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Presentation on theme: "OHIO PLANNING CONFERENCE"— Presentation transcript:

Florida Department of TRANSPORTATION OHIO PLANNING CONFERENCE Risk Analysis/Management during Project Development Ohio Department of Transportation Hyatt Regency Columbus Columbus, Ohio Similar to Ohio DOT, Florida DOT has also investigated ways to improve the quality of cost estimates especially at the early stages of project development. After attending a FHWA-TRB sponsored pilot training course on risk management, FDOT decided to begin developing a formal risk management process. FDOT began with conducting risk management workshops on projects with a total costs of more than $100 million including major projects (greater than $500 million) which requires a FHWA Cost Estimate Review. Efforts continue by FDOT to expand risk management practices to smaller projects as well. Today, I will provide you with a synopsis of FDOT efforts Phillip “Greg” Davis, P.E Specifications & Estimates Office State Estimates Engineer July 16, 2014

2 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

3 Traditional Estimating Risk-Based Estimating
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 Threat 1, 2,3,etc Contingency Opportunity 1, 2, 3, etc Florida Department of Transportation

4 Maximizes the Likelihood of Meeting Budget & Project Delivery Goals
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

5 Typical Project Scenario without Risk Analysis
Cost Time Projected PD&E Design Construction PD&E Design Construction Actual Late Over Budget Why Risk Management - Let’s look at a typical project scenario A project is programmed at a certain cost (including inflation) & schedule for delivery During project development, cost increases and schedule slips due to various risk issues Lack of clear project requirements Underestimated quantities and/or initial pricing Changes in project scope…(political reasons) Unanticipated events (to name a few): material supplies environmental constraints unknown subsurface conditions Forecasting errors (techniques, data, honest mistakes) not supported by data The results are a project that is over-budget and not delivered on time Lack of risk management is the primary reason (Nationwide Trend) Florida Department of Transportation

6 Typical Project Scenario with Risk Analysis
Cost Time Projected PD&E Design Construction PD&E Design Construction Actual On-time Within Budget What is the desired outcome? When a project is programmed at a certain cost & schedule for delivery, that it is delivered within budget and on time. Proactive and early risk identification, assessment and mitigation will allow better management of the project within budget and on-time. (Nationwide Trend) Florida Department of Transportation

7 Risk Management Overview
Risk Management is the systematic process of identifying, assessing, and responding to risks in order to manage or reduce potential adverse effects on the achievement of project goals. Project Purpose & Needs Risk Identification & Assessment Risk Response Mitigation Strategies Risk Tracking & Monitoring Continuous Iterative Process Florida Department of Transportation

8 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

9 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

10 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

11 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 Utilities Local agencies Others depending on project scope Florida Department of Transportation

12 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

13 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

14 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

15 FDOT Risk Starter List Florida Department of Transportation
Functional Area Risk Name Include Risk Comments 84 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 Other Issues Related to Contract Language (Warranties, Liquidated Damages, DBE, Insurance/Bonding, etc.) Delays in Ad/Bid/Award Process due to Addenda or Bid Protests Lack of Qualified Bidders Other construction projects in region limit supply of labor, bid costs are higher as a result Potential issue, $600 M in lets in D2, twice of normal Contractor Non-Performance Labor and/or Productivity Disruptions probably not a major concern - review vs. base schedule Structures & Geotech Changing Geotechnical Conditions (Due to New Information) 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. Florida Department of Transportation Florida Department of Transportation

16 Base Cost Variability Review
Florida Department of Transportation

17 Project Schedule Review
Florida Department of Transportation Florida Department of Transportation

18 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

19 Baseline Risk Assessment Results
$650.0 Contingency $ $605.3 = $44.7 Florida Department of Transportation

20 Baseline Risk Assessment Results
Florida Department of Transportation

21 Risk Register: Risk Identification
Florida Department of Transportation

22 Risk Register: Risk Quantification
Florida Department of Transportation

23 Goal of Risk Management
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. Probability of Occurrence Impact Initial Risk Managed Risk Florida Department of Transportation

24 Statewide Risk Management Team
Greg Davis, PE State Estimates Engineer Kurt Lieblong, PE, CVS State Project Review Administrator Tim Brock District VE/Utilities Administrator Jose Theiler, AVS District Program Services Administrator Rob Quigley, PE State Project Management Engineer Alan Autry State Alternative Contracting Administrator Florida Department of Transportation

25 Regional Risk Management Teams
Identify Projects for Workshops Support Workshops with Staff & Facilities Change culture by promoting risk Monthly teleconferences with SRM Team Membership in each District consists of : District Value Engineer District Estimates Engineer Design Project Manager Construction Project Manager Florida Department of Transportation

