Risk-Based Integrated Cost and Schedule Analysis

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1 Risk Management in Underground Construction Risk-Based Integrated Cost and Schedule Analysis Washington D.C., 11/28/2017 Philip Sander Olympiastr Innsbruck Austria

2 Overview 1. Introduction 2. Considerung Uncertainties 3. Integrated Cost and Schedule Model Slide 2

3 RiskConsult GmbH Olymipastr. 39, 6020 Innsbruck, Austria Founded 2007 Staff: 12 Expert in Cost- and Risk Management: Risk Management for Infrastructure Projects Implementation of RM Processes Cost Estimation and Project Cost Control RAMS Reliability, Availabiity, Maintainability, Safety Software development Experience with major infrastructure projects in Europe, North and South America. Slide 3

4 Selected Projects Slide 4

5 Overview 1. Introduction 2. Considerung Uncertainties 3. Integrated Cost and Schedule Model Slide 5

6 Uncertainty Would you wade through a river 1.30 meters deep on average? Information about uncertainty is necessary! Source: Dr. Frank Lulei Slide 6

7 Fallacy of the Deterministic Approach 5 Very Likely 5 Flat tire Give equal weight to completely different scenarios Likely Possible Unlikely By multiplying the two elements of probability and impact, these values are no longer independent. Loosing the probability information Loosing the scenario impact information 1 Very Unlikely TBM fire 5 Negligible Minor Moderate Significant Severe The actual impact will definitely deviate from the deterministic value (i.e., the mean) see following example Example deterministic calculation: Tire damage mine dumper: 80% x 10,000 $ = 8,000 $ TBM fire: (1/500) x 4,000,000 $ = 8,000 $ NPP accident: (1/10,000,000) x 80,000,000,000 $ = 8,000 $ Slide 7

8 RIAAT Risk Administation and Analysis Tool RIAAT is an advanced project management software, which integrates and links information from cost management, risk management and schedule planning. Further Information: Slide 8

9 RIAAT Risk Administation and Analysis Tool RIAAT is an advanced project management software, which integrates and links information from cost management, risk management and schedule planning. Further Information: Slide 9

10 Overview 1. Introduction 2. Considerung Uncertainties 3. Integrated Cost and Schedule Model Slide 10

11 Integrated Cost and Schedule Analysis B Base Cost Estimate Base Cost Estimate Cost categories: - Property - Investigation - Tunnelling Works - Work Breakdown Structure Results Cost T E R B Base Cost Uncertainties + Total Project Cost Escalation Cost Risk Cost Base Cost Schedule Simulation Completion Date Critical Paths Delay from Risks Risk Assessment (1) R (2) (5) (4) Unknown Mark-Up Identified Risks Probability of Occurence & Impact % of Base Cost Cost Impact Time Impact Owner Risk Contractor Risk Delay Results Schedule (3) (1) Base cost estimate is reviewed, associated with uncertainties and integrated into the WBS. (2) Risks are assessed (cost & time impact) and integrated into the WBS. (3) Risks are assigned to tasks in the project s schedule. Subsequently, completion date, critical paths and delays from risks are simulated. (4) Cost impact from time delay is calculated with time-related cost and integrated into the WBS. (5) Project Cost including uncertainty is available an all WBS levels and for all cost components. Slide 11

Integrated Cost and Schedule Analysis B Base Cost Estimate Base Cost Estimate Cost categories: - Property - Investigation - Tunnelling Works - Base Cost Uncertainties + Risk Assessment (1) R (2)

12 Integrated Cost and Schedule Analysis B Base Cost Estimate Base Cost Estimate Cost categories: - Property - Investigation - Tunnelling Works - Base Cost Uncertainties + Risk Assessment (1) R (2) Unknown Mark-Up Identified Risks Probability of Occurence & Impact % of Base Cost Cost Impact Time Impact Work Breakdown Structure Schedule Simulation (3) Delay Results Cost (5) (4) Owner Risk Contractor Risk Results Schedule T E R B Total Project Cost Escalation Cost Risk Cost Base Cost Completion Date Critical Paths Delay from Risks Slide 12

13 Example Cost Estimate Concrete Works Description Quantity Unit Price Item Price Dist. Min ML Max Unit Dist. Min ML Max USD Concrete works 7,386, Concrete Tower Floor Triangle m³ Triangle , Reinforcement Tower Floor Triangle 51, , , kg Triangle , Concrete Newsroom Triangle m³ Triangle , Reinforcement Newsroom Triangle 19, , , kg Triangle , Concrete Basement Triangle m³ Triangle , Reinforcement Basement Triangle 18, , , kg Triangle , Concrete Walls Triangle 5, , , m³ Triangle ,973, Reinforcement Walls Triangle 519, , , kg Triangle , Concrete Slabs Triangle 9, , , m³ Triangle ,141, Reinforcement Slabs Triangle 1,072, ,128, ,241, kg Triangle ,298, Concrete Base Slab Triangle 3, , , m³ Triangle , Reinforcement Base Slab Triangle 289, , , kg Triangle , Slide 13

