risk management in value engineeringsp.design.transportation.org/documents/24-foley_lemberg.pdfrisk...
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Risk Management in Value Engineering
AASHTO 2009 VE Conference, San DiegoSeptember 1, 2009
Rich FoleyCalifornia Department of Transportation
Rein LembergCALTROP Corporation
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A bit of background about Caltrans policies and our largest project
to date.
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Caltrans Policies
Structured processDesign-orientedProject development
Since 2004Project developmentProjects over $25M
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Our Risk Management Program evolved on the San Francisco - Oakland Bay Bridge Program
Comprehensive Risk ManagementQuantitative risk analysisCost and schedule risksQuarterly updates to Legislature
Value engineering: During design and constructionInclude cost and schedule risksNot always the formal process
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The SFOBB is a complex program with multiple construction sequences…
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Multiple Interdependent Contracts
SSD West Tie-in Phase 1
(Tunnel Viaduct
Replacement)
Submarine Cable
Skyway
SAS Phase 1Erect Tower
E2/T1E2
Foundation
YBI Hinge K WB
YBI Construction
WB
SSD West Tie-in Phase
2
SSD East Tie-in
SSD Viaduct
SAS Phase 3Complete
EB
OTD 2Complete WB
SAS Phase 2 Complete
WB
OTD 1
SAS Phase 1Load
Transfer
YBI Hinge K EB
OTD 2 EB
SSD Demolition of
Existing Bridge
YBI Construction
EB
YBI Complete WB
Frame 2
YBI Complete EB
Frame 2
SAS Phase1Deck
Erection
SAS Phase1E2 Capbeam
SAS Phase1W2 Capbeam
OTD 2 EB Detour
SSD Traffic Switch
Bridge Closure
(Complete SSD WTI Phase 1)
SAS Phase 1Cable
InstallationE2/T1
T1Foundation
WB Traffic Switch
EB Traffic Switch
2
4
1
35
6
7
8
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How we apply quantitative risk analysis…
Quantitative Cost Risk Analysis
Schedule Risk Analysis
Application to value
engineering and decision
support
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Our quantitative cost risk analysis is kept simple for our teams
Inputs
Model
Output
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Inputs can appear daunting…we simplify the process
BetaGammaNormal
α1,α2 α,βμ,σ
Uniform
min max
Triangular
min peak max
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How we determine the input distribution…
Optimistic Pessimistic
Most Likely
$
Somewhere in between,if discernable.
Triangular distribution
Uniform distribution(if no Most Likely value)
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We assess probability distributions for all of our input variables…
Estimate
Risks
100 150$20 $35 $50
Line item = Quantity x Unit Price
10% 30% $1M $3M
Risk item = Probability x Impact
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Input Distributions
…that we run through a Monte Carlo model to get the output probability distribution.
Monte Carlo Simulation
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We turn it into a “readable” probability curve
50% Probable Cost
10% Chance of Overrun90% Chance of Underrun
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We innovated in quantitative analysis of
schedule risks
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Understanding Cost and Schedule Risk Analysis
1d
1d
1d
1d
1d
1d
1d
1d
$1
$1
$1
$1
$1
$1
$1
$1
3d4d
5d
1d
1d
1d
1d
1d
1d
1d
1d
$8 8dX
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20
40
20
20
20
25
25
20
100
9080
Schedule risk analysis is handled differently...
20
40
20
20
20
25
25
20
?
? ??
?
?
Longest Path
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How do schedule risks affect the schedule?
• Can change the critical (longest) path
• Determine the lengthof the critical path
1. Probability of occurrencee.g 20%
2. Delay range0d 60d
20
40
20
20
20
25
25
20
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Simulation: construct a schedule for each trial...
Determine if a risk occurs:e.g Probability = 20%
Pick its duration randomly
0d 60d
IF it occurs…
20
40
20
20
20
25
25
20
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The schedule for a trial may look like...
20
40
20
20
20
25
25
20
20
100
110
80
20
40
20
20
20
25
25
20
10
30
100
100110
20
40
20
20
20
25
25
20
20
30
20
120
110110
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Run 1000 trials and keep track of...
Length of the longest path
Whether a schedule risk is on a critical path
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Duration of the longest path
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Criticality of each schedule risk...
Criticality = Probability of being on a critical path.
Risk CriticalityRisk 10 100%Risk 3 97%Risk 14 92%Risk 12 83%Risk 4 78%
... ...
Priority
Top
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…and determine the “Criticality Path”
83%
92%
63%
72%
83%
80%
There may bemore than one critical path to monitor
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An example schedule…
Erect Temporary Works
Install Cable System
Transfer Load to Cable
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…we add duration uncertainties…
Erect Temporary Works
Install Cable System
Transfer Load to Cable
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…and place the risks into the schedule.
