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68 Table 7.4. Design phase risk allocation tools. 7.6 Design Phase Risk Monitoring and Control Tool Moderately The objectives of risk monitoring and control are to sys- Complex Minor Major tematically track the identified risks; identify any new risks; effectively manage the contingency reserve; and capture les- D1.1 Contract Packaging sons learned for future risk assessment and allocation efforts. The strategy for risk monitoring and control is developed in D1.2 Delivery Decision Support the programming phase and implemented in earnest in the design phase. 7.5.3 Design Phase Risk Allocation Outputs 7.6.1 Risk Monitoring and Control Inputs The final project delivery decision and contract packaging strategy should be known from decisions made in the pro- The key inputs to risk monitoring and control are the Risk gramming phase. If they are not, the project delivery and con- Management Plan (R3.1) and Risk Register (R3.12). These tract packaging will need to be determined as a first order of tools provide a framework for managing risks through a business in the design phase. At the end of the design phase, formalized monitoring and control process. On moderately detailed risk allocation decisions regarding the individual complex and major projects with a high degree of uncer- contract provisions will be made. tainty, an agency may invest in a Risk Management Informa- tion System (R3.13) to better monitor and control impacts. During the design phase, it is imperative that the risk 7.5.4 Design Phase Risk Allocation management plans and risk registers are kept current. Peri- Relationship to Project Complexity odic project risk reviews repeat the tasks of identification, as- Minor projects tend toward the use of traditional risk allo- sessment, analysis, mitigation, planning, and allocation and cation strategies. Typically, risk allocation in minor projects update the risk register for monitoring and control. Regu- requires only a cursory review of the risks to ensure that they larly scheduled project risk reviews can be used to ensure are allocated properly in the contracts. Moderately complex that project risk is an agenda item at all project development and major projects require careful consideration of all con- and construction management meetings. If unanticipated tract provisions affected by risks that could not be avoided or risks emerge, or a risk's impact is greater than expected, the mitigated. Alternative delivery methods and contract provi- planned response or risk allocation may not be adequate. At sions should be explored on moderately complex projects this point, the project team must perform additional re- and are becoming common for major projects. sponse planning to control the risk. Active risk monitoring and control ensures that the response is timely and adequate (refer to Section 3.4.6.2 for more information on reporting 7.5.5 Design Phase Risk Allocation Tips methods). Risk allocation affects the amount of contingency that must The other primary goal of risk monitor and control is to be included in a project estimate. ensure an accurate resolution of the contingency that was de- veloped for the baseline estimate. As the design phase pro- Explore alternatives to traditional risk allocation tech- gresses, the contingency should be resolved as risk are miti- niques in both delivery and contract packaging strategies. gated, avoided, or allocated to the contractor. If a risk is Gain industry input concerning risk allocation whenever accepted by the agency, contingency must remain to help possible. control project costs if the risk is in fact realized. As the proj- For each risk that cannot be avoided or fully mitigated, ex- ect progresses through the design phase, the contingency is amine the affected contract provisions closely. Risks allo- lowered and the base estimate increases. cated to the contractor will result in higher bid costs. Follow the four fundamental tenets of sound risk allocation: 7.6.2 Design Phase Risk Monitoring Allocate risks to the party best able manage them. and Control Tools Allocate the risk in alignment with project goals. Share risk when appropriate to accomplish project goals. Table 7.5 lists the risk monitoring and control tools sug- Ultimately seek to allocate risks to promote team align- gested for the design phase. More information on the tools ment with customer-oriented performance goals. can be found in Appendix A.