applied in the project control plans. The risk of overrun is expressed, in a probabilistic context, using confidence levels. The Cost MCX guidance for cost and schedule risk analysis generally focuses on the 80- percent level of confidence (P80) for cost contingency calculation. It should be noted that use of P80 as a decision criteria is a risk averse approach (whereas the use of P50 would be a risk neutral approach, and use of levels less than 50 percent would be risk seeking). Thus, a P80 confidence level results in greater contingency as compared to a P50 confidence level. The selection of contingency at a particular confidence level is ultimately the decision and responsibility of the project s District and/or Division management. 3

12 The risk analysis process uses Monte Carlo techniques to determine probabilities and contingency. The Monte Carlo techniques are facilitated computationally by a commercially available risk analysis software package (Crystal Ball) that is an add-in to Microsoft Excel. Cost estimates are packaged into an Excel format and used directly for cost risk analysis purposes. The level of detail recreated in the Excel-format schedule is sufficient for risk analysis purposes that reflect the established risk register, but generally less than that of the native format. The primary steps, in functional terms, of the risk analysis process are described in the following subsections. Risk analysis results are provided in Section Identify and Assess Risk Factors Identifying the risk factors via the PDT is considered a qualitative process that results in establishing a risk register that serves as the document for the quantitative study using the Crystal Ball risk software. Risk factors are events and conditions that may influence or drive uncertainty in project performance. They may be inherent characteristics or conditions of the project or external influences, events, or conditions such as weather or economic conditions. Risk factors may have either favorable or unfavorable impacts on project cost and schedule. A formal PDT meeting was held with the New Orleans District office for the purposes of identifying and assessing risk factors. The meeting conducted on January 25, 2017 included capable and qualified representatives from multiple project team disciplines and functions, including project management, cost engineering, design, environmental compliance, and real estate. The meeting focused primarily on risk factor identification using brainstorming techniques, but also included some facilitated discussions based on risk factors common to projects of similar scope and geographic location. The meeting was held to develop and finalize the risk register, resulting CSRA model, findings and results. 4.2 Quantify Risk Factor Impacts The quantitative impacts of risk factors on project plans were analyzed using a combination of professional judgment, empirical data and analytical techniques. Risk factor impacts were quantified using probability distributions (density functions) because risk factors are entered into the Crystal Ball software in the form of probability density functions. Similar to the identification and assessment process, risk factor quantification involved multiple project team disciplines and functions. However, the quantification process relied more extensively on collaboration between cost engineering and risk analysis team members with lesser inputs from other functions and disciplines. This process used an iterative approach to estimate the following elements of each risk factor: Maximum possible value for the risk factor 4

13 Minimum possible value for the risk factor Most likely value (the statistical mode), if applicable Nature of the probability density function used to approximate risk factor uncertainty Mathematical correlations between risk factors Affected cost estimate and schedule elements The resulting product from the PDT discussions is captured within a risk register as presented in section 6 for both cost and schedule risk concerns. Note that the risk register records the PDT s risk concerns, discussions related to those concerns, and potential impacts to the current cost and schedule estimates. The concerns and discussions support the team s decisions related to event likelihood, impact, and the resulting risk levels for each risk event. 4.3 Analyze Cost Estimate and Schedule Contingency Contingency is analyzed using the Crystal Ball software, an add-in to the Microsoft Excel format of the cost estimate and schedule. Monte Carlo simulations are performed by applying the risk factors (quantified as probability density functions) to the appropriate estimated cost and schedule elements identified by the PDT. Contingencies are calculated by applying only the moderate and high level risks identified for each option (i.e., low-level risks are typically not considered, but remain within the risk register to serve historical purposes as well as support follow-on risk studies as the project and risks evolve). For the cost estimate, the contingency is calculated as the difference between the P80 cost forecast and the baseline cost estimate. Each option-specific contingency is then allocated on a civil works feature level based on the dollar-weighted relative risk of each feature as quantified by Monte Carlo simulation. Standard deviation is used as the feature-specific measure of risk for contingency allocation purposes. This approach results in a relatively larger portion of all the project feature cost contingency being allocated to features with relatively higher estimated cost uncertainty. 5.0 KEY ASSUMPTIONS Key assumptions are those that are most likely to affect significantly the determinations and/or estimates of risk presented in the risk analysis. The key assumptions are important to help ensure that project leadership and other decision makers understand the steps, logic, limitations, and decisions made in the risk analysis, as well as any resultant limitations on the use of outcomes and results. The following data sources and assumptions were used in quantifying the costs associated with the project. a. Level of Design: The cost comparisons and risk analyses performed and reflected within this report are based upon design scope and estimates that are at feasibility level. 5