Erect Temporary Works
Install Cable System
Transfer Load to CableRisk Risk Risk
Has two properties: 1. probability that it may occur 2. three-point estimate of its duration IF it happens to occur
Risk activity appears as zero-duration activity
Schedule Risks Are Visible!
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We run schedule risk analysis software to get…
Probability DistributionFor Completion Milestone
Criticality Chart
50 55 60 65 70 75 80 85 90 95 100
002371 ‐ Install Suspenders000341 ‐ PWS System Installation
000351 ‐ Load Transfer Cable to Deck Sect.000841 ‐ Compact PWS/Cable Bands
000831 ‐ Erect Cable System Temporary Works001521 ‐ EB Completion Activities
000641 ‐ Stage 1 Demolition (Bent 39 to Bent 33)000691 ‐ Construct Abutment 23R
000751 ‐ Excavate & Light Weight Concrete Roadway000761 ‐ Construct Roadway & Complete Eastbound
002361 ‐ OBG Complete for Cable Erection002071 ‐ Erect Deck Lift 14W
002341 ‐ Align/Bolt /Weld Lifts 13W/14W002041 ‐ Erect Deck Lift 13W002051 ‐ Erect Deck Lift 13E
002191 ‐ Align/Bolt /Weld Lifts 12E/13E
Criticality (%)
Criticality
Criticality Paths
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We apply our quantitative techniques to value engineering and decision support.
Examples:
1.Evaluate retrofit or replace
2.Accelerate construction
3.Interaction of 2 contracts
?
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Example: Retrofit or Replace
75-year old structureUnknown conditionAs-builts?Connection to Detour?
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The viaduct retrofit issue…
Decided to replace the 75-year old viaduct
1.Eliminates risks of unknowns of an old structure2.Fewer risks in connecting to detour structure3.Eliminates additional bridge closures for retrofit4.Early completion reduces risk to corridor schedule
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The new viaduct … 3-day bridge closure
1. 6500 tons - 300 feet long, 5 lanes wide2. 20 concrete saws cut up the deck in 2 hours3. Cut out 48 girders and hauled off site 4. 8 skid tracks – 2 jacks per track5. Bridge opened to traffic about 11 hours early
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33
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Example: Contract acceleration options
Westbound
Eastbound OTD EB Contract
WB Open
EB Open
OTD EB Contract
Objective: shorten time between WB and EB open
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Evaluated schedule risks of acceleration option…
No change
Accelerated
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In the bigger picture, it is not just the OTD contract
SSD West Tie-in Phase 1
(Tunnel Viaduct
Replacement)
Submarine Cable
Skyway
SAS Phase 1Erect Tower
E2/T1E2
Foundation
YBI Hinge K WB
YBI Construction
WB
SSD West Tie-in Phase
2
SSD East Tie-in
SSD Viaduct
SAS Phase 3Complete
EB
OTD 2Complete WB
SAS Phase 2 Complete
WB
OTD 1
SAS Phase 1Load
Transfer
YBI Hinge K EB
OTD 2 EB
SSD Demolition of
Existing Bridge
YBI Construction
EB
YBI Complete WB
Frame 2
YBI Complete EB
Frame 2
SAS Phase1Deck
Erection
SAS Phase1E2 Capbeam
SAS Phase1W2 Capbeam
OTD 2 EB Detour
SSD Traffic Switch
Bridge Closure
(Complete SSD WTI Phase 1)
SAS Phase 1Cable
InstallationE2/T1
T1Foundation
WB Traffic Switch
EB Traffic Switch
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WB to EB opening is a three-horse race –SAS, YBITS and OTD
Westbound
Eastbound OTD EB Contract
SASYBITS
Two contracts complete the west end.
Slowest horse wins
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The 3-horse race has a different outcome
OTD - No change
YBITS Contract SAS Contract
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Example: Interaction of 2 contracts
Foundations Contract
Bridge Contract
Foundations Required
Bridge Contract
Question:
Pay $$ to accelerate Foundations contract
schedule?
Potential Delay ofBridge Contract
Foundations
Bridge
Timescale →
Foun
datio
nReq
uired
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Used schedule risk analysis to evaluate delay…
Decision:
Don’t accelerate
< 5% chance of Foundations delaying Bridge
Foundations Contract
Bridge Contract
Foundations Required
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Summary
Value Engineering can benefit from considering risk and uncertainty.
Also consider schedule risks, not just cost risks.
Update cost and schedule risks and opportunities regularly during design and construction.
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Discussion?
Project Risk Management
Contact Information:
Rich [email protected](510) 385-7189
Rein [email protected](510) 410-4344