Risk Analysis as a Portfolio Budgeting Tool

Transcription

1 Risk Analysis as a Portfolio Budgeting Tool CSVA 009 Conference Ottawa, Ontario Nov 3, 009 David Lewis Ph.D. HDR Corporation

2 Risk Analysis Process for Project Business Case Evaluation Get the base case right Map the logic of your business case and risk Quantify and visualize your risk Negotiate and Manage through reasoned consent

3 3 The Base Case is Not the Status Quo! Alternative Benefit Base Case Status Quo Year Year 5 Year 0

4 4 Be Comprehensive in the Logic of Your Business Case

5 5 Objective and Subjective Probability as a Basis for Quantifying Risk Value of Time ($) MEDIAN 0% LOWER 0% UPPER INDICATES THE UPPER AND LOWER LIMITS OF AN 80% CONFIDENCE INTERVAL.

6 6 Risk Visualization

7 7 Risks Prowl in Packs Revenue ($) Ramp-up (years) Debt Service ($) Jointly Determined Probability Distributions Capital Cost ($) F = f (A, B, C, D,... ) Coverage Ratio

8 8 Risk Adjusted Outcomes: MetroRoad

9 9 Risk Adjusted Outcomes (Cont d)

10 0 Baseline Portfolio Descending Project Business Case Criterion (e.g., ) Project Per Year (in $ millions) 0 5 Budget Cutoff 50 Per Year ,90 Sound Project Omitted From Budget Per Year

11 Portfolio Budgeting with Sub-Objectives Mega-Projects (more than $0 millions) Congestion Projects Urbanized Areas Suburban Areas Rural Areas Safety Projects Environmental Projects

12 Portfolio Budgeting with Risk-Adjusted Sub- Urbanized Areas Suburban Areas Rural Areas Objectives Mega-Projects (more than $0 millions) P>90 Congestion Projects P> Safety Projects P> Environmental Projects P>

13 Structure & Logic Model for Total Construction Cost Total Cost Estimate Level Concept Plan Constant $ Total Cost Estimate Level General Plan Constant $ Total Cost Estimate Level 3 Est. Constant $ Total Cost Estimate Level 4 Contractor's Bid Constant $ Factor for Methodological Uncertainty Unanticipated Environmental Mitigation and Compensation General Price Inflation Total Construction Cost Constant $ Total Construction Cost Current $ Legend Input Result

14 Structure & Logic Model for Base Construction Cost Estimate : Concept Plan Cost Index in Previous Years Real Cost % Annual Change Incidentals Traffic Landscaping Structures Drainage Asphalt Concrete Earthwork Base Cost Asphalt Concrete Earthwork Real Cost Index Incidentals Landscaping Structures Drainage Project Slippage Factor Design Cost % Prelim. Scope Creep Base Cost for Estimate Level Change Orders Construction Total Cost Estimate Level Concept Plan Constant $ Legend Input Result TO Figure 5

15 Structure & Logic Model for Base Construction Cost Estimate : General Plan Cost Index in Previous Years Real Cost % Annual Change Incidentals Traffic Landscaping Structures Drainage Asphalt Concrete Earthwork Base Cost Incidentals Landscaping Structures Drainage Asphalt Concrete Earthwork Real Cost Index Project Slippage Factor Design Cost % Prelim. Scope Creep Base Cost for Estimate Level Change Orders Construction Total Cost Estimate Level General Plan Constant $ Legend Input Result TO Figure 5

16 Structure & Logic Model for Base Construction Cost Estimate 3: Estimate Cost Index in Previous Years Real Cost % Annual Change Incidentals Traffic Landscaping Structures Drainage Asphalt Concrete Earthwork Base Cost Incidentals Landscaping Structures Drainage Asphalt Concrete Earthwork Real Cost Index Project Slippage Factor Change Orders Construction Base Cost for Estimate Level 3 Legend Input Result Total Cost Estimate Level3 Estimate Constant $ TO Figure 5

17 Structure & Logic Model for Base Construction Cost Estimate 4: Contractor s Bid Cost Index in Previous Years Real Cost % Annual Change Incidentals Traffic Landscaping Structures Drainage Asphalt Concrete Earthwork Base Cost Incidentals Landscaping Structures Drainage Asphalt Concrete Earthwork Real Cost Index Project Slippage Factor Change Orders Construction Base Cost for Estimate Level 4 Legend Input Result Total Cost Estimate Level 4 Contractor's Bid Constant $ TO Figure 5

18 Contact info David Lewis Tel: