National Academies Press: OpenBook
« Previous: Front Matter
Page 1
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2010. Guidebook on Risk Analysis Tools and Management Practices to Control Transportation Project Costs. Washington, DC: The National Academies Press. doi: 10.17226/14391.
×
Page 1
Page 2
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2010. Guidebook on Risk Analysis Tools and Management Practices to Control Transportation Project Costs. Washington, DC: The National Academies Press. doi: 10.17226/14391.
×
Page 2

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

S U M M A R Y Project cost escalation is a serious problem facing state highway agencies (SHAs). The fail- ure to deliver individual projects and programs within established budgets has a detrimen- tal effect on later programs and causes a loss of faith in the agency’s ability to wisely use the public’s money. Highway design and construction projects can be extremely complex and are often fraught with uncertainty. However, engineers, project managers, and cost estima- tors often overlook or fail to recognize project uncertainty early in the project development process. As a result they do not communicate uncertainty and its effect to the stakeholders. A comprehensive risk management approach can help project teams identify, assess, miti- gate, and control project risks. Among the benefits of a comprehensive risk management approach is the ability to generate range estimates early in the project development process and to establish justifiable contingencies that can be resolved throughout the design and construction process. This guidebook presents a systematic process to apply risk analysis tools and management practices to aid SHA management in controlling project cost growth. The Guidebook addresses risk identification, assessment, analysis, mitigation, allocation, and tracking and control in a manner that is systematically integrated into the organizational structure and culture of SHAs. Risk Management Framework The risk management framework described in this Guidebook is based on best practices in design and construction. In the Guidebook, those practices are adapted to the unique needs of highway project development. The iterative risk management framework is described in terms of the project development phases and project complexity. The frame- work is scalable from small and non-complex projects to large and complex projects. There are five imperative steps to managing project risk. 1. Risk identification is the process of determining which risks might affect the project and documenting their characteristics using such tools as brainstorming and checklists. 2. Risk assessment/analysis involves the quantitative or qualitative analysis that assesses impact and probability of a risk. Risk assessment assists in deriving contingency esti- mates. Quantitative and qualitative risk analysis procedures are applied to determine the probability and impact of risks. 3. Risk mitigation and planning involves analyzing risk response options (acceptance, avoid- ance, mitigation, or transference) and deciding how to approach and plan risk manage- ment activities for a project. 4. Risk allocation involves placing responsibility for a risk to a party – typically through a contract. The fundamental tenants of risk allocation include allocating risks to the party Guidebook on Risk Analysis Tools and Management Practices to Control Transportation Project Costs 1

2best able to manage them, allocating risks in alignment with project goals, and allocating risks to promote team alignment with customer-oriented performance goals. 5. Risk monitoring and control is the capture, analysis, and reporting of project performance, usually as compared to the risk management plan. Risk monitoring and control assists in contingency tracking and resolution. Keys to Success Lessons learned from the development of this Guidebook can be summarized in five keys to success for applying risk analysis tools and management practices to control project cost. 1. Employ all steps in the risk management process. 2. Communicate cost uncertainty in project estimates through the use of ranges and/or explicit contingency amounts. 3. Tie risks to cost ranges and contingencies as a means of explaining cost uncertainty to all stakeholders. 4. Develop risk management plans and assign responsibility for resolving each risk. 5. Monitor project threats and opportunities as a means of resolving project contingency.

Next: Chapter 1 - Introduction »
Guidebook on Risk Analysis Tools and Management Practices to Control Transportation Project Costs Get This Book
×
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

TRB's National Cooperative Highway Research Program (NCHRP) Report 658: Guidebook on Risk Analysis Tools and Management Practices to Control Transportation Project Costs explores specific, practical, and risk-related management practices and analysis tools designed to help manage and control transportation project costs.

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  6. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  7. ×

    View our suggested citation for this chapter.

    « Back Next »
  8. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!