Guide for the Process of Managing Risk on Rapid Renewal Projects (2012)

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Guide for the Process of Managing Risk on Rapid Renewal Projects S2-R09-RW-2 Project Scope/Strategy/ Conditions Structuring Risk Identification Risk Assessment Risk Analysis Risk Management Planning Risk Management Implementation

TRANSPORTATION RESEARCH BOARD 2014 EXECUTIVE COMMITTEE* OFFICERS Chair: Kirk T. Steudle, Director, Michigan Department of Transportation, Lansing Vice Chair: Daniel Sperling, Professor of Civil Engineering and Environmental Science and Policy; Director, Institute of Transportation Studies, University of California, Davis Executive Director: Robert E. Skinner, Jr., Transportation Research Board MEMBERS Victoria A. Arroyo, Executive Director, Georgetown Climate Center, and Visiting Professor, Georgetown University Law Center, Washington, D.C. Scott E. Bennett, Director, Arkansas State Highway and Transportation Department, Little Rock Deborah H. Butler, Executive Vice President, Planning, and CIO, Norfolk Southern Corporation, Norfolk, Virginia (Past Chair, 2013) James M. Crites, Executive Vice President of Operations, Dallas–Fort Worth International Airport, Texas Malcolm Dougherty, Director, California Department of Transportation, Sacramento A. Stewart Fotheringham, Professor and Director, Centre for Geoinformatics, School of Geography and Geosciences, University of St. Andrews, Fife, United Kingdom John S. Halikowski, Director, Arizona Department of Transportation, Phoenix Michael W. Hancock, Secretary, Kentucky Transportation Cabinet, Frankfort Susan Hanson, Distinguished University Professor Emerita, School of Geography, Clark University, Worcester, Massachusetts Steve Heminger, Executive Director, Metropolitan Transportation Commission, Oakland, California Chris T. Hendrickson, Duquesne Light Professor of Engineering, Carnegie Mellon University, Pittsburgh, Pennsylvania Jeffrey D. Holt, Managing Director, Bank of Montreal Capital Markets, and Chairman, Utah Transportation Commission, Huntsville, Utah Gary P. LaGrange, President and CEO, Port of New Orleans, Louisiana Michael P. Lewis, Director, Rhode Island Department of Transportation, Providence Joan McDonald, Commissioner, New York State Department of Transportation, Albany Abbas Mohaddes, President and CEO, Iteris, Inc., Santa Ana, California Donald A. Osterberg, Senior Vice President, Safety and Security, Schneider National, Inc., Green Bay, Wisconsin Steven W. Palmer, Vice President of Transportation, Lowe’s Companies, Inc., Mooresville, North Carolina Sandra Rosenbloom, Professor, University of Texas, Austin (Past Chair, 2012) Henry G. (Gerry) Schwartz, Jr., Chairman (retired), Jacobs/Sverdrup Civil, Inc., St. Louis, Missouri Kumares C. Sinha, Olson Distinguished Professor of Civil Engineering, Purdue University, West Lafayette, Indiana Gary C. Thomas, President and Executive Director, Dallas Area Rapid Transit, Dallas, Texas Paul Trombino III, Director, Iowa Department of Transportation, Ames Phillip A. Washington, General Manager, Regional Transportation District, Denver, Colorado EX OFFICIO MEMBERS Thomas P. Bostick, (Lt. General, U.S. Army), Chief of Engineers and Commanding General, U.S. Army Corps of Engineers, Washington, D.C. Alison J. Conway, Assistant Professor, Department of Civil Engineering, City College of New York, New York, and Chair, TRB Young Members Council Anne S. Ferro, Administrator, Federal Motor Carrier Safety Administration, U.S. Department of Transportation David J. Friedman, Acting Administrator, National Highway Traffic Safety Administration, U.S. Department of Transportation LeRoy Gishi, Chief, Division of Transportation, Bureau of Indian Affairs, U.S. Department of the Interior, Washington, D.C. John T. Gray II, Senior Vice President, Policy and Economics, Association of American Railroads, Washington, D.C. Michael P. Huerta, Administrator, Federal Aviation Administration, U.S. Department of Transportation Paul N. Jaenichen, Sr., Acting Administrator, Maritime Administration, U.S. Department of Transportation Therese W. McMillan, Acting Administrator, Federal Transit Administration Michael P. Melaniphy, President and CEO, American Public Transportation Association, Washington, D.C. Victor M. Mendez, Administrator, Federal Highway Administration, and Deputy Secretary, U.S. Department of Transportation Cynthia L. Quarterman, Administrator, Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation Peter M. Rogoff, Under Secretary for Policy, U.S. Department of Transportation Craig A. Rutland, U.S. Air Force Pavement Engineer, Air Force Civil Engineer Center, Tyndall Air Force Base, Florida Joseph C. Szabo, Administrator, Federal Railroad Administration, U.S. Department of Transportation Barry R. Wallerstein, Executive Officer, South Coast Air Quality Management District, Diamond Bar, California Gregory D. Winfree, Assistant Secretary for Research and Technology, Office of the Secretary, U.S. Department of Transportation Frederick G. (Bud) Wright, Executive Director, American Association of State Highway and Transportation Officials, Washington, D.C. Paul F. Zukunft, (Adm., U.S. Coast Guard), Commandant, U.S. Coast Guard, U.S. Department of Homeland Security * Membership as of July 2014.