14 b. Design Scope: Some areas of scope are not fully developed and significant assumptions were required to be made by the cost estimator. c. Operation and Maintenance: Operation and maintenance activities were not included in the cost estimate or schedules. Therefore, a full lifecycle risk analysis was not performed. Risk analysis results or conclusions could be significantly different if the necessary operation and maintenance activities were included. It is assumed that incorporation of operation and maintenance activities in the risk analysis would not result in significantly different conclusions for the construction acquisition. d. Contract Acquisition Strategy: Consistent with cost estimate and schedule assumptions, it is assumed that the contract acquisition strategy is firm fixed price. However, the final determination on acquisition strategy may change depending on funding availability. Use of other acquisition strategies may impact costs and schedules. e. Project Schedule: For development purposes the project is being developed based on the crew outputs referenced from RSMeans with the assumption that multiple crews would work simultaneously. f. Confidence Levels: The Cost Engineering DX guidance generally focuses on the eightypercent level of confidence (P80) for cost contingency calculation. For this risk analysis, the eighty-percent level of confidence (P80) was used. It should be noted that the use of P80 as a decision criteria is a moderately risk adverse approach, generally resulting in higher cost contingencies. However, the P80 level of confidence also assumes a small degree of risk that the recommended contingencies may be inadequate to completely capture actual project costs. g. Impacts Studied: Moderate and High impacts, as identified in the risk register, were considered for the purposes of calculating cost contingency. Moderate and high level risk impacts were only applied to critical path and near critical path schedule tasks for the purposes of calculating schedule contingency. Low and moderate level risk impacts should be maintained in project management documentation, and reviewed at each project milestone to determine if they should be placed on the risk watch list for further monitoring and evaluation. 6.0 RESULTS The cost and schedule risk analysis results are provided in the following sections. In addition to contingency calculation results, sensitivity analyses are presented to provide decision makers with an understanding of variability and the key contributors to the cause of this variability. 6.1 Risk Register 6

15 A risk register is a tool commonly used in project planning and risk analysis. The actual risk register is provided in Appendix C. The complete risk register includes low level risks, as well as additional information regarding the nature and impacts of each risk. It is important to note that a risk register can be an effective tool for managing identified risks throughout the project life cycle. As such, it is generally recommended that risk registers be updated as the designs, cost estimates, and schedule are further refined, especially on large projects with extended schedules. Recommended uses of the risk register going forward include: Documenting risk mitigation strategies being pursued in response to the identified risks and their assessment in terms of probability and impact. Providing project sponsors, stakeholders, and leadership/management with a documented framework from which risk status can be reported in the context of project controls. Communicating risk management issues. Providing a mechanism for eliciting feedback and project control input. Identifying risk transfer, elimination, or mitigation actions required for implementation of risk management plans. 6.2 Cost Contingency and Sensitivity Analysis The result of risk or uncertainty analysis is quantification of the cumulative impact of all analyzed risks or uncertainties as compared to probability of occurrence. These results, as applied to the analysis herein, depict the overall project cost at intervals of confidence (probability). Table 1 provides the construction cost contingencies calculated for the P80 confidence level and rounded to the nearest thousand. The construction cost contingencies for the P5, P80 and P90 confidence levels are also provided for illustrative purposes only. Cost contingency for the Construction risks (including schedule impacts converted to dollars) was quantified as approximately $35.6 Million at the P80 confidence level (23% of the baseline construction cost estimate). Table 2. Construction Cost Contingency Summary Most Likely Cost Estimate $156,011,000 Confidence Level Value Contingency 50% 191,583, % 80% 204,044, % 90% 208,717, % 7

