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

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.

38 INTRODUCTION As described in Chapter 4, the base project describes the planned project scope, strat- egy, conditions, and assumptions. However, projects do not always go as planned, par- ticularly when projects involve new or innovative methods like rapid renewal projects do. The DOT should identify what events might occur and thus change the project relative to the base assump- tions and thereby affect the project’s performance objec- tives of minimizing project cost, schedule, and disruption through construction, and maximizing longevity of the constructed facility. The risks and opportunities are listed in the risk register for later risk management activities. As described previously, events that might occur and change the project outcomes can be risks (potential problems that degrade project performance) or opportunities ( potential improvements that enhance project performance). Objectives The objectives of risk identification are to • Identify, categorize, and document all risks and opportunities that could signifi- cantly affect the project’s base performance measures. • Start a risk register, which is a comprehensive set of nonoverlapping risks and opportunities. 5 RISK IDENTIFICATION Adequately but efficiently identify, categorize, and document (in a risk register) a compre- hensive, nonoverlapping set of risks (poten- tial problems) and opportunities (potential improvements), which are events outside the base set of assumptions that might occur and change base project performance.

39 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS RISK IDENTIFICATION • Set the stage for subsequent steps in the risk management process, which include — Risk assessment (Chapter 6); — Risk analysis, if needed (Chapter 7); and — Risk management planning (Chapter 8). Another objective is to complete this step in the overall risk management pro- cess efficiently, producing accurate and defensible results that are compatible with the other steps of the process (which in turn is compatible with the project management approach). Facilitated consensus among a broad group of both project-team and inde- pendent subject-matter experts is key to successful risk identification. Philosophy and Concepts Risk identification is a relatively straightforward process, but DOTs should still follow a basic set of principles to ensure that risk identification is conducted appropriately. Key principles of risk identification are outlined below. Guidance for following these principles is provided later in this chapter. • Risk identification is just that—identification. To mitigate bias, it does not in- volve discussion of severity, screening, or prioritization. Similarly, risk identifica- tion does not involve redesigning the project to fix problems or identifying risk management actions. • Risk identification should be comprehensive. Be careful not to miss or exclude risks or opportunities. Do not assume that risks will be avoided through later engi- neering efforts. Consider all project phases, elements, and components. However, it is inevitable that some risks will be missed, and hence, to be comprehensive, there should be a miscellaneous risk to cover those unidentified risks. • Seek out both risks and opportunities. — Do not focus solely on potential problems (risks). — Opportunities generally do not include potential risk management actions. Risk management actions are deliberately planned and implemented specifically to manage risk or exploit genuine opportunities. • Risks and opportunities should be defined relative to the base. • Risks and opportunities should be identified at an appropriate level of detail. • Risks should be characterized and documented adequately (in a risk register), to provide enough basis for understanding the issue and subsequent assessment: — What is the nature of the risk? (What is the fundamental issue of concern?) — Who is affected by the risk? (Does the risk primarily affect the DOT?) — When could the risk occur? (Can it occur once during the project, or multiple times?) — Where could the risk occur? (What element of the project could it affect? Can it occur in more than one location or affect more than one element of the project?)

40 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS — What could cause the risk to occur? (What are the causes or triggers, and how would they be recognized?) — How likely are these triggers to occur during various phases of the project? — What are the potential impacts if it occurs? (How would this affect the project’s performance measures if it occurred?) — What are the potential relationships (correlations, dependencies) with other risks? • Risks change as the base project evolves, as conditions change, and new informa- tion becomes available. Eventually, each risk happens (and becomes part of the base) or does not happen (and can be “retired”). Generally, specific types of risk can only happen during specific project phases, after which they cannot occur. PROCESS OF RISK IDENTIFICATION There is not just one way to conduct risk identification. Risk identification can range from an informal, back-of-the-envelope, individual “thought exercise” to a very struc- tured, very formal, and facilitated process. For DOTs attempting to identify risks for rapid renewal projects, a facilitated yet semiformal group exercise, commonly known as the Delphi approach, is often the most efficient and effective approach to adequate risk identification. The following are key elements of a group process, which should be efficient, minimize bias, and maximize discovery and identification of risks: 1. Include both project-team members and independent subject-matter experts in the risk identification exercise. Ideally, these experts will be the same group that devel- oped the project base (described in Chapter 4). Example Risk Documentation (This is not the hypothetical case study) Additional Wetland Impacts Result from Changes to Project Design Wetland impacts have been delineated and permitted for the planned sign gantry foun- dations. However, the contractor might need to change one or more sign locations. If so, that might introduce additional wetland impacts, which are likely to be small (e.g., under several thousand square feet). In any case, the contractor would have to get ap- proval for any temporary impacts to the wetlands and develop and obtain permits for mitigation for any unavoidable permanent impacts, where permitting might involve the U.S. Army Corps of Engineers. This problem could affect the DOT’s project schedule (e.g., delaying permits, which is a precursor to other activities) and cost (in the form of a claim from the design–builder for additional mitigation and extended overheads).