26 Project Selection Guidelines – Risk Analysis
Complex project or total project cost greater than $500 Million – Consultant-led Independent Risk Analysis Workshop Total project cost between $100 - $500 million - Risk Analysis Workshop using commercial risk modeling program Projects not requiring a formal workshop - Risk Analysis Modeling Tool by HDR Qualitative Risk Analysis - Risk Based Graded Approach Worksheet Florida Department of Transportation

27 Implementation Assistance Levels 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 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 (Round 4- Coming soon Summer or Fall 2014) 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

28 October 2013 R09 Awards R09 Lead Adopter DOT Project Contact
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 Reconstruction of I-35W from 46th St to I-94 (Minneapolis-St. Paul) SR 0322 Potters Mills Gap Transportation Project

29 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 Two pieces of the technical assistance: (under ARA contract) 1. Basic Level of Assistance: One Training course, One demo workshop, One Peer Exchange, One Synthesis Report (ARA will write this report), and 8 hours of technical assistance. 2. In addition to the basic activities, they get $100k to use it on training courses, demo workshops, peer exchanges which can be done by either FHWA services or the states can hire their own consultant. Example: $50k for training and workshops through FHWA’s contractor + $50k for development of State DOT’s Project Development Manual or any other related document to project management. Note: The funding has to be used to implement R10 (specialized training to complete a project management manual or procedures for example) Value of FHWA Services to DOT $43,500 Implementation Assistance Funding to DOT Up to $100,000

30 State Estimates Engineer 850-414-4170
Greg Davis, PE State Estimates Engineer Florida Department of Transportation

31 Introduction What is Risk Analysis/Management?
Why Risk Analysis/Management? Risk Analysis Workshops Project Case Studies Risk Response Planning Contingency Management SHRP2 Implementation Assistance Statewide Risk Management Team Cost Estimate Review on Major Project – FHWA made a point of assessing risk FHWA conducted training in Orlando in Spring of 2007 Pilot Projects (to try risk assessment process) – Golder Associates I-4 Connector to Tampa Port/Lee Selman Expressway – Aug 2007 I-595 P3 Project in Ft Lauderdale – Dec 2007 First Coast Outer Beltway P3 in Jacksonville - Jan 2008 Risk Management Policy Projects with total estimated costs greater than $100 million should perform a formal quantitative risk analysis workshop. Projects with total estimated costs greater than $500 million, the risk analysis will be facilitated by a consultant with expertise in risk management. Formed Statewide Risk Team – Goal is to implement quantitative risk analysis/management at the project level during project development. Florida Department of Transportation

32 Risk Modeling - Monte-Carlo Simulation
y = f(x) or “y” is a function of “x” Outputs = f Qty Unit $ Risk Inflation % Random Number Inputs: Sampled Values Count Outputs: Binned Results R1 R2 R3 R4 R5 Source: FHWA Florida Department of Transportation

33 Project Case Studies Sisters Creek Bridge Replacement
I-95 Overland Bridge Florida Department of Transportation

34 Sisters Creek Bridge Replacement
Project Overview Located on SR 105, northeast of Jacksonville The proposed project will: Replace a movable bridge with a fixed span, high level bridge Be built offset to existing bridge, on a new alignment, and tie into existing roadway Use existing FDOT right-of-way for new alignment Florida Department of Transportation

35 Sisters Creek Bridge Replacement
Objectives Validated Cost Estimate Identify and quantify risks to project cost and schedule Assess likelihood of meeting aggressive delivery schedule Estimate implications of potential funding delay on project costs Identified and quantified critical cost items not listed in LRE Developed a risk management plan for project team Quantified cost of funding delay to inform FDOT management decision making Florida Department of Transportation

36 Sisters Creek Bridge Replacement
Cost Estimate Base Cost (inflated) = $69.7M Risk-based Cost (70%) = $77.0M Cost Range = $63.6 M- $82.7M Florida Department of Transportation

37 Sisters Creek Bridge Replacement
Schedule Base Time = Apr 2016 Risk-based Time (70%) = Mar 2017) Time Range = Mar 2017 – Mar 2017 Florida Department of Transportation

38 Sisters Creek Bridge Replacement
Florida Department of Transportation

39 Sisters Creek Bridge Replacement
Florida Department of Transportation

40 Sisters Creek Bridge Replacement
Risk Mitigation Extensive Geotech Survey in RFP Bathometric survey of river bottom debris & composition Maximum budget requirement Procurement Information Award Cost = $44.2M (Dec 13) Bid Range = $39.0M -$45.9M Awarded Time = 800 days Completion Date = Apr 2016 Time Range = days Florida Department of Transportation

