Risk Management in Value Engineering
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- Mervyn Shelton
- 5 years ago
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1 Risk Management in Value Engineering AASHTO 09 VE Conference, San Diego September 1, 09 Rich Foley California Department of Transportation Rein Lemberg CALTROP Corporation
2 A bit of background about Caltrans policies and our largest project to date.
3 Caltrans Policies Structured process Design-oriented Project development Since 04 Project development Projects over $25M
4 Our Risk Management Program evolved on the San Francisco - Oakland Bay Bridge Program Comprehensive Risk Management Quantitative risk analysis Cost and schedule risks Quarterly updates to Legislature Value engineering: During design and construction Include cost and schedule risks Not always the formal process
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6 The SFOBB is a complex program with multiple construction sequences
7 Multiple Interdependent Contracts SSD West Tiein Phase 1 (Tunnel Viaduct Replacement) 4 Bridge Closure (Complete SSD WTI Phase 1) SSD Viaduct SSD West Tie-in Phase 2 SSD Traffic Switch SSD Demolition of Existing Bridge YBI Construction EB YBI Construction WB YBI Complete EB Frame 2 7 SSD East Tie-in 2 E2/T1 E2 Foundation E2/T1 T1 Foundation SAS Phase1 W2 Capbeam SAS Phase1 E2 Capbeam SAS Phase 1 Erect Tower Skyway SAS Phase1 Deck Erection 1 SAS Phase 1 Cable Installation 6 SAS Phase 1 Load Transfer SAS Phase 2 Complete WB YBI Complete WB Frame 2 YBI Hinge K WB WB Traffic Switch YBI Hinge K EB SAS Phase 3 Complete EB EB Traffic Switch 3 Submarine Cable OTD 1 5 OTD 2 Complete WB OTD 2 EB Detour OTD 2 EB 8
8 How we apply quantitative risk analysis Quantitative Cost Risk Analysis Schedule Risk Analysis Application to value engineering and decision support
9 Inputs Our quantitative cost risk analysis is kept simple for our teams Model Output
10 Inputs can appear daunting we simplify the process Beta Normal Gamma α 1,α 2 μ,σ α,β Uniform min max Triangular min peak max
11 How we determine the input distribution Triangular distribution Uniform distribution (if no Most Likely value) Optimistic Most Likely Somewhere in between, if discernable. Pessimisti c $
12 We assess probability distributions for all of our input variables Estimate Line item = Quantity x Unit Price $ $35 $50 Risk item = Probability x Impact Risks 10% 30% $1M $3M
13 that we run through a Monte Carlo model to get the output probability distribution. Input Distributions Monte Carlo Simulation
14 We turn it into a readable probability curve 10% Chance of Overrun 90% Chance of Underrun 50% Probable Cost
15 We innovated in quantitative analysis of schedule risks
16 Understanding Cost and Schedule Risk Analysis $1 1d 1d $1 $1 1d 1d 1d 1d $1 1d 1d 1d $1 $1 1d 1d 3d 1d 1d 4d $1 1d 1d $1 1d $8 8dX 5d