16 6.2.1 Sensitivity Analysis Sensitivity analysis generally ranks the relative impact of each risk/opportunity as a percentage of total cost uncertainty. The Crystal Ball software uses a statistical measure (contribution to variance) that approximates the impact of each risk/opportunity contributing to variability of cost outcomes during Monte Carlo simulation. Key cost drivers identified in the sensitivity analysis can be used to support development of a risk management plan that will facilitate control of risk factors and their potential impacts throughout the project lifecycle. Together with the risk register, sensitivity analysis results can also be used to support development of strategies to eliminate, mitigate, accept or transfer key risks Sensitivity Analysis Results The risks/opportunities considered as key or primary cost drivers and the respective value variance are ranked in order of importance in contribution to variance bar charts. Opportunities that have a potential to reduce project cost and are shown with a negative sign; risks are shown with a positive sign to reflect the potential to increase project cost. A longer bar in the sensitivity analysis chart represents a greater potential impact to project cost. Figure 1 presents a sensitivity analysis for cost growth risk from the high level cost risks identified in the risk register. Likewise, Figure 2 presents a sensitivity analysis for schedule growth risk from the high level schedule risks identified in the risk register. Figure 1 Cost Sensitivity Analysis 8

17 6.3 Schedule and Contingency Risk Analysis The result of risk or uncertainty analysis is quantification of the cumulative impact of all analyzed risks or uncertainties as compared to probability of occurrence. These results, as applied to the analysis herein, depict the overall project duration at intervals of confidence (probability). Table 2 provides the schedule duration contingencies calculated for the P80 confidence level. The schedule duration contingencies for the P50 and P90 confidence levels are also provided for illustrative purposes. Schedule duration contingency was quantified as 11.3 months based on the P80 level of confidence. These contingencies were used to calculate the projected residual fixed cost impact of project delays that are included in the Table 1 presentation of total cost contingency. The schedule contingencies were calculated by applying the high level schedule risks identified in the risk register for each option to the durations of critical path and near critical path tasks. The schedule was not resource loaded and contained open-ended tasks and non-zero lags (gaps in the logic between tasks) that limit the overall utility of the schedule risk analysis. These issues should be considered as limitations in the utility of the schedule contingency data presented. Schedule contingency impacts presented in this analysis are based solely on projected residual fixed costs. Table 3 - Schedule Duration Contingency Summary Base Case Schedule 48.0 Months Confidence Level Value Contingency 50% 70.6 Months 47.00% 80% 77.3 Months 61.00% 90% 81.1 Months 69.00% 9

18 Figure 2 Schedule Sensitivity Analysis 7.0 MAJOR FINDINGS/OBSERVATIONS/RECOMMENDATIONS This section provides a summary of significant risk analysis results that are identified in the preceding sections of the report. Risk analysis results are intended to provide project leadership with contingency information for scheduling, budgeting, and project control purposes, as well as to provide tools to support decision making and risk management as projects progress through planning and implementation. Because of the potential for use of risk analysis results for such diverse purposes, this section also reiterates and highlights important steps, logic, key assumptions, limitations, and decisions to help ensure that the risk analysis results are appropriately interpreted. 7.1 Major Findings/Observations Project cost and schedule comparison summaries are provided in Table 3 and Table 4 respectively. Additional major findings and observations of the risk analysis are listed below. The PDT worked through the risk register on January 25, That period of time allowed improved project scope definition, investigations, design and cost information, and resulted in reduced risks in certain project areas. The key risk drivers identified through sensitivity analysis suggest a cost contingency of $48M and schedule risks adding a potential of 29.3 months to the schedule, both at an 80% confidence level. Cost Risks: From the CSRA, the key or greater Cost Risk items of include: 10

