Risk Assessment For Capital

Construction Projects

RAJPUT
Overview
Definition of Risk

FTA Mandate

Elements of a Construction Project

Risk Assessment
 What does it mean for the grantee/owner
 Looking at the “Big Picture”

Types of Risk

Criteria for Evaluating Risk

Risk Assessment “Methods and Strategies”

Risk Assessment “Tools”

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Overview cont…
Mitigating Risk…using Quality Management Techniques

Two Case Studies – Tren Urbano/WMATA

 Comparison of QA/QC Programs
 How Can Quality Affect Risk

Modern Day Risk Challenges

 SEPTA
 MTA-MD

Effective Risk Management

 Keys to Success

Recommendations

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FTA Mandate / Guidance

 Project Management Oversight Program

Operating Guidance No.22

 Full Funding Grant Agreements (FFGA)

 Fixed Guideway Modernization Projects

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Dear Colleague Letter

FTA Administrator, Jennifer L.Dorn – Dated – March 9, 2005

“As part of its ongoing effort to make the New Starts evaluation and rating process as
transparent as possible, FTA has revamped the format and content of the project
profiles to more clearly indicate the reasons for each rating. In addition, we have
included more specific information about the New Starts evaluation criteria and FTA’s
rating system in the body of the report.”

Annual Report on New Starts/FY 2006 – Article (Dorn Announces Possible

Changes to New Starts Process) Passenger Transport-Volume 63 No.13-Monday,
March 28, 2005

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Elements of a Construction Project
 Design Plans
• Required to identify costs
• Drives implementation of project

 Clearly define the project and associated costs

• The definition of the project is important to controlling risk
• The conceptual plan must be clear (relative to potential costs and
schedule risks)

 Risk Management and Mitigation Plans

• Evaluate and re-evaluate risk throughout various stages of the
project
• Establish key management team
• Assign contingencies
• Monitor and Control

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Risk Assessment
Definition:
The process used to qualify the significance of a project by identifying
and analyzing uncertainties and constraints in terms of the likelihood
that an occurrence will happen and the probable consequences.

A Smart & Prudent Practice

 PRIVATE & PUBLIC PROJECTS

 NEW STARTS

 DESIGN/BUILD

 DESIGN - BID – BUILD

 DESIGN – BUILD – OPERATE – MAINTAIN (DBOM)

 TURNKEY

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 Risk Assessment
What Does Risk Assessment Mean To A Grantee/Owner?

 Rejection or Approval of FFGA

 Mandatory prior to executing FFGA

 Provides basis for communicating level of confidence that the project can be carried out successfully, on time and within
budget

What does it mean to the internal/external community?

• Secretary of Transportation

• Local/State Government

• Board Members

• Funding Agency

• Community

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Risk Assessment
Looking At The “BIG” Picture

 What is the purpose of the project?

 Is there a clear, consistent description of what is to be

accomplished?

 Is there a clear, consistent understanding of the project

execution plan?

 What can go wrong?

 How likely is it that something will go wrong?

 If something does happen, what are the consequences?

 What are risks to plan for and manage?

 Can we better plan and deliver a quality project?

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Types of Risks

Real Estate
 Property acquisition Environmental
 Relocation  Environmental impact studies
 Condemn
 Eminent Domain
Historical Significance
 Protected Lands
Public Utilities  Archaeological
 Analysis & coordination  Structures
 Agreements
 Relocation
Contract phasing and packaging
 Scope of work
Shared Right- of-Way (ROW) Track  Bid process / Labor
 Memorandum of Understanding (MOU)  Integrating Construction Packages
 Insurance costs/requirements

Community impacts and public perception

Financial

Public hearing
Politics  Marketing/Communication
 Internal/external  Safety & security

Material, Equipment and Construction

Techniques

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Criteria for Evaluating Risk
 Funding
• Capital cost
• Operating and Maintenance (Life Cycle) costs
• Financing costs
• Contingencies

 Schedule (the greater the number of years, the higher the risk)
• Limitations
• Compatible with method of construction

 Ridership
• Operations

 Safety/Security
• Project (safety and security certification)
• Contractors
• Laborers / Employees

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 Risk Assessment Methods and Strategies

Risk assessment analyses are mainly based upon:

 Cost estimates (budget limitations, ‘not-to-exceed’ dollar amounts)

 Design Plans

 Construction and scheduling

 Methods of construction available

 Client/owner/grantee requirements

Examples of analytical Methods

 Deterministic

 Probabilistic

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 RISK ASSESSMENT TOOLS

Commercial Software Programs used in risk

analysis:

 @Risk

 PERTMaster

 Crystal Ball

 Monte Carlo Project Risk Analysis Software for

Primavera Project Planner (P3)

 Project-specific in-house models

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Mitigating Risk…using Quality Management
Techniques…

Quality Assurance and Quality Control in transit is

essential to the success of a project. There are
various techniques and tools that can be used to
reduce risk throughout the life cycle of a project.
Establishing methodologies, plans and resources that
integrate systems and processes into the risk
assessment that measure, control, and balance the
project needs based on the defined risk.
Let us take a look…

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 CASE STUDIES

TWO LARGE URBAN TRANSIT PROJECTS

Tren Urbano - San Juan, Puerto Rico

Washington Metropolitan Area Transit Authority (WMATA)

Comparison Of QA/QC Programs

How Can Quality Affect Risk?

