Risk Assessment and Management for Large Infrastructure Projects. Outline

Transcription

1 Risk Assessment and Management for Large Infrastructure Projects Travis McGrath, Ph.D., P.E. Bill Roberds, Sc.D. Alan Keizur Chuck Lockhart, P.E. 1 Outline Probabilistic, Risk-Based Integrated Cost and Schedule RA/RM Concepts Project Examples Summary 2

2 Outline Probabilistic, Risk-Based Integrated Cost and Schedule RA/RM Concepts Project Examples Summary 3 Uncertainty in Project Cost and Schedule Cost & schedule estimates for large or unique projects are often significantly inaccurate, with corresponding consequences (e.g., Flyvbjerg et. al. 2002) A project can be affected by a number of technical and policy variables These variables cause uncertainty in cost and schedule: Variations in project conditions assumed for estimates (e.g., in average unit rates, progress rates, escalation rates) Uncertain impacts from unplanned events (deviations from assumptions) During project development, information on these variables is typically limited 4

3 Probabilistic Cost and Schedule RA / RM: Objectives Help mitigate these problems by: Quantifying project cost and schedule uncertainty Identifying and prioritizing critical risks and key opportunities Increasing confidence in the cost and schedule estimates Increasing project team understanding and communication Enabling Risk Management and Value Engineering studies Probabilistic Cost and Schedule RA / RM: Philosophy Take a comprehensive look at the project (i.e., not just construction) Quantify uncertainty in key project assumptions Utilize independent perspective (for validation) Employ a collaborative, team approach Achieve consensus (and reduce controversy) Focus on the key issues Identify and evaluate risk-management strategies to improve project performance Update as the project changes significantly 6

4 Probabilistic Cost and Schedule RA / RM: Concept Total Base + Risk Replace contingency with explicit risk and opportunity events (may or may not occur) Relative Likelihood Quantify risk and uncertainty in base to determine uncertainties in total risk contingency + + Performance (e.g., cost) base total conservative Event _ X Integrated Cost and Schedule Model Uncertainty in total project cost and schedule, plus sensitivities Start Activity A Activity C Activity B End $ time T escalation cash flow Activity Base Costs and Uncertainties Activity Base Durations and Uncertainties Event _ Y Risk Events (likelihood of occurrence, and uncertainty in activity cost and duration changes if the event occurs) 8

5 Outline Probabilistic Cost and Schedule RA/RM Concepts Project Examples Summary 9 Example Applications Transportation: Highways (WSDOT) Bridges (WSDOT) Rapid transit (Pittsburgh, NY PATH, Dallas) Rail (Pittsburgh Maglev, Denmark-Storebaelt) Ports / Airports (SeaTac, Transbay) Tunnels (San Vicente, Caldecott) Other Infrastructure: Water supply (San Diego Co) Sewer systems (King Co WA, Hong Kong) Electrical substations (SEPTA) Buildings (NY PATH) Mines / LNG plant (Freeport, Trinidad) Landfills (Cleanaway, RDOS) 100 projects, totaling US $70B capital cost 10

6 Floating Highway Bridge Old bridge with multiple fixed spans and long floating span Carries 11,000 vehicles per day Owner considering 3 bridge re-build alternatives, two with additional improvements beyond the ends of the bridge: 4 lanes with full improvements (bridge and beyond) 6 lanes with full improvements 6 lanes with bridge improvements only ( 6 lane partial ) Owner wanted to compare cost and schedule for the alternatives, considering uncertainties and risks Policy dictates budgeting for the 80 th percentile 11 12

