Capital Project Risk Management - Amazon S3...Plan Risk Management 2. Identify Risks 3. Perform Qualitative Risk Analysis 4. Perform Quantitative Risk Analysis 5. Plan Risk Response

King County Auditor’s Office

Capital Project Risk Management

Where to look.

Will you know best practice when you see it?

Tina J. Rogers, P.E.


What we will cover today

Where to look

• What prompted King County to focus on risk

• How to select the riskiest projects

• King County requirements for highest risk projects

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What we will cover today

What to look for

• Best practices – project risk management

Will you know when you see it?

• Lessons from real time assessment

• Stories from the trenches

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King County, Washington

• 2 million population

• 13th largest county in U.S.

• Elected county executive

• Nine-member county council

• Auditor – independent office of

legislative branch

• 2 of 16 focus on capital projects

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Legislative perspective

• Approve funding, then in the best case

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King County sewer bills likely to rise

The murky dealings of Brightwater

Big headache: County's sewer project

in court, over budget

• Worst-case scenario…

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http://seattletimes.nwsource.com/html/home/

http://seattletimes.nwsource.com/html/home/

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King County Council concerns

• Could we have

avoided cost overruns

& schedule delays?

• How do we focus our

oversight?

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Benefits of risk scoring

• Heightened awareness of risk management

• More transparency & accountability:

– scope changes

– schedule

– budget performance

• Better communication

• Informs Auditor’s Office

work

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How to pick your riskiest projects

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King County capital programs

2015/16 capital budget: $1 billion

• Wastewater • Transit

• Solid Waste • Facilities

• Airport • Ferry

• Parks • Information Technology

• Stormwater

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Start with a definition – Here is ours:

“Having characteristics that increase the

likelihood of a project being completed late

or over budget, at a potentially significant

financial or other impact to the County.”

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Focus on a subset

• Size – $10 million & up

• Exemptions

– Separate oversight bodies – most IT projects

– Acquisition only – Transit fleet, open space purchase

– Risk transferred to developers

• 20 to 30 projects – not hundreds

• Early in project development

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Scoring instrument development

• Engage subject matter experts

• Create an objective scoring tool

• Identify & weigh criteria that contribute to risk

• Create questionnaire

• Automatically generate score & graph results

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Criteria – What contributes to risk?

Weighted for high influence

• Total Project Cost Estimate

• Schedule Constraints

• Property Acquisition & Use

• Unusual Design or Engineering Challenges

• Unusual Construction Challenges

• Agency Commitment to Project

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• Project Phase

• Cost Estimate Class

• Permitting

• Public Impact During Implementation

• Public Interest

Criteria – What contributes to project risk?

Weighted for average influence

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• Project Delivery Method

• Number of Prime Contractors Managed

• Market Conditions

• Agency Experience with Project Type

Criteria – What contributes to project risk?

Weighted for low influence

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My agency’s commitment is uncertain. The potential benefits of the

project have not been demonstrated and/or additional funding is

required and the likelihood of full funding approval cannot be predicted.

My agency’s commitment could change. The project offers well

documented benefits and, although additional funding is needed,

approval is likely.

My agency’s commitment is unconditional. The project is of the

highest priority, offers proven benefits, and all necessary funding is in

place.

What is the agency’s commitment to this

project?

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My agency’s commitment is uncertain. 25

My agency’s commitment could change. 16

My agency’s commitment is unconditional. 4

What is the agency’s commitment to this

project?

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Externally Imposed Deadline: Has a deadline which can’t be missed

without violating the terms of a court order, grant, or other legally

enforceable agreement involving a substantial financial impact.

Public Deadline: Has a publicly committed deadline which can’t be

missed without causing adverse financial, operational, or public service

delivery impacts.

Internal Deadline: Has an internally published deadline which can’t be

missed without causing adverse…impacts.

Soft Deadline: Has no deadline or a deadline which can be missed

without causing adverse…impacts.