19 CA-1: Limited Competition Since only one dustpan dredge is commercially owned, all work with that dredge must be negotiated instead of being competitively bid for the crossings. Lack of competition foregoes the lowest bid process and hinders achieving the lowest cost to the government in the bar channel and southwest pass. PR-1: Fuel Price Volatility Fuel is a volatile cost and can greatly affect the cost of this project. ET-1: Production Rates The production rate would be affected greatly if there was a small face if the maintenance contract were to happen before the construction of the new channel was underway. PM-3: Funding Funding is subject to being appropriated by Congress. Corps has no control over the amount appropriated. Appropriations received for new construction has been significantly decreasing in recent years. TL-3: Clay Materials in the Crossings There is a possibility of encountering clay material in the Crossings. Another type of equipment other than the dust pan would be required to dredge this material. CO-5: Additional Relocations If the dredging limits of crossings are extended an additional relocation maybe required. CO-1: Adverse Weather During high water events dustpan dredges do not work but stage and wait for the river to recede. An additional mobilization is possible in the crossings. During tropical storm events an additional mobilization is possible in Southwest Pass and the Bar Channel. CO-6: Additional Rock for Stability Issue in Crossings Areas in the Crossings may require additional slope stability measures. Schedule Risks: The high value of schedule risk indicates a significant uncertainty of key risk items, time duration growth that can translate into added costs. Over time, risks increase on those out-year contracts where there is greater potential for change in new scope requirements, uncertain market conditions, and unexpected high inflation. The greatest risk is: PM-3: Funding Funding is subject to being appropriated by Congress. Corps has no control over the amount appropriated. Appropriations received for new construction has been significantly decreasing in recent years. PM-5: O&M Funding Fiscal law requires that any portion of the dredging attributed to maintenance should be paid with O&M funding. Therefore, in order to award dredging contract, O&M funds must be in place to pay for the maintenance portion. Timing of contract award will be coordinated between PM and OM to optimize the timing. ET-1: Production Rates If maintenance material has been removed previous to the construction of the new channel depth, there could be a very small face which would lower the production rate. TL-2: Construction Quantity Changes Overdepth dredging could be higher than estimated at the Crossings. There is uncertainty on the maintenance material quantity that may be on top of the construction quantity when construction begins. 11

20 Table 4. Construction Cost Comparison Summary (Uncertainty Analysis) Most Likely Cost Estimate $155,759,000 Confidence Level Value Contingency 0% 157,316, % 5% 169,777, % 10% 174,450, % 15% 177,565, % 20% 180,680, % 25% 182,238, % 30% 185,353, % 35% 186,910, % 40% 188,468, % 45% 190,025, % 50% 191,583, % 55% 193,141, % 60% 196,256, % 65% 197,813, % 70% 199,371, % 75% 200,929, % 80% 204,044, % 85% 205,601, % 90% 208,717, % 95% 214,947, % 100% 232,080, % 12

21 Table 5. Construction Schedule Comparison Summary (Uncertainty Analysis) Base Case Schedule 48.0 Months Confidence Level Value Contingency 0% 52.8 Months 10.00% 5% 59.5 Months 24.00% 10% 61.0 Months 27.00% 15% 62.4 Months 30.00% 20% 63.4 Months 32.00% 25% 64.8 Months 35.00% 30% 65.8 Months 37.00% 35% 67.2 Months 40.00% 40% 68.2 Months 42.00% 45% 69.6 Months 45.00% 50% 70.6 Months 47.00% 55% 71.5 Months 49.00% 60% 73.0 Months 52.00% 65% 73.4 Months 53.00% 70% 74.4 Months 55.00% 75% 76.3 Months 59.00% 80% 77.3 Months 61.00% 85% 78.7 Months 64.00% 90% 81.1 Months 69.00% 95% 84.0 Months 75.00% 100% 96.0 Months % 7.2 Recommendations Risk Management is an all-encompassing, iterative, and life-cycle process of project management. The Project Management Institute s (PMI) A Guide to the Project Management Body of Knowledge (PMBOK Guide), 4th edition, states that project risk management includes the processes concerned with conducting risk management planning, identification, analysis, responses, and monitoring and control on a project. Risk identification and analysis are processes within the knowledge area of risk management. Its outputs pertinent to this effort include the risk register, risk quantification (risk analysis model), contingency report, and the sensitivity analysis. The intended use of these outputs is implementation by the project leadership with respect to risk responses (such as mitigation) and risk monitoring and control. In short, 13