7 Floating Bridge Flow chart 1. Site Selection 12. ESA Consultation 13. DEIS (incl. Selection of Preferred Alt.) 14. Corr Prelim (<10%) 1. Early ROW Acquisition 9. Project Management. 7. Permitting 2. Env. ROD Documentation 10. Ad/Bid/ 11. Pontoon Final Award Site Prelim. /PS&E Engineering 26. Environmental Mitigation (Off- 3 9a. Early ROW 9b. Remaining Acquisition 1 ROW 27. Mob/Shop Acquisition 1 Drawings/Build/ Transport Pontoons (with Attached 4. ROW Plans Superstructure) F-3 S+? 30. Install Pontoons (with F 1 mo. Attached Superstructure). ROD 16. FEIS F-11 (after FEIS) 28. Construct West 21. Permits 2. Ad/Bid/ Approach Award Preliminary Construct North (<30%) Half of East Approach 2 S + 6 mo PS&E 38. Permits Remaining ROW 36. S + 6 mo. 34. Preliminary 20. ROW Plan 14 (<30%) 39. PS&E (Phase 2 East) 24. RTID 8. TDM / Funding Regional ITS ROW 3. ROW Plan Acquisition (Phase 2 East) 37. Phase 2E 2 Funding 48. Permits S + 6 mo. 44. Preliminary (<30%) 49. PS&E 14 (Phase 2 West) 6-Lane Full 31. switch 32. Construct South traffic Half of East Approach/ demo old bridge 33. (4 lanes) Open addl. 2 lanes on Floating Bridge 42. Eastside Communities (alt) Ad/Bid/Award (Phase 2 East) Bellevue IC (alt) 11. Build I- Interchange (incl lid) 3a. Build Pacific IC, incl ship canal 6. Demo and Build bridge, etc. (alt 2. Build North Half South Half of only) 12 of Portage Bay Bridge (alt) 12 Portage Bay Bridge (alt) b. Build North Half 7. Demo and Build of Montlake IC (alt) 12 South Half of Montlake IC (alt) Ad/Bid/Award 28 (Phase 2 West) 6 4. Montlake Blvd CN (alt only) ROW Plan (Phase 2 West) 47. Phase 2W Funding 0. ROW Acquisition 13 Floating Bridge Flow chart 1. Site Selection 12. ESA Consultation 13. DEIS (incl. Selection of Preferred Alt.) 14. Corr Prelim (<10%) 1. Early ROW Acquisition 9. Project Management. 7. Permitting 2. Env. ROD Documentation 10. Ad/Bid/ 11. Pontoon Final Award Site Prelim. /PS&E Engineering 26. Environmental Mitigation (Off- 3 9a. Early ROW 9b. Remaining Acquisition 1 ROW 27. Mob/Shop Acquisition 1 Drawings/Build/ Transport Pontoons (with Attached 4. ROW Plans Superstructure) F-3 S+? 30. Install Pontoons (with F 1 mo. Attached Superstructure). ROD 16. FEIS F-11 (after FEIS) 28. Construct West 21. Permits 2. Ad/Bid/ Approach Award Preliminary Construct North (<30%) Half of East Approach 2 S + 6 mo PS&E 38. Permits Remaining ROW 36. S + 6 mo. 34. Preliminary 20. ROW Plan 14 (<30%) 39. PS&E (Phase 2 East) 24. RTID 8. TDM / Funding Regional ITS ROW 3. ROW Plan Acquisition (Phase 2 East) 37. Phase 2E 2 Funding 48. Permits S + 6 mo. 44. Preliminary (<30%) 49. PS&E 14 (Phase 2 West) 6-Lane Partial 31. switch 32. Construct South traffic Half of East Approach/ demo old bridge 33. (4 lanes) Open addl. 2 lanes on Floating Bridge 42. Eastside Communities (alt) Ad/Bid/Award (Phase 2 East) Bellevue IC (alt) 11. Build I- Interchange (incl lid) 3a. Build Pacific IC, incl ship canal 6. Demo and Build bridge, etc. (alt 2. Build North Half South Half of only) 12 of Portage Bay Bridge (alt) 12 Portage Bay Bridge (alt) b. Build North Half 7. Demo and Build of Montlake IC (alt) 12 South Half of Montlake IC (alt) Ad/Bid/Award 28 (Phase 2 West) 6 4. Montlake Blvd CN (alt only) ROW Plan (Phase 2 West) 47. Phase 2W Funding 0. ROW Acquisition 14

8 Floating Bridge Cost Uncertainty (for the 6-Lane 6 Full alternative) Impacts on Target Confidence Level or Reliability (80 th percentile) Cumulative Probability ' 100% 80% 60% 40% 20% 0% 1,700 Base Cost (No Risk or Opportunity); Unescalated With Cost and Schedule Risk and Opportunity; Unescalated With Cost and Schedule Risk and Opportunity and Escalation From Risk and From Opportunity Inflation $22M $10M 1,900 2,100 2,300 2,00 2,700 Total Project Cost (US$M) 2,900 3,100 1 Floating Bridge Comparison of Alternatives 6-Lane Partial 4-Lane Full 6-Lane Full Cumulative Probability 100% 90% 80% 70% 60% 0% 40% 30% 20% 10% 0% 00 $700M $800M 1,000 1,00 2,000 2,00 3,000 Total Project Cost (YOE US$M) 3,00 Cumulative Probability 100% 90% 80% 70% 60% 0% 40% 30% 20% 10% 0% 6-Lane Partial 4-Lane Full 6-Lane Full + months (full vs. partial) Nov 2013 Jun 2014 Dec 2014 Jul 201 Jan 2016 Aug 2016 Mar 2017 Sep 2017 Apr 20 Oct 20 May 2019 Project Completion Date 16

9 Floating Bridge Updating and Risk Management Probability 16% 14% 12% 10% 8% 6% 4% 2% 0% 2,000 Impact of Risk Management 2,10 2,300 2, ,600 2,70 2,900 3,00 Project Cost (US$M Year-of-Expenditure) 3, Floating Bridge Uncertainty in Cash Flow of Expenditures Cashflow (YOE US$M) 3,000 2,00 2,000 1,00 1, Annual - Mean Annual - 10th Percentile Annual - 90th Percentile Cumulative - Mean Cumulative - 10th Percentile Cumulative - 90th Percentile Year

10 Water-Supply Tunnel San Diego, California (US) alternative shaft locations SURGE CONTROL FACILITY 19 Water-Supply Tunnel Comparison of Alternatives probability of non-exceedance 100% 80% 60% 40% 20% 0% $40M Difference in cost at 80 th percentile as determined from risk assessment. Before RA, costs were assumed to be the same for shallow and deep shallow cost total escalated cost ($M) or duration (mos after June 2002) shallow duration deep cost deep duration 20

11 Cumulative Probability Power Substations Impact of Delayed Funding Unconstrained Funding Constrained Funding: -month delay to 2nd Substation Funding 100% 90% 80% 70% 60% 0% 40% 30% 20% 10% 0% + 1.% at the 80 th percentile (smaller than anticipated, so good news) Total Project Cost (YOE$M) 21 Outline Probabilistic Cost and Schedule RA/RM Concepts Project Examples Summary 22

12 Summary of Benefits Clarify and evaluate project delivery strategies Validate and improve project estimates Quantify uncertainties in project estimates to ensure more realistic expectations Quantify key cost and schedule risks and opportunities provide basis for Risk Management, Value Engineering, and Strategic Planning Improve communication (360 degrees) save time and money 23 Summary of Challenges Interim validation: the approach appears to be performing better (on average) than traditional estimating, but may still be underestimating the uncertainty Challenges: Difficulty convincing owner to include all significant uncertainties and risks (excluding them constrains results) Removing optimism and/or management bias, even when they re known to exist Making results understandable and more useful to owner Careful implementation is required to ensure accurate and defensible results 24