Risk-Based Project Management Approach for Large- Scale Civil Engineering Projects

Transcription

1 Risk-Based Project Management Approach for Large- Scale Civil Engineering Projects Alex Bredikhin, P.E., Risk Manager - Megaprojects, U.S. Army Corps of Engineers, Pittsburgh District 1000 Liberty Ave., 22 nd Floor Pittsburgh, PA OTEC 2018

2 OTEC 2018 The views, opinions and findings contained in this report are those of the author and should not be construed as an official Department of the Army position, policy or decision, unless so designated by other official documentation.

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4 army.mil/ The single official repository for official U.S. Army Corps of Engineers (USACE) Engineering Regulations (ERs), Engineering Circulars (ECs), Engineering Manuals (EMs) and other official public documents originating from Headquarters USACE. OTEC 2018

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6 On the structural side: Runaway barges, concrete and steel fatigue, flooding damage, etc. OTEC 2018

7 RISK IS NOT JUST ABOUT LOSSES Risk and the risk framework apply when desired gains are uncertain (and/or potential losses are anticipated). A lot of what USACE does is about getting a return or a gain, i.e. wetlands restored, flood damages reduced, transportation cost savings realized, etc. The term is opportunity risk. OTEC 2018

8 The fact that the Congress approves the project budget piecemeal (annually) adds to uncertainty and increases funding risk. If/when a project is not funded (or funded partially) for any given fiscal year, all (some of) construction work stops. OTEC 2018

9 At the organizational level, the USACE has made a decision to establish an enterprise-wide guidance for applying risk analysis, a systematic application of assessment, communication and management of risk and uncertainty in decisionmaking, as a part of Civil Works Project Risk Management practices. Perhaps the most important objective here is to facilitate the effective communication of information to employees at all levels in the organization, and to establish a culture where each individual is empowered to identify, evaluate and act on risks and opportunities within and beyond a project. Risk management - (in business) the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact. OTEC 2018

10 The objectives are to: Support execution of USACE Military, Civil Works and International and Interagency Support (IIS) missions; Integrate existing risk management practices across functional silos; Improve strategic planning and decision-making; Improve the flow of risk information to decision makers; Include diverse viewpoints while driving towards consensus; Establish early warning systems and escalation policies; Identify, prioritize, and proactively manage risks; Identify opportunities; Support budget decisions and performance management; Establish forums to discuss risks across functional silos; Promote accountability and integrity of the USACE s work; and Use a common approach to evaluating risks within the USACE. OTEC 2018

11 DAM & Levee SAFETY: Old program focused on individual projects needing to meet a safety standard such as PMF and MCE (probable maximum flow and maximum credible earthquake); New program focuses on Risk Management of the entire portfolio by applying the concept of tolerability of risk. OTEC 2018

12 Risk Utility (Tolerability) Risk utility or risk tolerability is the amount of satisfaction or pleasure received from a potential payoff Utility rises at a decreasing rate for people who are riskaverse Those who are risk-seeking have a higher tolerance for risk and their satisfaction increases when more payoff is at stake The risk-neutral approach achieves a balance between risk and payoff. 12

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14 Negative Risk A dictionary definition of risk is the possibility of loss or injury (physical, financial, etc.) Negative risk then involves understanding potential problems that might occur in the project and how they might impede project success. Negative risk management is like a form of insurance; it is an investment. 14

15 Risk Can Be Positive Positive risks are risks that result in good things happening; sometimes called opportunities. A general definition of project risk is an uncertainty that can have a negative or positive effect on meeting project objectives. The goal of project risk management is to minimize potential negative risks while maximizing potential positive risks. 15

16 Other possible risks to be tracked are: - Lands & Damages (Real Estate Acquisition Status, Right-of-Way, etc.) - Regulatory and Environmental (water quality, endangered species, cultural artifacts, etc.) - Construction (contractor inefficiency, materials availability, differing site conditions, etc.) - Estimate & Schedule (priority conflicts, local costs and delivery, etc.) - External Risks (sponsor s share of costs, objections from local communities, late stakeholder changes, etc.) Why me?! A case history: East Branch Dam Safety Modifications OTEC 2018 Act of God an External Risk

17 East Branch dam safety modification East Branch Dam and Lake USACE-LRP OTEC-2018 The views, opinions and findings contained in this report are those of the authors(s) and should not be construed as an official Department of the Army position, policy or decision, unless so designated by other official documentation. 184 feet high, 1725 feet long earthen embankment dam repairs 17

18 East Branch Dam: Congress-Authorized Purposes: Flood Control Water Quality Recreation OTEC 2018

19 Problem: Dam is DSAC-II classified, meaning likely to fail (a risk designation), with leakage / seepage through the base (rock foundation) and embankment. Solution: embankment grouting and cut-off wall CORE EXISTING DAM Easy enough, right? What can possibly go wrong? OTEC 2018

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26 Scope of work 26

27 EAST BRANCH DAM SAFETY MODIFICATIONS Overall Project Scope East Branch Dam Rehab Plan S3 includes construction of a concrete cutoff wall through the embankment/overburdened and into rock. Current designs are for a one meter wide, 2,300 foot long concrete cutoff wall through embankment and overburdened of various depths from zero to 100 feet, and into rock 50 to 150 feet thick and at a maximum depth of 250 feet (approx EL 1450) below the crest of the dam (approx EL 1700). Construction activities involved with construction of the cutoff wall include: (1) Site development and Access road improvement, (2) Investigative drilling, (3) Construction of a 75 foot wide work platform on the dam crest, (4) Instrumentation installation, (5) Containment and Pre-grouting, (6) Construction of a 1m wide 2100 LF cutoff wall, (7) Site remediation. 27

