risk management

The Washington State Department of Transportation (WSDOT) is focused on practicing project management in a consistent, rigorous fashion. The benefits include more predictable budgets and potentially improving the reputation of transportation mega-projects.  Fresh from delivering the $850 million Tacoma Narrows suspension bridge one month early and 13% under budget, WSDOT is using risk management and cost estimating practices on a $3.1 billion highway program along Seattle’s scenic waterfront. 

 

The program’s official title is the Alaskan Way Viaduct and Seawall Replacement Program.

Washington has more than two miles of elevated highway, part of State Route 99, running the length of Seattle’s downtown waterfront. Built in the 1950’s, the structure was badly shaken by an earthquake in 2001.  Although it could still be used, the Department of Transportation deemed the structure unsafe, and plans to replace it were undertaken soon after the quake. Construction began in 2010 to replace the viaduct’s southern mile, near Seattle’s stadiums, with a new side-by-side roadway, but controversy has surrounded efforts to identify a replacement for the section through downtown. In January 2009, after pursuing multiple options, Washington’s Governor, Seattle’s Mayor, King County Executive and the Port of Seattle CEO agreed on a plan for tearing down the highway, boring a tunnel under the heart of the city, and improving surface street traffic flow.  Despite this coalition of government leaders and many other supporters, it is a plan that has many detractors. A new mayor, elected in 2009 after the plan was proposed, is a prominent opponent. He warns against the tunnel being “another Big Dig,” referring to Boston’s monumental transportation project that ran $10 billion more than its original $4 billion budget.

 

Paula Hammond, Washington State’s Secretary of Transportation is using risk management to chase the Big Dig cloud away. In a July 15, 2010, editorial in The Seattle Times, Secretary Hammond noted, “People are focused on the potential for cost overruns…and who would be responsible for them. But no one is talking about what the Washington State Department of Transportation is doing to manage the project’s risks and prevent overruns.” 

Project manager Linea Laird oversees the high-risk tunnel portion.  When asked if it could become Seattle’s Big Dig, she replies, “Not even close.” Two prominent reasons for her confidence are strict scope management and a robust risk management practice. 

A Rigorous Process

The foundation of Ms. Laird and Secretary Hammond’s budget confidence is WSDOT’s Cost Estimate Validation Process, or CEVP® for short. Developed in 2002, it is a risk management approach to developing cost estimates and then actively identifying and managing the risks that have traditionally led to big overruns. Ms. Laird is quick to point out that CEVP® is just one of many tools in their risk management process.

WSDOT’s risk process has all the standard artifacts and processes described in this chapter.  What is remarkable is the scale of the project and the application of these principles.

Expert advice. Tunnels are special and the underground tunneling industry has its own stars. WSDOT has assembled a team of industry heavy-weights that have experience on major tunnels around the world.  Not only are there a number of experienced tunneling experts working on the project, WSDOT also engaged a seven member advisory team to help set direction for the program.  This team includes legal, geology, project management, and major construction expertise.

Risk throughout the project. Washington’s governor and local officials recommended the bored tunnel option in January 2009.  In June 2009, the first CEVP event was convened to identify risks for the entire $3.1 billion program. Estimating continued over the summer and a second CEVP® was conducted in Fall 2009. Each event brought WSDOT and industry experts together. After these initial program CEVP’s, shorter, more focused Cost Risk Assessments (CRA’s) and Value Engineering (VE) efforts were repeated on specific components of the overall effort. All of these efforts have helped to identify and mitigate risk. Risk registers were developed and are reviewed on a monthly basis to evaluate, update, and continue to mitigate risk elements throughout the program.

Risk adjusted schedule and budget. The forward to WSDOT’s CEVP® guidelines points to the critical role that risk plays in establishing major project budgets: “An estimate is more accurately expressed, not as a single number, but as a range.”  For that reason, probability plays a role in setting the base cost of the project.  In addition to the base cost, the specific threats and opportunities each have a probability and impact assigned. All together, these make up a budget that gives Transportation Secretary Hammond the confidence she needs. 

The risk process helped the project team plan for many "known-unknowns" including tunnel fires, tsunami's, and broken tunneling machines.

This article was excerpted from The Fast Forward MBA in Project Management, 4th ed., 2011, Chapter Five, Risk Management.

Buy the book and read the full article for examples of risk identification, risk reduction, and risk results.

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