THE SECOND STRATEGIC HIGHWAY RESEARCH PROGRAM Golder Associates Inc. with Keith Molenaar Michael Loulakis Ted Ferragut TRANSPORTATION RESEARCH BOARD Washington, D.C. 2014 www.TRB.org Guide for the Process of Managing Risk on Rapid Renewal Projects SHRP 2 Report S2-R09-RW-2

SUBJECT AREAS Construction Highways

THE SECOND STRATEGIC HIGHWAY RESEARCH PROGRAM America’s highway system is critical to meeting the mobility and economic needs of local communities, regions, and the nation. Developments in research and technology—such as advanced materials, communications technology, new data collection technologies, and human factors science—offer a new opportunity to improve the safety and reliability of this important national resource. Breakthrough resolution of significant transportation problems, however, requires concentrated resources over a short time frame. Reflecting this need, the second Strategic Highway Research Program (SHRP 2) has an intense, large-scale focus, integrates mul- tiple fields of research and technology, and is fundamentally different from the broad, mission-oriented, discipline-based research programs that have been the mainstay of the high- way research industry for half a century. The need for SHRP 2 was identified in TRB Special Report 260: Strategic Highway Research: Saving Lives, Reducing Congestion, Improving Quality of Life, pub- lished in 2001 and based on a study sponsored by Congress through the Transportation Equity Act for the 21st Century (TEA-21). SHRP 2, modeled after the first Strategic High- way Research Program, is a focused, time-constrained, management-driven program designed to complement existing highway research programs. SHRP 2 focuses on applied research in four areas: Safety, to prevent or reduce the severity of highway crashes by understanding driver behavior; Renewal, to address the aging infrastructure through rapid design and construction methods that cause minimal disruptions and produce lasting facilities; Reli- ability, to reduce congestion through incident reduction, management, response, and mitigation; and Capacity, to integrate mobility, economic, environmental, and commu- nity needs in the planning and designing of new transporta- tion capacity. SHRP 2 was authorized in August 2005 as part of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). The program is managed by the Transportation Research Board (TRB) on behalf of the National Research Council (NRC). SHRP 2 is conducted under a memorandum of understanding among the American Association of State Highway and Transportation Officials (AASHTO), the Federal Highway Administration (FHWA), and the National Academy of Sci- ences, parent organization of TRB and NRC. The program provides for competitive, merit-based selection of research contractors; independent research project oversight; and dissemination of research results. SHRP 2 Report S2-R09-RW-02 ISBN: 978-0-309-27292-6 © 2014 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from pub- lishers or persons who own the copyright to any previously published or copyrighted material used herein. The second Strategic Highway Research Program grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, or FHWA endorsement of a particular product, method, or practice. It is expected that those reproducing material in this document for edu- cational and not-for-profit purposes will give appropriate acknowledg ment of the source of any reprinted or repro- duced material. For other uses of the material, request per- mission from SHRP 2. Note: SHRP 2 report numbers convey the program, focus area, project number, and publication format. Report num- bers ending in “w” are published as web documents only. NOTICE The project that is the subject of this report was a part of the second Strategic Highway Research Program, conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. The members of the technical committee selected to moni- tor this project and to review this report were chosen for their special competencies and with regard for appropriate balance. The report was reviewed by the technical commit- tee and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the Governing Board of the Na- tional Research Council. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the re- search and are not necessarily those of the Transportation Research Board, the National Research Council, or the pro- gram sponsors. The Transportation Research Board of the National Acad- emies, the National Research Council, and the sponsors of the second Strategic Highway Research Program do not en- dorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered es- sential to the object of the report. SHRP 2 REPORTS Available by subscription and through the TRB online bookstore: www.TRB.org/bookstore Contact the TRB Business Office: 202.334.3213 More information about SHRP 2: www.TRB.org/SHRP2

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished schol- ars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and techni- cal matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advis- ing the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achieve- ments of engineers. Dr. C. D. Mote, Jr., is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the ser- vices of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Victor J. Dzau is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sci- ences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. C. D. Mote, Jr., are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transportation Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdis- ciplinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transpor- tation departments, federal agencies, including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. www.TRB.org www.national-academies.org

