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The Big Dig: Managing Risk and Complexity on Mega Projects Presentation to PM Connect Thursday, December 15, 2011 Virginia A. Greiman, Assistant Professor,

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Presentation on theme: "The Big Dig: Managing Risk and Complexity on Mega Projects Presentation to PM Connect Thursday, December 15, 2011 Virginia A. Greiman, Assistant Professor,"— Presentation transcript:

1 The Big Dig: Managing Risk and Complexity on Mega Projects Presentation to PM Connect Thursday, December 15, Virginia A. Greiman, Assistant Professor, Boston University V. A. Greiman Copyright © 2011 Permission as Required


3 Project Structure and Cost
Element Current Estimate ($MM) Construction $ 9,496 Design $ 1,034 Project Management $ 1,977 Force Accounts $ 608 ROW Settlements $ 576 Insurance Premiums $ 609 Contingency $ 498 TOTAL $14,798 Source: CA/T Project Finance Plan 2007 Virginia A. Greiman © 2010

4 Why are Mega Projects Consistently Underestimated?
A review of large public works projects over the last century concluded that costs are consistently underestimated, a phenomenon attributed to the desire of the project advocates to have their projects approved. (Flyvbjerg, Megaprojects and Risk: An Anatomy of Ambition, 2002)

5 National Transportation Research Board 2006 Cost Estimation Report
Identified 8 Strategies linked to 18 different causes of cost escalation on highway projects in the United States. Notably, the research concluded that most efforts in cost estimation have focused on creating tools to improve cost estimates with less emphasis on tools for cost estimation management. (Anderson et. al. 2006).

6 Risk and Cost Escalation Factors
Engineering and Construction Complexities Scope Changes Ambiguous and Conflicting Contract Provisions Unforeseen Events Unforeseen Conditions Virginia A. Greiman © 2010

7 What Makes a Project Complex?
Size and Duration: The Big Dig and The English Chunnel (FHWA: More than $1Billion) Numerous Stakeholders with diverse interests Technology: Hoover Dam and Panama Canal Extension Untried: BP Gulf of Mexico Oil Disaster Integration of Processes: Many Diverse and Autonomous, but interrelated and interdependent components or parts linked through many dense interconnections. Virginia A. Greiman © 2010

8 Major Complexity Challenges on the Big Dig:
Project Integration – (150 Major Employers – One Team) 5,000 workers, thousands of complex processes Risk Management – World’s Largest Wrap-up Program Technology Integration – Monitoring the Critical Path Claims and Changes - Partnering

9 Project Integration Management
Close Project 7 Project Charter 1 Scope Statement 2 Integrated Change Control 6 Project Mgmt Plan 3 Monitor And Control 5 Direct and Manage Execution 4 Project Management Institute, PMBOK, 4th ed.

10 Project Integration People Process Stakeholders Community Disciplines
Virginia A. Greiman © 2010

11 PMI Project Management Trade-offs
Des Design, Risk, Safety, and Quality Decisions!!

12 What Is Project Risk? Completion Risks? – Scope, Schedule and Budget
Operational Risks? – Market Demand and Technical Capacity Political/Sovereign Risks? – Expropriation, Regulatory, Permitting, Change in Law Financial Risks? – Funding Sources and Sequencing (Debt and Equity) Force Majeure Events and Catastrophic Loss? Virginia A. Greiman © 2010

13 CA/T’s Risk Management Mission
Operating a World-Class Risk Management Program for: Engineering and Construction Safety and Health Loss Control Insuring all identified loss exposures through and beyond Project completion Virginia A. Greiman © 2010