41 I-95 Overland Bridge The proposed project will:
Replace the single bridge with two shorter bridges and a fill section of MSE in between the two Widen southbound mainline of I-95 to create 3 continuous travel lanes to improve traffic flow and eliminate dangerous weaving. Modify and widen the southbound collector/ distributor road Build a new northbound collector/distributor road Modify Atlantic Blvd and Philips Hwy areas for additional access points to I-95. Florida Department of Transportation

42 Summary of Key Findings
I-95 Overland Bridge Summary of Key Findings Conducted risk assessment prior to RFP development Identified critical elements to include and specify within the RFP Identified need for railroad agreement in CRA workshop – critical element needed for a utility relocation Determined need for contractor to provide temporary drainage to assure that the project didn’t case any extra water runoff Florida Department of Transportation

43 I-95 Overland Bridge Cost Estimate
Base Cost (inflated) = $257.0 million Risk-based Cost (70%) = $254.9 million Cost Range = $254.9-$319.3 million Florida Department of Transportation

44 I-95 Overland Bridge Schedule Base Time = Dec 2015
Risk-based Time (70%) = May 2016 Time Range = Jan Sep 2016 Florida Department of Transportation

45 I-95 Overland Bridge Florida Department of Transportation

46 I-95 Overland Bridge Florida Department of Transportation

47 I-95 Overland Bridge Risk Mitigation Procurement Information
RFP eliminated access areas VE Study on draft RFP Design Build Team proposed alternative alignment Procurement Information Award Cost = $148.8M (May 2012) Bid Range = $148.8M -$156.7M Awarded Time = 1,165 days Completion Date = Oct 2015 Time Range = 1,085-1,165 days Florida Department of Transportation

48 Risk Response Mitigate / Enhance Transfer /Share Accept
Avoid / Exploit Accept Florida Department of Transportation

49 Risk Response Strategies
Threats Risk Factors that Increase Cost or Schedule Opportunities Risk Factors that Reduce Cost or Schedule Avoid: Change the project scope to eliminate the impact of a risk. Exploit: To make a proactive decision to take action to show that an opportunity is realized. Transfer: Move a risk to another party who is more capable at handling the risk (such as the developer or insurance company). Share: Assigning ownership of the opportunity to a third-party who is best able to capture the benefit for the project. Mitigate: The project team may seek to lessen the impact of a specific risk item, which may involve the consumption of additional time and/or money. Mitigation usually requires positive action and has a cost. Enhance: Take action to increase the probability and/or impact of the opportunity for the benefit of the project; seeking to facilitate or strengthen the cause of the opportunity, and proactively targeting and reinforcing its trigger conditions. Accept: To take no action when a response may be too costly to be effective or when the risks are uncontrollable and no practical action may be taken to specifically address it. In active acceptance, the project team sets up a contingency reserve fund to account for the residual expected value of the remaining risks. Florida Department of Transportation

50 “Hope is not a Strategy”
Risk Management “Hope is not a Strategy” Florida Department of Transportation

51 Risk Response Planning
Risk Response Plan – A plan of action designed to reduce the impact once a risk event has occurred Planning – Prior to the risk event occurring as though it will occur Trigger – Identifies that the risk event has occurred and notifies the team to implement the risk response plan Implementation – Actions to take after the risk event has occurred Florida Department of Transportation

52 Tracking, Monitoring & Control
Development of Risk Management Plan involves: Identifying Risk Owners to take responsibility for key risk factors and associated risk response strategies Identifying Monitoring Frequency for risk updates and feedback on the effectiveness of risk response strategies Updates to the Risk Model and results at key milestones and when baseline cost and schedules are updated Update Risk Management Plan continuously to document and report progress Florida Department of Transportation

53 Tracking, Monitoring & Control
Risk Response Plan Monitoring & Control Strategy Action To Be Taken (response actions including advantages and disadvantages. Specify the time frame Risk Owner Risk Review Dates Date, Status & Review Comments (to show the history of risks monitoring, do not delete previous comments) Mitigation Finalize design to identify all wetlands that are impacted. Early coordination with the outside agencies to determine mitigation ratio Design Leader / Environ. Mgr. 2008-Dec Jan-2 As of Nov. 15, 2008 there are only two potential areas where there could be additional wetland impacts. As of De. 2, 2008 agency has initially determined that mitigation ratio would be 4:1. Florida Department of Transportation

54 Risk Workshops – Completed to Date
Consultant Contract (HDR) – 24 In-house (District 4) - 8 FHWA – 4 SHRP2 - 1 Conducted in 7 Districts Florida Department of Transportation


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