The Big Dig: Managing Risk and Complexity on Mega Projects Presentation to PM Connect Thursday, December 15, 2011 Virginia A. Greiman, Assistant Professor, Boston University V. A. Greiman Copyright © 2011 Permission as Required
The Big Dig: Managing Risk and Complexity on Mega Projects
Presentation to PM ConnectThursday, December 15, 2011
Virginia A. Greiman, Assistant Professor, Boston UniversityV. A. Greiman Copyright © 2011
Permission as Required
Project Structure and Cost
Element Current Estimate ($MM)
Construction $ 9,496Design $ 1,034Project Management $ 1,977Force Accounts $ 608ROW Settlements $ 576Insurance Premiums $ 609Contingency $ 498
TOTAL $14,798
Virginia A. Greiman © 2010 3
Source: CA/T Project Finance Plan 2007
Why are Mega Projects Consistently Underestimated?
A review of large public works projects over the last century concluded that costs are consistently underestimated, a phenomenon attributed to the desire of the project advocates to have their projects approved.
(Flyvbjerg, Megaprojects and Risk: An Anatomy of Ambition, 2002)
National Transportation Research Board 2006 Cost Estimation Report
Identified 8 Strategies linked to 18 different causes of cost escalation on highway projects in the United States.
Notably, the research concluded that most efforts in cost estimation have focused on creating tools to improve cost estimates with less emphasis on tools for cost estimation management.
(Anderson et. al. 2006).
Risk and Cost Escalation Factors
Engineering and Construction Complexities
Scope Changes
Ambiguous and Conflicting Contract Provisions
Unforeseen Events
Unforeseen Conditions
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What Makes a Project Complex?
Size and Duration: The Big Dig and The English
Chunnel (FHWA: More than $1Billion)
Numerous Stakeholders with diverse interests
Technology: Hoover Dam and Panama Canal
Extension
Untried: BP Gulf of Mexico Oil Disaster
Integration of Processes: Many Diverse and
Autonomous, but interrelated and interdependent
components or parts linked through many dense
interconnections. Virginia A. Greiman © 2010 7
Major Complexity Challenges on the Big Dig:
Project Integration – (150 Major Employers – One Team) 5,000 workers, thousands of complex processes
Risk Management – World’s Largest Wrap-up Program
Technology Integration – Monitoring the Critical Path
Claims and Changes - Partnering
Project Integration Management
Project Charter
1
CloseProject
7
Integrated Change Control
6
ProjectMgmtPlan
3
MonitorAnd Control
5
Direct and ManageExecution
4
Scope Statement
2
Project Management Institute, PMBOK, 4th ed.
Project Integration
People
Process
Stakeholders
Community
Disciplines
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PMI Project Management Trade-offs
Design, Risk, Safety, and Quality Decisions!!
Des
What Is Project Risk?
Completion Risks? – Scope, Schedule and Budget
Operational Risks? – Market Demand and Technical Capacity
Political/Sovereign Risks? – Expropriation, Regulatory, Permitting, Change in Law
Financial Risks? – Funding Sources and Sequencing (Debt and Equity)
Force Majeure Events and Catastrophic Loss?
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CA/T’s Risk Management Mission
Operating a World-Class Risk Management Program for:–Engineering and Construction–Safety and Health–Loss Control
Insuring all identified loss exposures through and beyond Project completion
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CA/T Project Insurance Wrap-up Coverage’s ($609M) (2006 CA/T Project Finance Report)
0 50 100 150 200 250 300
262
215
48
11
8
5
60
Administrative Costs and Safety Mitigation Railroad Protective Liability Airport Contractors’ Liability Professional LiabilityBuilders’ RiskGeneral Liability/Excess Li-ability Worker's Compensation
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Major Public Project Wrap-Up Programs
Channel Tunnel (U.K./France)
Sydney Harbor Tunnel (Australia)
Great Belt Link (Denmark)
U. S. Nuclear Power Plants
The Central Artery/Tunnel Project
Oregon Tri-Met Westside Light Rail Line
New Jersey Transit Corporation Hudson-Bergen Rail Line
Chicago Transit Authority Green Line Rehabilitation Project
Utah Department of Transportation Interstate 15
New York City Transportation Authority
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Sources: Great Projects, James Tobin, 2001, United States General Accounting Office, GAO/RCED-99-155, 1999, Bechtel Corporation, San Francisco, CA
How Is Risk Managed?
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VisionMissionStrategyOrganization
Risk ManagementObjectives and GoalsRisk InformationCommunication
Risk ControlEvaluationMonitoringReportingRoot CauseLessons Learned Risk Allocation
AvoidancePreventionReduction/MitigationSeparationDuplicationTransfer
Risk Assessment
IdentificationPerceptionQualitative v. Quantitative Analysis
Lessons from Practice
Source: Central Artery Tunnel Project, Photo of Fort Point Channel
Classification of Catastrophic Loss
Natural
EconomicTechnology
Human
Major Catastrophic LossesEvent Estimated Loss ($MM)
Hurricane Katrina (2005) $43B-$60BWorld Trade Center (2001) $30-40BEarthquake in Chile (2010) $30B ($8B insured)Hurricane Andrew (1992) $18BCalifornia Earthquake (1994) $12.5BHurricane Hugo (1989) $ 4.2BJapan Typhoon Murielle (1991) $ 6.4B Hurricane Georges (1998) $ 2.9BHurricane Floyd (1999) $ 2.0BOakland, CA fire (1991) $ 1.7BIRA Bombing, London (1993) $ 1.0BSource: Lloyds, Munich Re, Swiss Re
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Human Threats to Technology
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Risk Motivation Conduct
Hacker ChallengeRebellion
HackingSocial EngineeringSystem intrusionBreak-insUnauthorized access
Computer Criminal Destruction of informationDisclosure of confidential or illegal informationMonetary gainUnauthorized data alteration
Cyber stalkingFraudulent actBribery informationSystem intrusion
Terrorist BlackmailDestructionExploitationRevenge
Economic exploitationInformation theftPersonal privacyIllegal access to classified Information
Risk Analysis Events and Condition ChartWhat? How? And Why?
Worker Makes Error
Down-grading Changes
Occur
Worker Fails to Adapt to
Changes
HazardousSituation
Developed
Incident Occurred
21
Accident Occurred
U.S. Dept. Of Energy Events and Causal Factors Analysis, Root Cause Analysis is any analysis that identifies underlying deficiencies in a safety management system that, if corrected, wouldprevent the same and similar accidents from occurring.
Big Dig Safety and Health Programs and Practices
Substance Abuse and Prevention Program
Shared Responsibility
Continuous Improvement PracticesTraining and
Best Practices
Safety Incentive Program (SHARE) Mitigation
Program
Emergency Response
Public Image
Threat Assessment
CommunityInvolvementProgram
Abutter Program
Zero Accident Tolerance
And many more…
Owner Controlled Insurance Program
1,344Environmental Commitments
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20060
2
4
6
8
10
12
14
16
18
Rate
Recordable Rate People
5000
4500
4000
3500
3000
2500
2000
1500
500
0
Peak Manpower/YearActuals per year
National Average
Challenges of Mega ProjectsKeeping the Focus on Risk, Quality and Safety!
Integration of all Project Disciplines throughout the Life of the Project!
Educating and Involving the Public Citizens from the Inception of the Project!
Establishing a strong public owner with independent oversight!
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Thank Your For Your Participation!Questions???
Virginia A. GreimanAssistant ProfessorBoston University
Virginia A. Greiman © 2010 25