1. 2006 TEA Conference Terry Berends, PE Assistant State Design Engineer Washington State Department of Transportation Risk Based Estimating Tools at WSDOT Self-Modeling Spreadsheet, CRA, CEVP ®

2. Presentation Outline Introduction WSDOT’s Program Background on Risk Based Estimating at WSDOT Cost Estimate Validation Process (CEVP®) Cost Risk Assessment (CRA) Self-Modeling Risk Management Spreadsheet –Demo –One Page Summary Sheet –Uses –Outcomes –Future direction

3. WSDOT Sectary Doug MacDonald’s Edict “What gets measured… gets managed.” The MacDonald Mantra “Project Delivery and Accountability” (“On time… on budget!”)

4. The Questions  How much will it cost?  How long will it take? The Follow-up Questions  Why does it cost that much?  Why does it take that long?

5. The Answer An Estimate is not a number  Projects are subject to many variables that cannot all be known beforehand.  Cost and schedule estimates represent one possible outcome of multiple variables.  These variables are not all directly controllable or absolutely quantifiable.  Therefore cost and schedule estimating and the validation process must consider probabilities in assessing estimates and schedules, using a recognized, logical and tested process.

6. Estimate …to judge tentatively or approximately: to determine roughly the size, extent… to produce a statement of the approximate cost. Implies a judgment, considered or casual, that precedes or takes the place of actual measuring… Assess …implies a critical appraisal for the purpose of understanding or interpreting, or as a guide in taking action. The Answer continued… … and an Estimate is still just an Estimate.

7. Managing the program at the project level 2003 Legislature passed a nickel a gallon gas tax to fund 130 line item projects 2005 Legislature passed an additional nine and one half cents a gallon gas tax to fund an additional 274 line item projects With the programmatic approach, risk events that affect cost and schedule would often balance across the portfolio of projects within the contingencies of the entire program. With line item project delivery we no longer have the flexibility to transfer dollars between projects to cover over or under runs

8. 2002 Developed the CEVP Process 2003 CEVP’s performed on first 12 mega projects 2003 Cost Risk Assessment (CRA) workshops on smaller projects 2005 Project Management Executive Order & On-Line Guide developed 2006 Self-Modeling Risk Management Plan Spreadsheet developed 2007 Develop Performance Measurements

9. Risk Based Estimating Tools at WSDOT What is CEVP®?  CEVP® is an intense workshop in which a team of top engineers and risk managers from local and national private firms and public agencies examine a transportation project and review project details with WSDOT engineers. The CEVP® workshop team uses systematic project review and risk assessment methods to identify and describe cost and schedule risks. What is CRA ?  Cost Risk Assessment (CRA) is a term that describes a workshop process similar but less intense than the Cost Estimate Validation Process (CEVP®). What is Self-Modeling Risk Management Spreadsheet?  This spreadsheet is a simplified self-modeling spreadsheet that project design teams can enter risk into and determine what the quantitative impacts are to the projects estimate. This spreadsheet can be implemented early on during the scoping stage of a project when the initial budget is generally set for projects. This can be used for all projects but especially on projects that do not meet the threshold for a formal CRA/ CEVP®

10. WSDOT Policies  CEVP® - required on all projects in excess of $100 million.  CRA – required on all projects in excess of $25 million, but less than $100 million.  Value Engineering – all projects in excess of $10 million  Project Management – A project management plan including a risk assessment plan is required on all projects regardless of size  Estimate updates are required quarterly to ensure that project budgets stay current due to the volatile market conditions.

11. 101 Workshops Completed (2002 – present) 45 CEVP ® 53CRA 3 Combined VE/CRA (Self- Modeling Spreadsheet)

12. Why the need for a self modeling spreadsheet?

13. Self Modeling Risk Management Plan Spreadsheet

14. One page summaries provide a great tool for communication  Project Description  Project benefits  Progress  Cost Range  Project risks  Schedule Range  Key Financial assumptions

15.  Improved communication with the public.  Validates the estimate.  Risk register useful for project planning and management  Improved team communication.  Project Managers take action pro-actively to avoid, transfer or mitigate risk.  Risks that are accepted are known.  Potential response strategies, especially pro-active measures, are identified early.  Risks register can be used during Value Engineering Studies. Results of informal Cost Risk Assessments Project Engineers/Managers have indicated…

16. Project RISK Management PLANNING  Risk Identification  Qualitative Risk Analysis  Quantitative Risk Analysis  Risk Response Strategy  Risk Monitoring & Control Cost Risk Analysis Self-Modeling Spreadsheet, CRA & CEVP ®  Risk Response Strategy  Risk Monitoring & Control

17. How to use this valuable information in a VE study?  Investigation Review the risk register, contingencies and bid items that are set up to mitigate risk  Functional analysis include the secondary function of “reduce risk”  Speculation Brainstorm ideas on how to reduce risk  Evaluation Include a risk assessment as part of the evaluation criteria  Development Develop recommendations that reduce risk Include a risk assessment for VE recommendations that modify the original design

18. Comparison of the VE and Cost Risk Assessment Processes  Investigate  Functional analysis  Speculate  Evaluate  Develop  Learn about project  Identify Risks  Strategize how to handle  Qualify and Quantify  Develop response plans and triggers Value Engineering Cost Risk Assessment Both use a team approach

19. Next Steps  Develop Risk Database(s)  Track common risk  Track response Strategies  Assist with performance measurements  Develop consistency when identifying common risks  Improve monitoring and quantification of results  More fully develop performance measurements  Document risk response strategies

20. Questions? The Self-Modeling spreadsheet and the one page summary template along with other information about WSDOT’s Risk based estimating tools can be found at the following website: www.wsdot.wa.gov/Projects/ProjectMgmt/RiskAssessment/