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OCR for page 88
88 A Guidebook for the Evaluation of Project Delivery Methods Document Results Yes No Select project Qualitative Approach: Quantitative Approach: Cost/ Selection? delivery method; Risk-allocation matrix schedule impact Document Results Figure 6.1. Overview of the risk-based qualitative and quantitative approaches. was found that projects in which more attention was paid to risk analysis fared better than other projects in terms of meeting budget and schedule goals. The following sections describe the qualitative and quantitative phases of the Tier 3 approach in more detail. Qualitative Analysis Figure 6.3 shows the risk-based approach superimposed on the project lifecycle. The most likely times to decide on the project delivery method are at the end of the Conceptual Design Phase or during the Preliminary Engineering Phase. If a project goes into the Final Design Phase without a decision on a project delivery method, the agency will lose the opportunity to effec- tively use alternative delivery methods and will be limited to the traditional DBB approach. At the end of the Conceptual Design Phase, the agency usually has not done a detailed risk analy- sis. If an agency is unable to select a project delivery method upon completion of the Tier 1 and Tier 2 approaches, it would need to conduct a preliminary risk analysis in order to make an informed choice of project delivery method. The result of this preliminary risk analysis is a risk-allocation matrix. The risk-allocation matrix has become an industry standard for legal teams when authoring alternative contracts for large infrastructure projects. For example, a risk-allocation matrix was a first step in creating the contract for the T-REX multimodal DB project in Colorado. Table G-1 in Appendix G (avail- able on the TRB website at presents a generic risk-allocation matrix that can be used for accomplishing the qualitative analysis. It should be noted that the matrix of Table G-1 will most likely consist of only two (and in rare cases maybe three) delivery methods because the completion of the Tier 1 and Tier 2 approaches should 0.1 0.08 Probability 0.06 0.04 0.02 0 2500 2700 2900 3100 3300 3500 3700 3900 Total Project Cost (Year of Expenditure $M) Figure 6.2. Distribution of project costs.

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Tier 3--Optimal Risk-Based Approach 89 Qualitative Quantitative Method (PDM) Selection Document Results Project Delivery and Stop Document Results and Stop Successful? Evaluate Decision Preliminary Risk-Allocation Verify Risk Analysis Matrix PDM Selection Risk Analysis Selected PDM Project Lifecycle Preliminary Conceptual Design Final Design Engineering Figure 6.3. Risk-based approach superimposed on project lifecycle. reduce the number of possible alternatives. Table 6.1 shows a risk-allocation matrix for a hypo- thetical project. A description of the development of this risk-allocation matrix is given below. Risk factors (shown the first column in Table 6.1 and typically arranged in a matrix according to either their impact [rank] or chronology) are major events or conditions that can affect a proj- ect in a negative way (the events that can affect the project in a positive way are called "opportu- nities," and traditionally there are far fewer opportunities than risks). Only significant risks should be considered because identifying and measuring all project risks would be a major effort. Under each project delivery method listed in the matrix, a main responsible party should be identified for each risk factor. For example, in the matrix shown in Table 6.1, the party responsible for design defects in a DBB contract is the owner, whereas in the DB contract, the responsible party is the constructor. Risk factors are rated, always from the perspective of the owner agency, according to the effect of a particular project delivery method on that risk factor. In the hypothetical case shown in Table 6.1, from the agency perspective, DBB is seen as having a favorable effect on the risk fac- tor of "permits/approvals." The agency thinks that it is the best party to obtain permits/approvals and that it can most effectively do this using a DBB approach. Therefore, the risk factor of Table 6.1. Risk-allocation matrix for a hypothetical project. DBB DB Risk Factor Responsible Party Rating Responsible Party Rating Permits/Approval Owner + Constructor/Owner Different Site Conditions Owner 0 Constructor/Owner + Design Defects Owner Constructor + Quality Assurance/ Constructor/Owner 0 Constructor + Quality Control Exchange Rate Risk Owner Owner Other Risk Factors