SHRP 2 STAFF Ann M. Brach, Director Stephen J. Andrle, Deputy Director Neil J. Pedersen, Deputy Director, Implementation and Communications Cynthia Allen, Editor Kenneth Campbell, Chief Program Officer, Safety JoAnn Coleman, Senior Program Assistant, Capacity and Reliability Eduardo Cusicanqui, Financial Officer Richard Deering, Special Consultant, Safety Data Phase 1 Planning Shantia Douglas, Senior Financial Assistant Charles Fay, Senior Program Officer, Safety Carol Ford, Senior Program Assistant, Renewal and Safety Jo Allen Gause, Senior Program Officer, Capacity James Hedlund, Special Consultant, Safety Coordination Alyssa Hernandez, Reports Coordinator Ralph Hessian, Special Consultant, Capacity and Reliability Andy Horosko, Special Consultant, Safety Field Data Collection William Hyman, Senior Program Officer, Reliability Linda Mason, Communications Officer Reena Mathews, Senior Program Officer, Capacity and Reliability Matthew Miller, Program Officer, Capacity and Reliability Michael Miller, Senior Program Assistant, Capacity and Reliability David Plazak, Senior Program Officer, Capacity Rachel Taylor, Senior Editorial Assistant Dean Trackman, Managing Editor Connie Woldu, Administrative Coordinator

This work was sponsored by the Federal Highway Administration in cooperation with the American Association of State Highway and Transportation Officials. It was con- ducted in the second Strategic Highway Research Program (SHRP 2), which is admin- istered by the Transportation Research Board of the National Academies. The project was managed by James Bryant, SHRP 2 Senior Program Officer, Renewal. ACKNOWLEDGMENTS

FOREWORD In recent years, risk management has become an area of emphasis for transportation agencies. Project risks must be managed regardless of how they are allocated between the contractor and the transportation agency. Transportation agencies continue to seek a balanced approach to risk allocation because, generally speaking, increased risks to the contractor will be refl ected in increased bid prices. The incorrect allocation of risks can also lead to project delays and increased costs. Agencies are moving toward the use of innovative contracting approaches and accelerated construction techniques to complete projects more rapidly. Although guid- ance exists and is being developed for managing risks on transportation projects, this guidance has generally not included consideration of the unique features of rapid renewal projects, which are those projects that use accelerated project delivery. Several state transportation agencies have been exposed to the formal risk man- agement required by the Federal Highway Administration on infrastructure projects that exceed a total estimated cost of $500 million. Few transportation agencies use formalized risk assessment and management programs that are not associated with “major projects.” This guide and supporting products provide tools that transportation agencies can use to apply risk management principles systematically to their projects. They are specifi cally useful for those projects that are below the $500 million threshold for major projects. The primary objectives of Renewal Project R09 were to address the general lack of understanding of risk and risk management associated with the unique aspects of rapid renewal projects and to develop practical guidance and materials for the applica- tion of risk management methods to the rapid renewal project development process in a manner consistent with state transportation agency business practices. James W. Bryant, Jr. Ph.D., P.E., SHRP 2 Senior Program Offi cer, Renewal

The products developed as part of this project include (1) a comprehensive guide, with extensive checklists and a comprehensive example project application, and (2) associated implementation materials for conducting risk management on rela- tively simple rapid renewal projects, including a presentation introducing the risk management process and a Microsoft Excel template (with user’s guide) for both documenting the process and conducting the necessary analyses. The guidelines and corresponding training materials provide the state of the prac- tice for risk management on rapid renewal projects and also a detailed process of risk identification and mitigation strategies. The materials will be useful to state depart- ments of transportation, municipal agencies, and consultants working on projects that involve some type of accelerated project delivery and will make the risk management process more accessible for use as a standard project solution.

CONTENTS 1 EXECUTIVE SUMMARY 4 CHAPTER 1 Introduction 4 The Problem 7 The Solution 9 The Guide 10 Conclusions 11 CHAPTER 2 Risk Management Process 11 Introduction 14 Process of Risk Management 17 Conclusions on the Risk Management Process 19 CHAPTER 3 Context for Rapid Renewal 19 Introduction 21 Process of Rapid Renewal 26 Conclusions on Rapid Renewal 27 CHAPTER 4 Structuring a Project for Risk Management 27 Introduction 29 Process of Structuring 36 Conclusions on Structuring

38 CHAPTER 5 Risk Identification 38 Introduction 40 Process of Risk Identification 45 Conclusions on Risk Identification 47 CHAPTER 6 Risk Assessment 47 Introduction 52 Process of Risk Assessment 64 Conclusions on Risk Assessment 67 CHAPTER 7 Risk Analysis 67 Introduction 75 Process of Risk Analysis 87 Conclusions on Risk Analysis 90 CHAPTER 8 Risk Management Planning 90 Introduction 92 Process of Risk Management Planning 100 Conclusions on Risk Management Planning 103 CHAPTER 9 Implementing Risk Management Plan 103 Introduction 104 Process of Implementing the Risk Management Plan 108 Conclusions on Implementing the Risk Management Plan 110 CHAPTER 10 Implementing This Guide 110 Introduction 110 Process of Implementing This Guide 119 Conclusions on Implementing This Guide 121 CHAPTER 11 Conclusions 127 Glossary 131 References