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Case Study #1

Tren Urbano
San Juan, Puerto Rico

Rapid Rail Project: A high-capacity third rail system, with a mixture of at-grade,
above grade and underground sections spanning 10-miles (17.2 km) and 16-
stations with a construction value of $2.5 billion.

Project Delivery Method: Design-Build-Operate-Maintain (DBOM)

Challenge: Dealing with the complexity of managing multiple contracts and contractors
tasked with the design, construction and operation of a new transit system

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Tren Urbano

Lessons Learned:

Develop a uniform nonconformance system with identical forms,

logs, tracking procedures between all contractors involved.

Reducing the number of QC firms involved would have reduced the

overall complexity of the quality program and perhaps saved time
or costs.

Consistent contract language would have resulted in a more

integrated and consistent program that would have reduced the
contract administration burden. (Each of the seven contracts
included different quality specifications.)

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Case Study #2
Washington Metropolitan Area Transit Authority
(WMATA), Washington, DC

Regional Metrorail System: A $9.4

billion project (first and second phase
cost) completed in January 2001, after a
32-year construction effort.

Project delivery method: Design-bid-

build

Challenges: Motivate contractors to use,

follow and have confidence in QA/QC plan
and QA/QC staff

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Washington Metro (WMATA)
Lessons Learned:

• A QAP can be an effective tool to ensure that quality work is performed, but
the key to having a successful quality control program is its integration into
the work plan

• The Quality Manager should be properly trained and have experience in the
industry

• The Contractor must accept the Quality Manager as an integral part of his
team and implement the quality control program as part of his regime

• The Owner, Quality Manager and Contractor must work together as a team
and effectively communicate so that project goals will be achieved and
project risk will be minimized or eliminated.

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A Modern Day Risk Challenge
Southeastern Pennsylvania Transportation Authority (SEPTA)
Philadelphia, PA

Market Street Elevated Reconstruction Project (MSE)

$567 million multi-year project to reconstruct the nearly 100 year old elevated train system located within a highly
urbanized area from 46th Street Station in West Philadelphia to the Millbourne Station in Eastern Delaware County. The
El is a two track, heavy rail guideway structure supported by approximately 11,000 feet of recurring structural steel
bents.

Construction Plan
Design Elements: A Single Column “T” Bent vs. Double Column Structure (Basic Layout); State-of-the-Art Passenger
Stations; Utility Work; Operations and Maintenance. (The completed utility work will create a modern infra-structure for
redeveloping the West Philadelphia corridor)

Challenge: Construction never done by SEPTA before, consisting of a system of weekend and 9-day outages (a high
risk plan), managing, coordinating/integrating schedules for five construction packages.

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SEPTA - MSE
Project Risks

 Construction never done by SEPTA before

 Unique construction

 Utility construction

 Acquiring permits

 Coordination of multiple contractor schedules

 Environmental issues

 Real estate acquisitions/relocations

 Public issues

 Bid protests

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SEPTA – MSE

Additional Risks - Lessons Learned

 Pre-qualification for contractors

 Scheduling delays and capital budget

 Contingency and schedule costs

 No economic redevelopment plan for local businesses

 Additional 9-day outages

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 A Modern Day Risk Challenge
Middle Branch
Maryland Transit Administration, MTA/Light Rail ,Double Track Bridge
Project
Management Approach:

Effective Communications, early and often

Establish Action Teams for critical subjects
Ensure comprehensive stakeholder identification
Accountability - define actions and firm deadlines
Commit to a work plan that includes an integrated schedule at the start and maintain
throughout
and design to it
Develop understanding that Planning Approach:

Develop staging plan in advance multiple priorities must be met and project must strike
a balance
Develop understanding that construction under operation requires a different mind-set
and rules
Start small with achievable goals
Build Budget Contingency into approach for risk
Provide flexibility in shutdown durations and milestones dates to give some breathing
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Effective Risk
Management

A “Systems” approach is the key to success…

 Strong and focused leadership with authority

 Properly trained staff members

 Skill Mix

 Clearly defined tasks

 Accountability

 Integration of systems

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RECOMMENDATIONS

Establish, execute and monitor QA/QC Programs during

design and construction phases

Implement FTA guidelines

Establish and maintain effective communication (across all

levels)

Adhere to scope of work

Effective and continual staff training

Use forward-looking budget planning (analysis)

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 Summary

Capital Construction Projects can be successful when,

a comprehensive risk assessment is completed and a
risk management and mitigation plan are established.
Quality is integrated into the process throughout the
project lifecycle, thus allowing the reduction of risk
associated with cost overruns.
THANK YOU….
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