14 Uncertainty Baseline Cost Cumulative Relative Frequency in % Standard deterministic cost estimate Uncertainties in quantities and unit prices Baseline Cost (BC) Baseline Cost (BC) + Uncertainty (BC*) Cost in $K Baseline Cost Slide 14

15 Integrated Cost and Schedule Analysis B Base Cost Estimate Base Cost Estimate Cost categories: - Property - Investigation - Tunnelling Works - Base Cost Uncertainties + (1) R Unknown Mark-Up Risk Assessment % of Base Cost Cost Impact Time Impact (2) Identified Risks Probability of Occurence & Impact Work Breakdown Structure Schedule Simulation (3) Delay Results Cost (5) (4) Owner Risk Contractor Risk Results Schedule T E R B Total Project Cost Escalation Cost Risk Cost Base Cost Completion Date Critical Paths Delay from Risks Slide 15

Risk Assessment Probability of occurence (%) or expected occurrence rate (multiple occuring risks) Impact (cost and time) 3-Point Estimate Reality can be described much

16 Risk Assessment Probability of occurence (%) or expected occurrence rate (multiple occuring risks) Impact (cost and time) 3-Point Estimate Reality can be described much better with bandwidths than with single numbers Triangle function is easy to understand More complex modeling is possible at any point in the process A[min] A[ml] A[max] Slide 16

17 Integrated Cost and Schedule Analysis Slide 17

18 Integrated Cost and Schedule Analysis B Base Cost Estimate Base Cost Estimate Cost categories: - Property - Investigation - Tunnelling Works - Base Cost Uncertainties + (1) R Unknown Mark-Up Risk Assessment % of Base Cost Cost Impact Time Impact (2) Identified Risks Probability of Occurence & Impact Work Breakdown Structure Schedule Simulation (3) Delay Results Cost (5) (4) Owner Risk Contractor Risk Results Schedule T E R B Total Project Cost Escalation Cost Risk Cost Base Cost Completion Date Critical Paths Delay from Risks Slide 18

19 Base Schedule Schedule Density: the need to schedule at an appropriate level of detail based on the contemporary knowledge available to the project team. Condense large schedules to restore the overview! Slide 19

20 Assign Risk to Schedule Activities Slide 20

21 Base Schedule with Assigned Risks Completion Date Delay Slide 21

22 Critical Paths View Slide 22

23 Example: Change of the Critical Path Base Schedule Base Schedule + Risk Critical path is changing to ATC tower due to risk impact Slide 23

24 Summary Integrated Cost and Schedule Model Slide 24

25 Uncertainty Baseline Cost + Risk Cumulative Relative Frequency in % Baseline Cost (BC) Baseline Cost (BC) + Uncertainty (BC*) Baseline Cost + Risk (BC*+R) Cost Baseline $K Cost + Risk Cost VaR80 Baseline Cost Baseline Cost + Uncertainty VaR80 Slide 25

26 Integrated Cost and Schedule Analysis B Base Cost Estimate Base Cost Estimate Cost categories: - Property - Investigation - Tunnelling Works - Base Cost Uncertainties + Risk Assessment (1) R (2) Unknown Mark-Up Identified Risks Probability of Occurence & Impact % of Base Cost Cost Impact Time Impact Work Breakdown Structure Schedule Simulation (3) Delay Results Cost (5) (4) Owner Risk Contractor Risk Results Schedule T E R B Total Project Cost Escalation Cost Risk Cost Base Cost Completion Date Critical Paths Delay from Risks Slide 26

27 Escalation Slide 27

28 Depiction Baseline Cost, Total Cost, Delta Cost Cumulative Relative Frequency in % Baseline Cost (BC) Baseline Cost (BC) + Uncertainty (BC*) Baseline Cost + Risk (BC*+R) Total Project Cost (BC*+R+E) Baseline Cost Cost Baseline $K Cost + Risk Cost VaR80 Baseline Cost + Uncertainty VaR80 Baseline Cost + Risk Cost + Escalation VaR80 Delta Cost VaR80 Total Project Cost Baseline Cost Slide 28

at Hierarchical Project Tree Structure Cost Components Probabilistic Methods Risk Analysis Process Schedule

29 Summary RIAAT Risk Administation and Analysis Tool Cost Estimate Risk Management Cost Control Further Information: Hierarchical Project Tree Structure Cost Components Probabilistic Methods Risk Analysis Process Schedule Analysis RAMS Analysis - Reliability, Availability, Maintainability, Safety Numerous visualization options Custom reports with tables and graphics Various import/export options for MS Excel Slide 29

Quantitative Risk Analysis Fallacy of the Single Number

World Tunnel Congress 2015 Dubrovnik Quantitative Risk Analysis Fallacy of the Single Number Dubrovnik, 27.05.2015 Philip Sander sander@riskcon.at Alfred Mörgeli alfred.moergeli@moergeli.com John Reilly