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67 risk allocation, and risk information systems, documentation, build projects are most frequently used on large and complex and reports. Major projects should use a risk register that is in- projects, but they have been successful on moderately com- tegrated into the formal Risk Management Plan (R3.1). plex projects of a size for which the design-builders can inno- vate to offset the additional risk of taking on design liability. Project managers and designers should examine each con- 7.4.5 Design Phase Risk Mitigation tract provision closely. They should not treat standard con- and Planning Tips tract language as a "one size fits all." For example, the appli- Project cost is subject to many variables, but actions to mit- cation of unit price contracts has traditionally allocated risks igate the impacts of risks can have a significant effect in con- equitably for items in which field quantities can vary (e.g., trolling cost. earthwork quantities). However, the application of lump sum payment provisions can allocate risk equitably when design- Begin risk planning efforts early. Formal risk management build delivery is being used or when schedule is a primary plans can begin concurrently with risk identification and project goal. Similarly, the risk for undiscovered site condi- analysis steps. tions has typically been borne by the agency, but some agen- Clearly assign responsibility for risk ownership. Individu- cies have found success in sharing this risk with the contrac- als responsible for managing risks should be informed on tor (see Section 3.4.5.4 for examples). The determination of the costs of mitigation efforts and in which the risks must project time is a risk that agencies are commonly allocating to be resolved. contractors through A + B (cost + time) procurement. In When planning for risk responses, keep in mind the com- essence, A + B procurement passes the risk for accurately set- mon strategies of avoidance, transference, mitigation, or ting the fastest construction completion date from the agency acceptance. to the contractor. All of these examples show a thoughtful ap- Risk mitigation and planning efforts may necessitate that proach to allocating risks that have been identified through a agencies set policies, procedures, goals, and responsibility thorough and structured risk management process. standards. Document the risk mitigation and planning efforts at a 7.5.1 Design Phase Risk Allocation Inputs level of detail that is appropriate for the project complex- ity and resources available to management. Risk allocation inputs at the design phase include the out- Actively update risk management plans and risk registers. puts from the first three steps in the risk management process Update these documents whenever there is a major design plus an examination of the detailed contract provisions for milestone, a change to project scope, identification of a the project. Designers who are developing the plans, specifi- new risk(s), and/or change to an existing risk. cations, and contract decisions must have a clear understand- ing of the project risks. They must also have a clear under- standing of project goals as inputs to their decisions. Take for 7.5 Design Phase Risk Allocation example the risk of unusually severe weather. If achieving the The goal of risk allocation is to minimize the total cost of risk lowest project cost is a primary goal, a contract provision for on a project and not necessarily the costs to each party sepa- unusually severe weather can be written to share the risk for rately. Risk allocation begins in the programming phase with delays while not providing for additional compensation the project delivery decision and contract packaging decisions. costs. However, this provision may lead to longer project du- It then continues in the design phase with careful considera- ration. If shortening project duration is a primary project tion of those contract provisions impacted by the identified goal, then the highway agency may wish to allocate the risk risks. The identified project risks should align with the selected for unusually severe weather to the contractor to develop in- project delivery method, contract packaging, and individual novative methods avoiding the risk. However, this provision contract provisions to provide an optimal allocation of risk to will undoubtedly lead to higher bid costs from the contrac- minimize the total cost and meet other project objectives. tor. Risk allocation decisions require clear inputs of the proj- The traditional design-bid-build delivery method is most ect goals, the identified risks, and understanding of the con- commonly used by SHAs and its risk allocation tenets are well tract provisions. understood in the industry. However, alternatives to the tra- ditional delivery method exist. Designbuild, construction 7.5.2 Design Phase Risk Allocation Tools management at risk, and publicprivate partnerships are among the alternative project delivery options that can bene- Table 7.4 lists Design Phase tools discussed in this Guide- fit from innovative risk allocation opportunities. In all of these book for risk allocation. The Delivery Decision Support (D1.2) project delivery decisions, consideration must be given to the tool includes descriptions of numerous alternative project scope and size of the contract packages. For example, design- delivery methods.