22 the effectiveness of the project risk management effort requires that the proactive management of risks not conclude with the study completed in this report. The Cost and Schedule Risk Analysis (CSRA) produced by the PDT identifies issues that require the development of subsequent risk response and mitigation plans. This section provides a list of recommendations for continued management of the risks identified and analyzed in this study. Note that this list is not all inclusive and should not substitute a formal risk management and response plan. Cost Risk: The key cost risk drivers identified through sensitivity analysis are CA-1 Limited Competition, PR-1 Fuel Price Volatility, ET-1 Production Rates, PM-3 Funding, TL-3 Clay Materials in the Crossings, CO-5 Additional Relocations, CO-1 Adverse Weather and CO- 6 Additional Rock for Stability Issue in Crossings. USACE has no control over the amount of dredge plants available, fuel prices, weather or the funding allocated by Congress for infrastructure. Better surveys would be available as we get closer to P&S stages lowering the risks related to design (TL-3, CO-6, etc.). Schedule Risk: The key schedule risk drivers identified through sensitivity analysis are, PM-3 Funding, PM-5 O&M Funding, ET-1 Production Rates and TL-2 Construction Quantities. However as the design progresses through the plans and specification, the risk associated with TL-2 factors will be reduced. Political factors are typically beyond the PDT s scope of influence and with the project being so expensive, political hiccups are more likely to occur therefore impacting the project funding along with project schedule. Risk Management: Cost Engineering DX recommends use of the outputs created during the risk analysis effort as tools in future risk management processes. The risk register should be updated at each major project milestone. The results of the sensitivity analysis may also be used for response planning strategy and development. These tools should be used in conjunction with regular risk review meetings. As an example, recommended uses of the risk register include: Documenting risk mitigation strategies being pursued in response to the identified risks and their assessment in terms of probability and impact. Providing project sponsors, stakeholders and leadership/management with a documented framework from which risk status can be reported in the context of project controls. Communicating risk management issues. Providing a mechanism for eliciting risk analysis feedback and project control input. Identifying risk transfer, elimination or mitigation actions required for implementation of risk management plans. 14

23 APPENDIX A Risk No. Risk/Opportunity Event Concerns PDT Risk Conclusions, Justification Project Cost Likeliho od* Impact* Risk Level* Likeliho od* Impact* Risk Level* Contract Risks (Internal Risk Items are those that are generated, caused, or controlled within the PDT's sphere of influence.) PROJECT & PROGRAM MGMT PM1 Scope Growth Additional features added to the scope in later stages could be added changing the project cost and schedule. There is little opportunity for scope growth in the crossings for mobilization. Since all crossings are being deepened between Baton Rouge to New Orleans there is no chance for added crossings. Unlikely Marginal LOW Unlikely Marginal LOW PM2 Staff Issues Staff could be over worked or insufficient to work on the project. There are times of the year that staff is overtaxed. Work could be done to avoid the end of the FY push. Likely Negligible LOW Likely Negligible LOW 1

24 PM3 Funding Difficulty to secure funding could delay project start or award of project. Funding is subject to being appropriated by Congress. Corps has no control over the amount appropriated. Appropriations received for new construction has been significantly decreasing in recent years. This project is a high priority on the president's top infrastructure projects. The current funding stream is $169.4M / 4 years approx. $42M per year. Will model a funding stream of approximately $34M / year for construction (for a 5 year construction duration) Do recognize additional mob and demob costs if work has to be broken into additional contracts. This would trigger additional P&S, contracting and S&A costs. Unlikely Significant MODERATE Likely Marginal MODERATE PM4 Non-Federal Funding Ability of Non-Federal sponsor to provide 25% cost share Project cannot proceed without cost share match from local sponsor. Despite budget problems currently being experienced by sponsor, the high profile and high demand nature of this project will likely make it a priority in State budgeting. Unlikely Negligible LOW Unlikely Significant MODERATE 2

25 PM5 O&M Funding O&M does not have required funding for the maintenance portion of the "template". Fiscal law requires that any portion of the dredging attributed to maintenance should be paid with O&M funding. Therefore, in order to award dredging contract, O&M funds must be in place to pay for the maintenance portion. Timing of contract award will be coordinated between PM and OM to optimize the timing. Very Unlikely Negligible LOW Unlikely Significant MODERATE CONTRACT ACQUISITION RISKS CA1 Limited Competition There is only one commercial dredge and 2 government owned dredges capable of dredging the crossings, significantly reducing competitiveness of dredging contracts. Additionally in Southwest Pass and the Bar Channel high demand in other areas of the country can increase the bid for contract award. Since only one dustpan dredge is commercially owned, all work with that dredge must be negotiated instead of being competitively bid for the crossings. Lack of competition foregoes the lowest bid process and hinders achieving the lowest cost to the government in the bar channel and southwest pass. Very Likely Significant HIGH Very Unlikely Negligible LOW 3

26 CA2 Accelerated Schedule An aggressive schedule to perform the work or an aggressive award date for contract could limit the number of bids. Aggressive schedules could limit contractors ability to participate or eliminate their interest in bidding for the work, therefore contractors (being aware of probable limited interest) will bid closer to the 25% threshold of IGE. This is modeled in CA 1 Limited Competition. Likely Negligible LOW Very Unlikely Marginal LOW TECHNICAL RISKS TL1 Channel Alignment Change There could be a need to change the alignment of the channel. All channel alignment/modifications changes would happen before the final stages of the feasibility stage and prior to the P&S stage. The assessment of relocations cannot be completed until channel modifications are completed. Very Unlikely Marginal LOW Very Unlikely Marginal LOW TL2 Construction Quantity Changes Overdepth dredging could be higher than estimated at the Crossings. There is uncertainty on the maintenance material quantity that may be on top of the construction quantity when construction begins. Surveys for construction were based off of a survey performed following the completion of O&M dredging. The construction overdepth quantity in the crossings could vary however the impact to the project is negligible. The variation on the quantities could be +/- 15% on the Maintenance material. The maintenance quantities in the Likely Negligible LOW Likely Marginal MODERATE 4

27 Hydraulic Models provided by ERDC do not match what the New Orleans District experienced in the last years. TL3 Clay material in the Crossings There is a possibility of encountering clay material in the Crossings. Another type of equipment other than the dust pan would be required to dredge this material. A cutterhead would be required to dredge the clay material. The cost to mobilize and perform the dredging on a portion of the material would be added. 3 to 7 days of dredging with a large cutterhead dredge. Unlikely Significant MODERATE Unlikely Negligible LOW TL4 Utility Owner Refusal to Relocate A utility owner could refuse to relocate their utility. In the event of this happening, a legal would ensue. This would cause delays on the schedule. Legal issues could take 6 months to 2 years to resolve. This risk would affect only the Crossings which allows the rest of the project to continue as scheduled. The delay to the project would be only 0 to 6 months. Very Unlikely Negligible LOW Very Unlikely Significant LOW LANDS AND DAMAGES RISKS LD1 Land Acquisition No concerns This project will not acquire any new right of way or disposal areas at this time

28 REGULATORY AND ENVIRONMENTAL RISKS REG 1 Emissions from Construction Limited Emissions in Baton Rouge area for Crossings Construction Environmental concerns can occur with the construction emission limits in the Baton Rouge Area. The limit is 100 Tons per year. Therefore for construction of these crossings we will assume an additional 2 years of construction duration for the project as a result. Since mobilization to the crossings will occur during the maintenance cycle it is a negligible impact to cost but a significant impact to the schedule. Very Likely Negligible 0 0 CONSTRUCTION RISKS CO1 Adverse weather Adverse weather conditions could increase the schedule of construction. During high water events dustpan dredges do not work but stage and wait for the river to recede. An additional mobilization is possible in the crossings. During tropical storm events an additional mobilization is possible in Southwest Pass and the Bar Chanel. Unlikely Significant MODERATE Unlikely Negligible LOW 6