41 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS 2. Circulate base information to the participants beforehand. Ensuring that the par- ticipants in the risk identification are already familiar with the project scope, strat- egy, conditions, and assumptions will promote more effective discussion during the risk identification exercise. 3. Before the actual risk identification exercise, ask each expert to document his or her issues of concern. This helps to ensure participant buy-in and subsequent consensus. 4. In a facilitated meeting or workshop environment with the experts, have a qualified facilitator lead the identification of risks, minimizing bias. This is generally done a. First through group brainstorming (e.g., existing concerns of project team and reviewers, issues identified during structuring, and judgment or experience from other similar projects); b. Then through analysis (e.g., evaluation of scope, key assumptions and condi- tions, and project strategy or project phase); and c. Finally through comparison with risk checklists (see below). 5. After the risks have been identified, have the facilitator categorize the risks to help establish a proper risk register: — A risk register is a comprehensive, nonoverlapping set of risks and opportuni- ties. In a risk register, risks are often organized or categorized in some conve- nient fashion and should be described at the appropriate level of detail (i.e., typically dozens of significant risks). The risk register is a dynamic document “owned” by the project team. — Categorization can be by type of risk, by project component, or by project phase (which captures both the type of risk and the time element). For the pur- poses of this guide, the recommended categorization is by project phase because the authors’ experience is that people often organize their thinking about the project by the type of project activity and when the activity occurs. In fact, it is recommended that risks be categorized by the phase in which they are most likely to occur (which is not necessarily when the impacts would occur) and after which they can be retired, which subsequently helps in developing contin- gency drawdown and risk monitoring plans (see Chapter 8). However, it is not important for the categories to be rigidly defined. In fact, many risks could eas- ily be categorized into more than one category because of their impacts across many facets of the project. — Categorization serves to ▪ Organize the list of risks at an appropriate level of detail. ▪ Combine highly correlated or dependent risks, which means that the remain- ing risks are often largely independent. ▪ Eliminate duplicate risks. ▪ Identify missing risks within each category.

42 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS To ensure a smooth and effective risk identification exercise, consider the follow- ing guidance (which parallels some of the previously identified principles): • Document all credible possibilities outside the base set of assumptions to develop a comprehensive set of risks and opportunities (separate from potential risk man- agement actions). However, recognize that regardless of how thorough the identi- fication process is, there will still be risks that have not been identified, although they should not be major ones. A miscellaneous risk can capture all of these un- identified risks (“unknown unknowns”). • Do not debate the severity of issues (i.e., the likelihood of occurrence or the magni- tude of the impacts from occurrence) or prematurely screen out minor issues—this comes later during risk assessment. • Do not try to “fix” the problem—this comes later during risk management. • Think broadly. Individuals should consider other projects they have worked on, and reflect on how much those projects changed from original concept to comple- tion. They should also consider both obvious and implied risks (e.g., as hinted in base project documentation by words such as might, maybe, could, assumes, or likely). Ideally, the group could, at the completion of the project, look back and say, “We identified as a possibility every significant change that ultimately occurred.” • If at all possible, do not intentionally exclude any significant issues from the risk identification and subsequent risk assessment. — Excluding major uncertainties, risks, and opportunities is the quickest way to misleading or erroneous risk assessment results. — If a DOT must exclude something from the risk assessment (for whatever rea- son), document the exclusion explicitly. Remember that results will be condi- tional on the assumption that the excluded issues do not occur (which might be a big assumption), and results might be misleading if these exclusions are not clearly conveyed to those who use the results. As mentioned earlier, to supplement the brainstorming and analysis by project-team and independent subject-matter experts, the facilitator should attempt to identify any missing risks through use of risk checklists (Figure 5.1). These checklists are not intended to be proper risk registers per se, because they are often not comprehensive and contain items that might partially overlap one another. However, their purpose is to serve as memory prompts or shopping lists of issues that have been observed on other projects. The facilitator can peruse these lists to identify types of risks that might be applica- ble to the current project but that were not identified through brainstorming and analy- sis. Note that risk checklists should only be used after the brainstorming and analysis to avoid prepopulating a risk register and therefore stifling creativity and jeopardizing buy-in. Although various risk checklists are available in several risk assessment references, most lists are substantially incomplete for various reasons (Golder Associates 2008b). As a result, a significant focus for the research effort that led to this guide was to