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29 Risk Management Process Flowchart (USACE Draft Work in Progress!) OTEC 2018

30 Risk Management Process Flowchart cont.. USACE Risk-Based Management Enterprise OTEC 2018

31 Project Risk Management Processes Planning risk management : Deciding how to approach and plan the risk management activities for the project Identifying risks: Determining which risks are likely to affect a project and documenting the characteristics of each Performing qualitative risk analysis: Prioritizing risks based on their probability and impact of occurrence 31

32 Project Risk Management Processes (cont d) Performing quantitative risk analysis: Numerically estimating the effects of risks on project objectives Planning risk responses: Taking steps to enhance opportunities and reduce threats to meeting project objectives Controlling risk: Monitoring identified and residual risks, identifying new risks, carrying out risk response plans, and evaluating the effectiveness of risk strategies throughout the life of the project 32

33 Planning Risk Management The main output of this process is a risk management plan a plan that documents the procedures for managing risk throughout a project The project team should review project documents and understand the organization s and the sponsor s approaches to risk The level of detail will vary with the needs of the project 33

34 Topics Addressed in a Risk Management Plan: -Methodology -Roles and responsibilities -Budget and schedule -Risk categories -Risk probability and impact -Revised stakeholders tolerances -Tracking -Risk documentation 34

35 Contingency and Fallback Plans, Contingency Reserves Contingency plans are predefined actions that the project team will take if an identified risk event occurs Fallback plans are developed for risks that have a high impact on meeting project objectives, and are put into effect if attempts to reduce the risk are not effective Contingency reserves or allowances are provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level; management reserves are funds held for unknown risks that are NOT part of the cost baseline but ARE part of the budget and funding requirements 35

36 Common Sources of PM Risk on Construction Projects -Schedule Delays -Inaccurate Estimates -Ineffective Cost Controls -Contractor delays -many more 36

37 Risk Register The main output of the risk identification process is a list of identified risks and other information needed to begin creating a risk register. A risk register is: A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format A tool for documenting potential risk events and related information Risk events refer to specific, uncertain events that may occur to the detriment or enhancement of the project 37

38 Risk Register Contents -An identification number for each risk event -A rank for each risk event (based on probability of occurrence and impact) -The name of each risk event -A description of each risk event -The category under which each risk event falls -The root cause of each risk -Potential budget/schedule impact -Risk management strategy 38

39 Risk Register Contents (cont d) -Triggers for each risk; triggers are indicators or symptoms of actual risk events -Potential responses to each risk -The risk owner or person who will own or take responsibility for each risk -The probability and impact of each risk occurring (linked to risk ranking). -The status of each risk 39

40 The project RR also tracks construction risks, estimate & schedule risks, lands & damages, environmental & regulatory risks, etc. (seventeen 11x17 sheets in total). 40

41 The project RR also tracks construction risks, estimate & schedule risks, lands & damages, environmental & regulatory risks, etc. (seventeen 11x17 sheets in total). 41

42 After identifying and quantifying risks, we must decide how to respond to them. Four main response strategies for negative risks: Risk avoidance Risk acceptance Risk transference Risk mitigation Planning Risk Responses 42

43 1. A Risk Register( RR) has been created and, as a living document, is constantly maintained / updated / revised. 2. The PDT has developed and bought into the RR. 3. Risk owners have been ID d for each risk. 4. The risk management strategies were developed for each risk. 5. Risk horizon (predicted schedule of occurrence / realization) has been determined. 6. Potential $$ impact determined. OTEC 2018

44 USACE General Guidance for Mega-Projects: Impact and Probability Ratings Definitions: OTEC 2018

45 Impact and Probability Ratings Definitions, cont : OTEC 2018 Cost Impacts Negligible: $0-$500 Thousand, Marginal: $500K-$5 Million, Significant: $5-$10 Million, Critical: $10-$20 Million, Crisis: $20 Million and up. Schedule Impacts Negligible: 0 to 2 Months, Marginal: 2 to 6 Months, Significant: 6 to 10 Months, Critical: 10 to 18 Months, Crisis: 18 Months and up.

46 Some of the risks on the East Branch Rehab Risk register: - PM turnover (the project is on its 3 rd PM in 3 years); - Grout quantities and modifications (exceeding the original estimate); - Adequate cleaning of panel joints; - Unforeseen obstructions during the COW (cut-off wall) installation; - Slurry loss / reservoir contamination; - NPDES permits renewal; - Seasonal construction restrictions; - Contractor efficiency. - Etc. OTEC 2018

47 East Branch Stakeholder Project Risk Management Best Practices: - Institute weekly PDT project progress meetings; - Institute monthly project risk look-ahead updates; - Institute monthly stakeholder (KTR, USACE / external consultants design team, con QA, PM) project progress meetings; - Institute monthly KTR / USACE RR sharing; - Institute annual facilitated partnering meetings for all the stakeholders; - Institute monthly PRB (project review board) meetings w/ USACE district upper management present / discuss active risks status OTEC 2018

48 CONCLUSION The USACE is currently implementing the risk-based project management approach to all of its megaprojects. The next step would be to expand this onto all projects. Stay tuned To be continued. OTEC 2018

49 Questions? Alex Bredikhin, P.E., Risk Manager - Megaprojects, U.S. Army Corps of Engineers, Pittsburgh District alexandre.j.bredikhin@usace.army.mil 1000 Liberty Ave., 22 nd Floor Pittsburgh, PA The views, opinions and findings contained in this report are those of the author and should not be construed as an official Department of the Army position, policy or decision, unless so designated by other official documentation.