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5 1. Risk Management Process 1.3 Guidebook Organization Risk identification; assessment; analysis; planning and mitigation; allocation; and monitoring and control. The Guidebook has eight chapters, including the introduc- 2. Project Development Phases tion. The background information and fundamental concepts Planning, programming, and design. concerning the content of the Guidebook are developed in 3. Project Complexity Chapters 2, 3, and 4. Chapter 2, "Project Cost Estimation and Project type, technical complexity, and management Management," demonstrates how cost estimation practice complexity. and cost estimation management are linked to planning and the project development process. Chapter 2 also summarizes Of particular note in Figure 1.1 is the fact that the overall the key strategies, methods, and steps for estimating that were risk management process is cyclical. As the project evolves, developed in NCHRP Report 574: Guidance for Cost Estimation some risks will be resolved or diminished, while others may and Management during Planning, Programming, and Precon- surface and thus be added into the process. The five funda- struction (Anderson et al., 2007). Chapter 3, "Risk Manage- mental risk management steps can be applied throughout ment Overview" provides a detailed description of the risk the project life cycle. The extent of application of each step analysis process. Chapter 3 opens with a discussion of how to varies as the methods and tools used to support these steps use contingency as a means of controlling costs throughout are influenced by the project development phase and project the project development process. It presents the risk manage- complexity. The process is scalable from small and non- ment definitions and steps used throughout this Guidebook. complex projects to large and complex projects. The Guide- It closes with a discussion of how to form policies and per- book directly addresses the interaction of these important formance measures for integrating risk management into the elements. operation and culture of a SHA. Chapter 4, "Guidebook Framework," presents a consistent approach to describe the risk analysis tools and management practices found in the re- 1.2 Guidebook Development mainder of the Guidebook. Chapter 4 presents the framework This Guidebook was developed under NCHRP Project 8-60, that will be applied in the subsequent chapters. "Guidebook on Risk Analysis Tools and Management Prac- Chapters 5, 6, and 7--"Guide to the Planning Phase," tices to Control Transportation Project Costs." The research "Guide to the Programming Phase," and "Guide to the Design was conducted in two phases. The first phase focused on a Phase," respectively, focus on the application of the fundamen- state-of-practice review of cost risk analysis and management. tal concepts presented in Chapters 2, 3, and 4. These chapters The current state of practice was characterized by an extensive provide guidance to risk analysis and management implemen- review of the literature supported by an industry survey repre- tation during each phase of project development. Guidance is senting responses from 48 SHAs and the FHWA. The survey provided with a specific focus on the most appropriate tools for found that very few SHAs were actively practicing risk analy- a specific project phase and project complexity. The risk analy- sis. The state of practice was further characterized through in- sis and contingency estimation framework is used to guide depth case studies into the practices of four SHAs identified readers to the appropriate tools for application. The tools are by the survey as leaders in the use of risk management prac- presented in an extensive Appendix A, which provides support tices. Additionally, leading public agencies from outside the for implementation of the methods described in Chapters 5, 6, highway sector were studied including the FTA, the New and 7. Appendix A provides information concerning tools, in- York Metropolitan Transit Authority, and the Department of cluding examples and illustrations of the tools. This appendix Energy. The literature, survey, and case studies were used to is meant to be used in conjunction with the chapters of the identify tools and management practices for inclusion in the Guidebook and not in la carte fashion. Guidebook. A strategic approach will be required to facilitate imple- The second research phase research synthesized the tools mentation of new risk analysis and management practices. and practices into a framework for application in this Guide- Chapter 8, "Implementation," covers key implementation book. The Guidebook framework addresses 1) risk identifica- thrust areas and steps in the implementation process that tion; 2) assessment; 3) analysis; 4) mitigation; 5) allocation; and must be considered when introducing changes to current cost 6) tracking and control in the planning, programming, and de- estimation practice and cost estimation management within sign phases of project development. This framework was tested a transportation agency. Finally, Chapter 9 summarizes the and validated with three SHAs. These SHAs provided a critique main features of the Guidebook and challenges users may en- of the Guidebook's content, structure, layout, and user friend- counter when striving to improve agency risk analysis and liness. The NCHRP 8-60 panel reviewed and commented on management that can ultimately lead to more accurate and this final version of the Guidebook. consistent cost estimating and cost management.