14 CA/T Project Insurance Wrap-up Coverage’s ($609M) (2006 CA/T Project Finance Report)
Virginia A. Greiman © 2010

15 Major Public Project Wrap-Up Programs
Channel Tunnel (U.K./France) Sydney Harbor Tunnel (Australia) Great Belt Link (Denmark) U. S. Nuclear Power Plants The Central Artery/Tunnel Project Oregon Tri-Met Westside Light Rail Line New Jersey Transit Corporation Hudson-Bergen Rail Line Chicago Transit Authority Green Line Rehabilitation Project Utah Department of Transportation Interstate 15 New York City Transportation Authority Sources: Great Projects, James Tobin, 2001, United States General Accounting Office, GAO/RCED , 1999, Bechtel Corporation, San Francisco, CA Virginia A. Greiman © 2010

16 How Is Risk Managed? Vision Mission Strategy Organization Risk Control
Evaluation Monitoring Reporting Root Cause Lessons Learned Risk Management Objectives and Goals Risk Information Communication Risk Assessment Identification Perception Qualitative v. Quantitative Analysis Risk Allocation Avoidance Prevention Reduction/Mitigation Separation Duplication Transfer Virginia A. Greiman © 2010

17 Lessons from Practice Source: Central Artery Tunnel Project, Photo of Fort Point Channel

18 Classification of Catastrophic Loss
Natural Economic Technology Human

19 Major Catastrophic Losses
Event Estimated Loss ($MM) Hurricane Katrina (2005) $43B-$60B World Trade Center (2001) $30-40B Earthquake in Chile (2010) $30B ($8B insured) Hurricane Andrew (1992) $18B California Earthquake (1994) $12.5B Hurricane Hugo (1989) $ 4.2B Japan Typhoon Murielle (1991) $ 6.4B Hurricane Georges (1998) $ 2.9B Hurricane Floyd (1999) $ 2.0B Oakland, CA fire (1991) $ 1.7B IRA Bombing, London (1993) $ 1.0B Source: Lloyds, Munich Re, Swiss Re

20 Human Threats to Technology
Risk Motivation Conduct Hacker Challenge Rebellion Hacking Social Engineering System intrusion Break-ins Unauthorized access Computer Criminal Destruction of information Disclosure of confidential or illegal information Monetary gain Unauthorized data alteration Cyber stalking Fraudulent act Bribery information Terrorist Blackmail Destruction Exploitation Revenge Economic exploitation Information theft Personal privacy Illegal access to classified Information Virginia A. Greiman © 2010

21 Risk Analysis Events and Condition Chart What? How? And Why?
Worker Makes Error Down-grading Changes Occur Worker Fails to Adapt to Changes Hazardous Situation Developed Incident Occurred U.S. Dept. Of Energy Events and Causal Factors Analysis, Root Cause Analysis is any analysis that identifies underlying deficiencies in a safety management system that, if corrected, would prevent the same and similar accidents from occurring. Accident Occurred

22 Big Dig Safety and Health Programs and Practices
Substance Abuse and Prevention Program Zero Accident Tolerance Continuous Improvement Practices Training and Best Practices Community Involvement Program Owner Controlled Insurance Program Safety Incentive Program (SHARE) Shared Responsibility Mitigation Program Think about the roles of a PM - is there anything they don’t have to get involved in? To debrief: first ask the class to compare their list of roles to the above list. Then summarize the common roles and then ask each group to address a unique role (or one of the common ones if they don’t have any unique ones) Now that we have the class’s view, take a quick look at pages Do you see anything that we didn’t cover? 1,344 Environmental Commitments Public Image Threat Assessment Abutter Program And many more… Emergency Response

23 Recordable Rate People Rate 5000 4500 4000 3500 3000 2500 2000 1500
Peak Manpower/Year Rate Actuals per year 5000 4500 4000 3500 3000 2500 2000 1500 500 National Average

24 Challenges of Mega Projects
Keeping the Focus on Risk, Quality and Safety! Integration of all Project Disciplines throughout the Life of the Project! Educating and Involving the Public Citizens from the Inception of the Project! Establishing a strong public owner with independent oversight! Virginia A. Greiman © 2010

25 Thank Your For Your Participation! Questions???
Virginia A. Greiman Assistant Professor Boston University Virginia A. Greiman © 2010

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