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

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133 APPENDIX A Inventory of Rapid Renewal Strategies and Methods 142 APPENDIX B Rapid Renewal Risk Categories and Risk Management Action Categories 209 APPENDIX C Simplified Risk Management Overview, Forms, Template, and Template User’s Guide 226 APPENDIX D Hypothetical Rapid Renewal Case Study 238 APPENDIX E Risk Management Plan

1 EXECUTIVE SUMMARY In the past, many transportation projects have performed poorly (e.g., in terms of ultimate cost and schedule to completion), often because of unexpected problems. This might be amplified for rapid renewal projects, which are intended to accelerate schedule and minimize disruption through construction, without adversely affecting either costs through construction or postconstruction longevity. By definition, these rapid renewal methods typically are innovative, with little past experience from which to learn, and possibly more susceptible to poor performance. This guide presents a formal risk management process (Figure ES.1) to better understand and to actually optimize project performance specifically for rapid renewal projects, especially by anticipating and planning for potential problems (risks) and potential improvements (opportunities). This process, which is a significant expansion of a previously developed risk management process for non–rapid renewal projects (for which the expanded process is also applicable), consists of a well-defined series of steps, each of which has been described in appropriate detail, including possible variations. Sufficient guidance is also provided to ensure compatibility and consistency among the various steps, and ultimately to ensure adequate accuracy and defensibility of results (where adequacy depends on how the results will be used), as efficiently as possible. The steps, which are sequential and in some cases iterative, include Step 1. Structuring. Define the base project scenario (including the relevant project performance measures of cost, schedule, and disruption through construction, and postconstruction longevity, and trade-offs among them), against which risk and oppor- tunity can be identified, assessed, and eventually managed. Step 2. Risk Identification. Identify a comprehensive and nonoverlapping set of risks and opportunities (i.e., scenarios that might occur, changing the base project performance). In addition to brainstorming and then analysis of risks, to ensure

2GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS completeness, check the lists of common risks that have been developed. Document the set of risks and opportunities to start the project risk register. Step 3. Risk Assessment. Assess the severity of each of the risks and opportunities in the risk register, and then prioritize them on that basis. Generally, this is done by (a) subjectively assessing the relevant risk factors (i.e., impacts if the scenario occurs and the probability of the scenario occurring), either qualitatively (e.g., “high” versus “low” descriptors are quantitatively defined by ranges of values) or quantitatively (mean values or, for quantitative risk analysis, full probability distributions); and then (b) analytically combining the risk factors to determine changes in project perfor- mance measures and thereby severity. Document the risk-factor assessments in the project risk register. Step 4. Risk Analysis. Analytically combine the base and risk factors to deter- mine the project performance measures (e.g., ultimate project escalated cost) as well as changes in those measures (e.g., combined using trade-offs, as a measure of severity) associated with each risk. This can include quantification of the uncertainty in (and correlations among) those performance measures, as a function of subjectively assessed uncertainties in the base and risk factors. Note that appropriately conducting risk analysis requires specialized skills. Step 5. Risk Management Planning. Identify and evaluate possible ways to pro- actively reduce risks, focusing on those that are most severe. Evaluate each possible action for its cost-effectiveness, considering changes in both base (e.g., additional cost) and risk (e.g., reduced probability) factors, and select those that are cost-effective. Consider reanalyzing the project performance measures for this risk reduction pro- gram, including quantification of uncertainty, based on which appropriate budgets and milestones can be established (e.g., to achieve a specified level of confidence). As part of these budgets and milestones, contingencies (in the form of additional funds and time, as well as recovery plans) and procedures to control their use would be estab- lished. Document this in the risk management plan. Step 6. Risk Management Implementation. Implement the risk management plan as the project proceeds, including (a) monitoring the status of risk reduction activi- ties and changes in risk (whether attributable to risk reduction or simply to changes in project development, conditions, and information) and (b) monitoring budget and milestones, especially with respect to contingencies. This might involve periodic updates (iterate Steps 1–5) at regular intervals or at major milestones or changes. For example, contingencies might be reduced as engineering reports or designs are com- pleted and risks are avoided or reduced.

3GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS Adequate direction is also provided to help ensure successful implementation of the risk management process described herein, which requires adequate planning and resources, especially qualified facilitators and experts. A course also has been developed to train department of transportation (DOT) staff to successfully implement this guide, focusing on training DOT facilitators to (a) implement the risk management process directly on relatively simple rapid renewal (as well as non–rapid renewal) projects and (b) supervise the evaluation of more complex projects and perform quantitative risk analysis. To help these facilitators, in addition to this training course (which includes annotated PowerPoint slides and application to a hypothetical project), an overview presentation of the process and forms for documenting inputs (which are also available electronically in a Microsoft Excel workbook template that automates the necessary analyses) have been developed for relatively simple projects. The template and related training materials are available online at www.trb.org/Main/Blurbs.168369.aspx. The primary benefits of the risk management process described in this guide include improved project performance as well as better understanding and clarity of the project and its range of possible performance. Moreover, it does this defensibly and efficiently. If performed correctly in accordance with the guide, the investment (e.g., in training, workshops, and documentation) should be small relative to the likely benefits of improved project performance, plus the more intangible benefits of better project understanding and the ability to defend significant project decisions. Figure ES.1. Iterative risk management process. 4 2014.01.07 R09 01 Guide Exec Sum_final for composition.docx Figure ES.1. Iterative risk management process. Adequate direction is also provided to help ensure successful implementation of the risk management process described herein, which requires adequate planning and resources, especially qualified facilitators and experts. A course also has been developed to train department of transportation (DOT) staff to successfully implement this guide, focusing on training DOT facilitators to (a) implement the risk management process directly on relatively simple rapid renewal (as well as non–rapid renewal) projects and (b) supervise the evaluation of ore complex project and perform quantitative risk analys . To help these facilitators, in a ditio to this training c urse (which includes annotat d PowerPoint slides and application to a hyp thetical project), an overview presentation of the process and forms for documenting inputs (which are also available electronically in a Microsoft Excel workbook template that automates the necessary analyses) have been developed for relatively simple projects. The template and related training materials are available online at www.trb.org/Main/Blurbs.168369.aspx. Project Scope/Strategy/ Conditions Structuring Risk Identification Risk Assessment Risk Analysis Risk Management Planning Risk Management Implementation