OHIO PLANNING CONFERENCE

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Florida Department ofTRANSPORTATION

Phillip “Greg” Davis, P.E. Specifications & Estimates Office State Estimates Engineer July 16, 2014

Risk Analysis/Management during Project Development

Ohio Department of TransportationHyatt Regency Columbus

Columbus, Ohio

What is Risk?

Project Management Institute (PMI) Says: “An uncertain event or condition that, if it occurs, has a positive or negative effect on the project’s objectives.”

Florida Department of Transportation

What is Risk Analysis?

Traditional Estimating Contingency is intended to include

all risk known/unknown

Little control of cost and schedule

Reactive

Risk-Based Estimating Risk are clearly identified and

quantified in estimate

Reasonable control of cost and schedule

Proactive

ContingencyContingency

Threat 1, 2,3,etcThreat

1, 2,3,etc

Opportunity 1, 2, 3, etcOpportunity 1, 2, 3, etc

Florida Department of Transportation

Why Risk Analysis?

• Support State Transportation Improvement Program with better cost estimates and schedules Validate cost & schedule for accurate project delivery Replace general project contingency with risk-based cost

• Enhance Risk Assessment/Mitigation activities in Project Management

• Support FHWA requirement for financial plans on major projects by providing risk-based cost estimates

Maximizes the Likelihood of Meeting Budget & Project Delivery Goals

Florida Department of Transportation

PD&E

Design

Construction

Actual

Late

Over

Budg

et

Cost

Time

Projected

PD&EDesign

Construction

(Nationwide Trend)

Typical Project Scenario without Risk Analysis

Florida Department of Transportation

Cost

Time

ProjectedPD&E

Design Construction

Typical Project Scenario with Risk Analysis

PD&E

Design Construction

Actual

On-time

Within Budget

(Nationwide Trend)

Florida Department of Transportation

Project Purpose & Needs

Risk Identification &

Assessment

Risk Response Mitigation Strategies

Risk Tracking & Monitoring

Risk Management Overview

Risk Management is the systematic processof identifying, assessing, and responding to risks in order to manage or reduce potential adverse effects on the achievement of project goals.

Continuous Iterative Process

Florida Department of Transportation

When to Use Risk Management

• Early planning and budgeting• Financial Planning Support• Evaluation of project delivery alternatives• Establishing Risk Allocation

between parties• Preparation of project contract documents• Throughout Project Delivery Lifecycle

Florida Department of Transportation

Benefits of Risk Management• Builds confidence and credibility in project’s estimates• Promotes pro-active practices and early planning to

meet project objectives • Facilitates development of response strategies for all

threats & opportunities• Better allocation of project risks • Facilitates tracking of risks throughout the life-cycle of

the project• Identification of best project delivery method

Florida Department of Transportation

Risk Analysis Workshops

• Collaborative team approach

• 2 to 3 day structured event• Identify and quantify

threats and opportunities• Identify risk management

strategies

Florida Department of Transportation

Who participates in a Risk Workshop

• Project Manager and Design Team

• External Subject Matter Experts

• Internal and External Stakeholders

• Disciplines – Construction– Bridge & Structures– Environmental– Right of Way– Geotechnical– Construction– Utilities– Local agencies– Others depending on

project scope

Florida Department of Transportation

Objectives of a Risk Workshop

• Identify project risk to account for uncertainty in scope, cost and schedule

• Assess project risks by quantifying impacts to cost and schedule:– Likelihood (probability) of occurrence– Impact (if it occurs)

• Analyze the project risks through modeling to develop a baseline risk assessment.

• Produce a Risk Register for future monitoring of identified project risks.

Florida Department of Transportation

Project Team Roles in Workshops

• Provide Project Information:– Project location maps, overheads, etc.– Project cost estimate and backup– Design and construction schedule or flow chart– Develop comprehensive list of risks, typically using

starter risk list• Workshop Support:

– Provide information on project history and key decisions as these items come up in discussion

– Provide input on risk identification, quantification and mitigation

Florida Department of Transportation

Workshop Preparation with Project Team

• Risk Analysis Process Overview• Project Overview & Identify Risk Areas• Develop Project Starter Risk List• Review Base Cost Estimate • Create a flowchart of the project schedule• Assign tasks to the project team members• Set the agenda for the workshop

Florida Department of Transportation

FDOT Risk Starter List

Florida Department of TransportationFlorida Department of Transportation

Functional Area Risk NameInclude Risk

Comments84

Contracting and Procurement Changes in Contract Packaging 1

Assumption is Segment 1 then separate contract for 2/3, low likelihood of change. Currently assuming a 2 month gap between projects, may reevaluate the staggering of projects based on estimated construction duration

Contracting and Procurement

Other Issues Related to Contract Language (Warranties, Liquidated Damages, DBE, Insurance/Bonding, etc.) 1

Contracting and Procurement Delays in Ad/Bid/Award Process due to Addenda or Bid Protests 1

Contracting and Procurement Lack of Qualified Bidders 1

Contracting and Procurement

Other construction projects in region limit supply of labor, bid costs are higher as a result 1 Potential issue, $600 M in lets in D2, twice of normal

Contracting and Procurement Contractor Non-Performance 1

Contracting and Procurement Labor and/or Productivity Disruptions 1 probably not a major concern - review vs. base schedule

Structures & Geotech Changing Geotechnical Conditions (Due to New Information) 1

Segment 1, all design geotech complete (Drilling complete, analysis is in and reports are being completed), very close to final in 90% submittal; Segment 2 not all borings are complete, have some issues accessing properties due to hunting season, there have been issues raised by one property owner about damage to property during drilling. Segment 3, have everything except for OH sign geotech and need some borings at north end for local access road.