43 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS develop a more comprehensive, yet still usable, checklist of risk categories, or types of risks, that could occur for rapid renewal projects. This checklist of rapid renewal risk categories is presented in Appendix B: • The Risk Checklist for Traditional Transportation Projects section provides a summary of types or categories of risks for traditional (non–rapid renewal) trans- portation projects, by project phase. This is presented because, DOTs with rapid renewal projects should, for comprehensiveness, address risks and opportunities for the entire project, not just for the project’s rapid renewal elements. • The Summary Risk Checklist for Rapid Renewal Projects section provides a sum- mary of risk categories specifically for rapid renewal projects, by project phase. This section is intended to serve as a risk checklist for rapid renewal projects, but only in terms of generic types of risks. It is up to the DOT to extrapolate from the risk checklist and identify specific risks related to specific rapid renewal strategies and methods employed in the DOT’s particular project. • The Rapid Renewal Risk Categories and Potential Risk Management Actions by Project Phase section provides more detail than the Summary Risk Checklist for Rapid Renewal Projects section. Each table in this section corresponds to one of the various project phases defined in Chapter 3: — Table B.1. Planning — Table B.2. Project Scoping 12 2014.01.09 R09 06 Guide Chapter 5_final for composition.docx Tables B.1 through B.16 provide insight into the summary checklist provided in the Summary Risk Checklist for Rapid Renewal Projects section. Within each table, the relevant major rapid renewal strategies and tactics or methods (distilled from Appendix A) are listed for that project phase. For each rapid renewal strategy in a given table, the general types of risks (risk categories) that could occur from using that renewal strategy are identified. And for each rapid renewal strategy, potential proactive risk management actions are also identified to manage the corresponding risks, as discussed in Chapter 8. [Insert Figure 5.1] [caption] Figure 5.1. Checklists (Appendix B). When considered together, the Risk Checklist for Traditional Transportation Projects section and the Summary Risk Checklist for Rapid Renewal Projects section (which is expanded Environmental •Uncertainty in appropriate environmental documentation (e.g., DCE vs. EA vs. EIS), and all the related consequential events (e.g., change in design, ROW, scope, and construction costs) •Challenge to environmental documentation (e.g., resulting in delay in ROD)Environmental Process and Permits •Different type of environmental documentation required •Additional documentation required (but not a change in document type)Table D-3. Project Phase: Environmental Process Rapid-Renewal Strategy Related Risk or Opportunity Categories Potential Risk-Management Actions Accelerate the environmental documentation process Examples:  Leverage master planning (see Project Scoping)  Conduct early coordination (see Planning)  Identify documentation requirements early  Identify and avoid major impacts early (historical, cultural, archaeological) Note: the individual risk categories (and their related examples, below) might apply to any or all of the renewal category examples (shown to the left). Different type of documentation required Example causes or issues:  Project’s impacts are greater than originally assumed (due to design changes, originally underestimated impacts, etc.), so more substantial documentation is required (e.g., EIS instead of EA)  Additional discipline studies are required  Additional (new) alternatives must be developed and documented  Documentation requirements change The following potential risk-management actions could apply to a number of the risk categories in the column to the left:  Modify the project design to reduce the impacts that are triggering different type of documentation  Anticipate potential concerns with main alternatives, and develop additional alternatives early in process to address those concerns  Anticipate/plan for and/or start additional (targeted) discipline studies earlier to reduce impact to project schedule if they are later required  Develop alternate (or additional/more- detailed) documentation in parallel with presumed appropriate documentation to reduce impact to schedule if alternate documentation is later required Figure 5.1. Checklists (Appendix B).

44 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS — Table B.3. Environmental Process and Permits — Table B.4. General Principles of Design and Construction — Table B.5. Structures — Table B.6. Geotechnical and Earthworks — Table B.7. Drainage and Stormwater Management — Table B.8. Roadway, Geometrics, and Intelligent Transportation Systems — Table B.9. Pavement — Table B.10. Maintenance of Traffic — Table B.11. Right-of-Way — Table B.12. Utilities — Table B.13. Railroads — Table B.14. Procurement and Contracting Strategy — Table B.15. Operations and Maintenance — Table B.16. Replacement Tables B.1 through B.16 provide insight into the summary checklist provided in the Summary Risk Checklist for Rapid Renewal Projects section. Within each table, the relevant major rapid renewal strategies and tactics or methods (distilled from Appendix A) are listed for that project phase. For each rapid renewal strategy in a given table, the general types of risks (risk categories) that could occur from using that renewal strategy are identified. And for each rapid renewal strategy, potential proac- tive risk management actions are also identified to manage the corresponding risks, as discussed in Chapter 8. When considered together, the Risk Checklist for Traditional Transportation Projects section and the Summary Risk Checklist for Rapid Renewal Projects section (which is expanded in the Rapid Renewal Risk Categories and Potential Risk Man- agement Actions by Project Phase section) constitute a relatively complete set of risk categories (types of risks) that could occur for projects with both traditional and rapid renewal elements. Remember that these risk checklists are not intended to be proper risk registers—they are only “brain ticklers.” To help the facilitator document and categorize risks during brainstorming, and to then add risks from analysis as well as from checklists and then edit risks to eliminate duplication, specific forms and a Microsoft Excel workbook template have been devel- oped (see Figure 5.2 and Appendix C). These forms and template use the basic project phases shown in Chapter 3 for categorizing risks. The template automatically sorts risks (by category) from brainstorming and assigns each one a unique label. This set of risks can then be supplemented by other risks identified in each category by analysis and then by comparing with risk checklists, and then can be edited to eliminate dupli- cation. This complete set of edited risks becomes the basis of the risk register.