Which schedule situation most closely

matches this project?

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Externally Imposed Deadline: 25

Public Deadline: 16

Internal Deadline: 9

Soft Deadline: 4

Which schedule situation most closely

matches this project?

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High Public Interest: Project which is already of interest to community

or business groups, the news media, elected officials, regulatory

agencies, and/or adjacent property owners.

Routine Public Interest: Project which may become of interest to…

Low Public Interest: Project which is unlikely to become of interest to

…

Which public interest situation most closely

matches this project & site?

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High Public Interest: 25

Routine Public Interest: 9

Low Public Interest: 4

Which public interest situation most closely

matches this project & site?

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How did your project score?

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King County Auditor’s Office 24


High-risk project selection

• Numbers don’t tell the whole story

• Committee judgment is used

• Focus suffers if too many selected

• Distribution of projects is desirable

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Requirements for selected projects

• Project funding by phase

• More information to Council

• More rigorous project management practices

– Specific risk management steps

– Earned value management

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Best practices – project risk management

What to look for?

– By the book

Will you know when you see it?

– Stories from the trenches

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Best Practices in Risk Management

• Definitive source –

PMBOK

• 5th edition – adopted

2013

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Project Risk Management

Compiled by

Muhammad Aleem Habib

June 25, 2013

Information derived from PMBOK & Rita Mulcahy

http://www.slideshare.net/


What is project risk management?

• Actively managing the risks on a project

• Being more proactive & less reactive

• Shifts focus from dealing with problems to

• Focus on preventing problems

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What is a risk?

• An uncertain event that could have a positive

or negative effect on a project

– Threats

– Opportunities

• Have a probability of occurring

• 100% probability = an issue

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Risk event graph

High

Low

Project Time

Deg

ree

Risk and uncertainty

Cost of changes

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PMBOK’s six risk management

processes

1. Plan Risk Management

2. Identify Risks

3. Perform Qualitative Risk Analysis

4. Perform Quantitative Risk Analysis

5. Plan Risk Response

6. Control Risks

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PMBOK identifies inputs, tools & outputs

for each process

• Inputs

• Tools & Techniques

• Outputs

IdentificationQuantitative

AnalysisPlanning

QualitativeAnalysis

ResponsePlanning

Monitoring &Control

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Identify risks

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Plan & identify risks

What a risk register might look like

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Plan & identify risks

What an auditor might ask

• Do you have the resources you need to implement your plan?

• Who was involved in developing your risk register?

– Experience level

– Objectivity

– Broad perspectives

• What techniques did you use to develop risk register?

• Were lessons learned from past projects considered?

• Can we see your first risk register? Your current one?

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Perform quantitative/qualitative analysis


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Perform qualitative/quantitative risk analysis


• How did you decide on the probability of

occurrence?

• How did you estimate impact?

• How often do you update probability & impact?

• How do you use this information?

• Which are the biggest risks on this project?

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King County Auditor’s Office 40


Can help assess the appropriate level of contingency

Risk Probability Impact EMV

A 20% $ (100,000) $(20,000)

B 90% $ 10,000 $ 9,000

C 5% $ 30,000 $ 1,500

D 65% $ (75,000) $(48,750)

Total $(58,250)

Quantitative analysis example:

Expected monetary value

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Plan responses/control risks


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AvoidReduce

(Mitigate) Transfer Accept

Risk Response Options

Best Worst

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• Which risks are you actively monitoring?

• What are the thresholds for taking actions?

• Which risks do you plan to avoid, transfer, mitigate, or

accept?

• What is your decision making process for exploiting

opportunities?

• How are you communicating risks to policy-makers?

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Tina Rogers 206 477 [email protected]/auditor

Questions & comments

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Capital Project Risk Management - Amazon S3...Plan Risk Management 2. Identify Risks 3. Perform Qualitative Risk Analysis 4. Perform Quantitative Risk Analysis 5. Plan Risk Response

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