Base Cost Variability Review

Florida Department of Transportation

Project Schedule Review

Florida Department of TransportationFlorida Department of Transportation

Workshop Deliverables

• Final report detailing the results of the workshop• Final Risk Register for Project Manager to use

managing the identified risks

Florida Department of Transportation

$533.2

$605.3

$674.4

$360

.7

$452

.1

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$250.0 $350.0 $450.0 $550.0 $650.0 $750.0

Pro

bab

ility

of N

ot E

xcee

din

g

Project Cost, Millions of Dollars

Alternative 1 - Risk-Based Total Cost (Pre-Response)

Alternative 1 - Base Cost Estimate (mean value, 2010 $)

Alternative 1 - Base Cost Estimate (mean value, escalated)

Baseline Risk Assessment Results

$650.0

Contingency$650.0 - $605.3 = $44.7

$658

.9

$652.2

$739.5

$775.7

$829.5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$500 $550 $600 $650 $700 $750 $800 $850 $900 $950

Pro

bab

ility

of

No

t Ex

ceed

ing

Cost, Millions of Dollars

Non-Escalated Design-BuildContract Base Cost, Program

Non Escalated Design-BuildContract Risk-Adjusted Total Cost,Program

Florida Department of Transportation

Baseline Risk Assessment Results

$1.4

$1.5

$1.7

$1.9

$2.3

$2.3

$3.8

$3.8

$25.5

$51.0

$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00

MGT 900.03 - Loss of Toll Revenue due to complex MOT

ENV 30.01a12 - Expected Controversy on Environmental Grounds - Alt 1/2

RR 20 .01 - Cost for Railroad Flaggers

ENV 80.01 - New Storm water Rule - Water quantity and quality issues

ENV 60.06a1 - Development of mitigation plan to offset impacts to public lands - Alt 1

STG 10.01 - Design Changes on Bridge or Overpass

ENV 10.01a1 - Determination of Significance Requiring EIS - Alt 1

CNS 30.01 - Excavation impacts during construction due to weather

ENV 20.04a1 - Determination of indirect impacts to wetlands - Alt 1

ENV 20.03a1 - Determination of direct impacts to wetlands - Alt 1

Expected Value Cost Impact ($ millions)

Based on Risks that Impact Alternative 1 Activities

Alternative 1 - Cost EV ($M) (Pre-Response)

Florida Department of Transportation

Risk Register: Risk Identification

Florida Department of Transportation

Florida Department of Transportation

Risk Register: Risk Quantification

Goal of Risk Management

Probability of Occurrence

Impact Initial Risk

Managed Risk

Risk Assessment’s aim is to assess potential impact of various scope, event, and budget risks on the project’s cost and schedule.

Risk Management’s aim is to identify opportunities and mitigation strategies to reduce both the likelihood of an event occurrence and the potential effect if it occurs.

Florida Department of Transportation

Florida Department of Transportation

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Statewide Risk Management Team

Greg Davis, PEState Estimates Engineer

Kurt Lieblong, PE, CVSState Project Review Administrator

Tim BrockDistrict VE/Utilities Administrator

Jose Theiler, AVSDistrict Program Services Administrator

Rob Quigley, PEState Project Management Engineer

Alan AutryState Alternative Contracting Administrator

Florida Department of Transportation

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Regional Risk Management Teamso Identify Projects for Workshops

o Support Workshops with Staff & Facilities

o Change culture by promoting risk

o Monthly teleconferences with SRM Team

o Membership in each District consists of :• District Value Engineer• District Estimates Engineer• Design Project Manager• Construction Project Manager

Florida Department of Transportation

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Project Selection Guidelines – Risk Analysis

o Complex project or total project cost greater than $500 Million – Consultant-led Independent Risk Analysis Workshop

o Total project cost between $100 - $500 million - Risk Analysis Workshop using commercial risk modeling program

o Projects not requiring a formal workshop - Risk Analysis Modeling Tool by HDR

o Qualitative Risk Analysis - Risk Based Graded Approach Worksheet

Implementation AssistanceLevels of Engagement

Proof of Concept Pilot • Funds for piloting products to evaluate readiness for implementation• Contractor support to collect data and evaluate the application

Lead Adopter Incentive• Funds for early adopters to offset implementation cost and mitigate risks• Recipients required to provide specific deliverables designed to further

refine the product

User Incentive • Funds for implementation support activities after early adopter use• Used to conduct internal assessments, build capacity, implement system

process changes, organize peer exchanges, or offset other implementation costs

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October 2013 R09 Awards

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DOT Project DOTContact

FHWA Contact

Florida SR 40 from east of CR 314 to east of CR 314A

Greg Davis

Rafiq Darji

Minnesota Reconstruction of I-35W from 46th St to I-94

Jenny Morris

William Lohr

Oregon I-5 Bridge replacement over Columbia River

Lea Ann Hart Chambers

Mike Morrow

Pennsylvania SR 0322 Potters Mills Gap Transportation Project

Selena Griffett

Don Horne

R09 Lead Adopter

R09 Lead Adopter Incentives

R09 implementation services provided by FHWA contractor resources Training Course Demonstration Workshop Peer Exchange Synthesis Report Technical Assistance

FHWA Up to $100,000 per DOT to perform

implementation activities such as: Training Courses Demonstration Workshops Peer Exchanges Technical Assistance Project Development Manual Updates Other activities as determined by the

State

STATE DOT

Value of FHWA Services to DOT

$43,500

Implementation Assistance Funding to DOTUp to $100,000

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30Florida Department of Transportation

Greg Davis, PEState Estimates Engineergreg.davis@dot.state.fl.us850-414-4170