45 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS Figure 5.2. Forms (Appendix C). 13 2014.01.09 R09 06 Guide Chapter 5_final for composition.docx in the Rapid Renewal Risk Categories and Potential Risk Management Actions by Project Phase section) constitute a relatively complete set of risk categories (types of risks) that could occur for projects with both traditional and rapid renewal elements. Remember that these risk checklists are not intended to be proper risk registers—they are only “brain ticklers.” To help the facilitator document and categorize risks during brainstorming, and to then add risks from analysis as well as from checklists and then edit risks to eliminate duplication, specific forms and a Microsoft Excel workbook template have been developed (see Figure 5.2 and Appendix C). These forms and template use the basic project phases shown in Chapter 3 for categorizing risks. The template automatically sorts risks (by category) from brainstorming and assigns each one a unique label. This set of risks can then be supplemented by other risks identified in each category by analysis and then by comparing with risk checklists, and then can be edited to eliminate duplication. This complete set of edited risks becomes the basis of the risk register. [Insert Figure 5.2] [caption] The actual how to details of implementing each of the above steps is covered in companion training materials. The logistics of implementing the above set of steps (e.g., through facilitated workshops), as well as when they should be implemented during project development, are discussed in Chapter 10. CONCLUSIONS ON RISK IDENTIFICATION Risk identification is an important step in the risk management process. It involves iden- tifying, categorizing, describing, consolidating and editing, and documenting all poten- tially significant risks and opportunities to the project’s base performance measures. No screening or excluding is done at this time because the significance of the various risks will be determined later, at which point those that are not significant will be identified as such and there will be a record of this determination. Similarly, no changes to the project to fix these problems are made (or assumed) at this time because this will also be done at a later step after the risks have been prioritized. Risk identification forms the basis for a project risk register, risk assessment, risk analysis (if needed), and risk management planning. Therefore, a qualified elicitor should facilitate identification (via brainstorming and then analysis) of a comprehensive and nonoverlapping set of risks from the project team and an appropriate group of project-independent subject-matter experts, efficiently achieving consensus among them, based on available information and expertise. A suitable risk checklist can then be used to ensure completeness.

46 GUIDE FOR THE PROCESS OF MANAGING RISK ON RAPID RENEWAL PROJECTS Example The hypothetical QDOT case study (see Appendix D) and associated risk management plan (RMP; see Appendix E), which are used throughout the guide to illustrate the various steps of the risk management process, was examined following the principles and process outlined in this chapter and documented in RMP Section 3, and is sum- marized below. The facilitated combined group of key project-team staff and independent subject- matter experts identified, categorized, and documented in the project risk register nearly 60 current risks and opportunities (relative to the base) with potential cost, schedule, and disruption impacts (see the table below for several examples). The risks and opportunities (hereafter collectively termed risks) spanned all remaining phases of the project and were categorized by the project phase in which they were most likely to occur (and after which they could be retired), for example, 4 planning risks, 7 scoping risks, 16 preliminary design or environmental process risks, 2 environmental permitting risks, 10 right-of-way or utility risks, 8 procurement risks, and 12 construction risks. At this point in the risk assessment, the group did not discuss the likelihood or severity for any of the risks. Initially, risks were simply brainstormed by the group and then categorized. Once the initial list of risks was categorized, the group added risks to complete each category, finally referring to the checklists (Appendix B), and then edited the risks to eliminate any overlap. Select Rapid Renewal Risks for QDOT US-555 and SH-111 Project Project Phase Risk ID Title of Risk or Opportunity No. Preliminary design or environmental process PD13 Change in environmental documentation Right-of-way, utilities, and railroad RU3 Unwilling sellers Procurement CP2 Uncertain design–build contracting market conditions at time of bid Construction CN3 Problems with planned accelerated bridge construction technique Source: Appendix E, RMP Section 3.