29 CO2 Modifications Construction modifications. All contract modifications encountered relate back to variations in quantity. Variations in dredge quantities is addressed under "ET2 - Quantity Change". Would be redundant to address here. No additional risks need to be identified. 0 0 CO3 Pipeline Encounter There have been occasions when the dredge has encountered utility pipelines that were not in the existing as-built or the pipeline could have been installed in non-compliance. A pipeline encounter could cause damage to the dredge, cause loss of life and environmental damage. This would delays on the project due to repairs depending on the damage done to the dredge or require an additional mobilization. Allow for 2 to 4 months for repairs or relocation of pipeline. Very Unlikely Negligible LOW Unlikely Negligible LOW CO4 River Traffic delays The running time assumed in the estimate could be impacted by periods of high river traffic. The dredge running time could vary due to river traffic on the Crossing and Southwest Pass. The Hopper Dredge would not be affected. Running time could increase by 1 hour or reduced by 2 hours. Likely Significant HIGH Likely Marginal MODERATE CO5 Additional Relocations If the dredging limits of crossings are extended an additional relocation maybe required. There is a possibility of dredging limits being adjusted for the crossings. We will assume that this may occur impacting the project with an additional relocation cost of Unlikely Critical MODERATE Unlikely Marginal LOW 7

30 $20,000,000 as per PDT discussion CO6 Additional Rock for Stability Issue in Crossings If a crossings requires additional slope stability measures. As a result of discussions with the PDT it was determined that all of the crossing should have stable bank lines after construction. However if assuming that one of the crossings may require stability work such as grading or additional rock it will need to be addressed. It was determined that if one crossing needed additional work it would cost $5,000,000. Unlikely Critical MODERATE Unlikely Marginal LOW ESTIMATE AND SCHEDULE RISKS ET1 Production rates If maintenance material has been removed previous to the construction of the new channel depth, there could be a very small face which would lower the production rate. The production rate would be affected greatly if there was a small face if the maintenance contract were to happen before the construction of the new channel was underway. Assume lowering production of Southwest Pass to 2,500 CY/hr (HIGH) and a 5% increase in production (LOW) on new work. The Crossings would see a lower production rate of 15% (HIGH) and an increase of 5% (LOW). The Likely Significant HIGH Likely Marginal MODERATE 8

31 Bar Channel would see a lower production rate of 15% (HIGH) and an increase of 5% (LOW). ET2 Quantity Change Wrong assumptions on overdepth would change the cost on the project. 20% overdepth was added to the net dredge quantities to account for varying side slopes as per conversation with the government inspector. Assume a high of an additional 15% overdepth material. Likely Marginal MODERATE Likely Negligible LOW ET3 Relocations Estimate ROM Level Estimate The level of details provided to prepare this portion of the estimate was minimal. The estimate for this portion is ROM level. A 35% increase is estimated in order to account for this lack of detail. Likely Significant HIGH Likely Negligible LOW Programmatic Risks (External Risk Items are those that are generated, caused, or controlled exclusively outside the PDT's sphere of influence.) PR1 Fuel Fuel is a volatile cost and can greatly affect the cost of this project. The cost for the most expensive dustpan dredge was used for this item. Fuel could increase or decrease altering the cost. We assume an increase of $1.25 or a decrease of $0.75 based price fluctuation in the past years. Likely Significant HIGH Very Unlikely Negligible LOW 9

32 Mississippi River Ship Channel Gulf to Baton Rouge, LA Integrated General Reevaluation Report And Supplemental Environmental Impact Statement Appendix I Annex 2 M-CACES April 2018

33 Print Date Mon 4 December 2017 U.S. Army Corps of Engineers Time 09:03:32 Eff. Date 6/30/2017 Project STUDY: MISSISSIPPI RIVER DEEPENING Mississippi Rver Ship Channel Deepening-TSP Title Page MISSISSIPPI RIVER DEEPENING Fuel $2.25 per gallon for fuel. Estimated by Designed by Prepared by Benjamin Salamone US Army Corps of Engineers Benjamin Salamone Preparation Date 6/30/2017 Effective Date of Pricing 6/30/2017 Estimated Construction Time Days This report is not copyrighted, but the information contained herein is For Official Use Only. Labor ID: NLS2017 EQ ID: EP14R08 Currency in US dollars TRACES MII Version 4.3