17 Schedule risk analysis is handled differently ?? 25??? 100 Longest Path?
18 How do schedule risks affect the schedule? Can change the critical (longest) path Determine the length of the critical path Probability of occurrence e.g % 2. Delay range 0d 60d
19 Simulation: construct a schedule for each trial... Determine if a risk occurs: e.g Probability = % IF it occurs 25 Pick its duration randomly 0d 60d
20 The schedule for a trial may look like
21 Run 1000 trials and keep track of... Length of the longest path Whether a schedule risk is on a critical path
22 Duration of the longest path
23 Criticality of each schedule risk... Criticality = Probability of being on a critical path. Risk Criticality Risk % Risk 3 97% Risk 14 92% Risk 12 83% Risk 4 78% Top Priority
24 and determine the Criticality Path 63% 83% 72% 92% 83% 80% There may be more than one critical path to monitor
25 An example schedule Erect Temporary Works Install Cable System Transfer Load to Cable
26 we add duration uncertainties Erect Temporary Works Install Cable System Transfer Load to Cable
27 and place the risks into the schedule. Erect Temporary Works Install Cable Transfer Risk Risk Risk System Load to Cable Schedule Risks Are Visible! Risk activity appears as zero-duration activity Has two properties: 1. probability that it may occur 2. three-point estimate of its duration IF it happens to occur
28 We run schedule risk analysis software to get Probability Distribution For Completion Milestone Install Suspenders PWS System Installation Load Transfer Cable to Deck Sect Compact PWS/Cable Bands Erect Cable System Temporary Works EB Completion Activities Stage 1 Demolition (Bent 39 to Bent 33) Construct Abutment 23R Excavate & Light Weight Concrete Roadway Construct Roadway & Complete Eastbound OBG Complete for Cable Erection 0071 Erect Deck Lift 14W Align/Bolt /Weld Lifts 13W/14W 0041 Erect Deck Lift 13W 0051 Erect Deck Lift 13E Align/Bolt /Weld Lifts 12E/13E Criticality Criticality Chart Criticality (%) Criticality Paths
29 ? 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
30 Example: Retrofit or Replace 75-year old structure Unknown condition As-builts? Connection to Detour?
31 The viaduct retrofit issue Decided to replace the 75-year old viaduct 1.Eliminates risks of unknowns of an old structure 2.Fewer risks in connecting to detour structure 3.Eliminates additional bridge closures for retrofit 4.Early completion reduces risk to corridor schedule
32 The new viaduct 3-day bridge closure tons feet long, 5 lanes wide 2. concrete saws cut up the deck in 2 hours 3. Cut out 48 girders and hauled off site 4. 8 skid tracks 2 jacks per track 5. Bridge opened to traffic about 11 hours early
33 33
34 Example: Contract acceleration options Westbound Eastbound OTD EB Contract WB Open OTD EB Contract EB Open Objective: shorten time between WB and EB open
35 Evaluated schedule risks of acceleration option No change Accelerated
36 In the bigger picture, it is not just the OTD contract SSD West Tiein Phase 1 (Tunnel Viaduct Replacement) Bridge Closure (Complete SSD WTI Phase 1) SSD Viaduct SSD West Tie-in Phase 2 SSD Traffic Switch SSD Demolition of Existing Bridge YBI Construction EB YBI Construction WB YBI Complete EB Frame 2 SSD East Tie-in YBI Complete WB Frame 2 YBI Hinge K EB SAS Phase1 W2 Capbeam Skyway YBI Hinge K WB E2/T1 E2 Foundation E2/T1 T1 Foundation SAS Phase1 E2 Capbeam SAS Phase 1 Erect Tower SAS Phase1 Deck Erection SAS Phase 1 Cable Installation SAS Phase 1 Load Transfer SAS Phase 2 Complete WB WB Traffic Switch SAS Phase 3 Complete EB EB Traffic Switch Submarine Cable OTD 1 OTD 2 Complete WB OTD 2 EB Detour OTD 2 EB
37 WB to EB opening is a three-horse race SAS, YBITS and OTD Westbound SAS Eastbound YBITS OTD EB Contract Two contracts complete the west end. Slowest horse wins
38 The 3-horse race has a different outcome OTD - No change YBITS Contract SAS Contract
39 Example: Interaction of 2 contracts Foundations Contract Bridge Contract Foundations Required Question: Bridge Contract Foundations Bridge Timescale Foundation Required Potential Delay of Bridge Contract Pay $$ to accelerate Foundations contract schedule?
40 Used schedule risk analysis to evaluate delay Foundations Contract Bridge Contract Foundations Required < 5% chance of Foundations delaying Bridge Decision: Don t accelerate
41 Value Engineering can benefit from considering risk and uncertainty. Summary Also consider schedule risks, not just cost risks. Update cost and schedule risks and opportunities regularly during design and construction.
42 Discussion? Contact Information: Rich Foley (510) Project Risk Management Rein Lemberg (510)