A presentation introducing risk based estimating that Mustafa developed and facilitated

1. Risk Based Estimating
Process Orientation
Introduction to Risk Based
Estimating at WSDOT
Mustafa Mohamedali
October 18, 2007

2. Risk Based Estimating Orientation
 This presentation comprises
 An introduction to WSDOT’s cost risk assessment process
 Why WSDOT embarked on this effort
 Where it fits in WSDOT’s overall project management
process
 How it works and what is the output
 What value it adds for project team and stakeholders
 Workshop preparation, roles and responsibilities
Mustafa Mohamedali - WSDOT/SAEO 2/38

3. Why are we doing this?
 Projects seldom materialize exactly as planned
 Risk mitigation: Project teams can act to prevent
“bad” outcomes and take advantage of
“opportunities”
 The process enhances project value only if action
is taken to manage the risks.
Mustafa Mohamedali - WSDOT/SAEO 3/38

4. Risk: Probability vs. Impact
Hi Probability Hi Probability
PROBABILITY
Low Impact Hi Impact
Low Low
Probability Probability
Low Impact Hi Impact
IMPACT
Mustafa Mohamedali - WSDOT/SAEO 4/38

5. When a project is conceived… what
do people want to know?
N? 1. What are we getting?
CO
2. How long will it take?
T IO
ST
RA
3. How much will it
?
DU
cost?
WHAT ?
Mustafa Mohamedali - WSDOT/SAEO 5/38

6. PM Fundamentals: Triple Constraints
Theory
LE
Risk
BU
Event!
DU
DG
HE
ET
SC
SCOPE
Mustafa Mohamedali - WSDOT/SAEO 6/38

7. PM Fundamentals: Triple Constraints
Theory
 When one side changes, the other two are
inevitably affected
E
BU
UL
DG
ED
ET
H
SC
SCOPE
Mustafa Mohamedali - WSDOT/SAEO 7/38

8. PM Fundamentals: Triple Constraints
Theory
 When one side changes, the other two are
inevitably affected
E
BU
UL
DG
ED
ET
H
SC
SCOPE
Risk
Event!
Mustafa Mohamedali - WSDOT/SAEO 8/38

9. PM Fundamentals: Triple Constraints
Theory
LE
BU
DU
DG
HE
ET
SC
SCOPE
Mustafa Mohamedali - WSDOT/SAEO 9/38

10. Confidence vs. Project maturity
Traditional
Engineers’
estimate as
project matures
Cost or Sched Est as % of Final
Unrecognized
cost Final cost at
(unknown completion
unknowns)
Known but not
quantified cost
(known Estimate with
unknowns) Contingency
(traditional)
Conservative
Known and estimate with
quantified cost some allowance
known knowns
Concept > Scoping > Design/PS&E > Ad > Construction > Open to Traffic
Project Maturity
Mustafa Mohamedali - WSDOT/SAEO 10/38

11. Estimating:
Traditional v/s Risk Based
Construction Geotech
Fixed Contingency % 25% 20%
Env/Cult.
40%
Project Project
Deterministic Base Cost ROW
30%
Estimate
10%
Unknown
Mustafa Mohamedali - WSDOT/SAEO 11/38

12. The end result of our work
 A one-pager for “mega projects”
Adobe Acrobat 7.0
Range of probable cost Document

 Range of possible schedule
 Ranked risk register
 Risk management plan spreadsheet
 Detailed report including possible risk mitigation
strategies
Mustafa Mohamedali - WSDOT/SAEO 12/38

13. Treating alternatives, phases &
multiple project portfolios
 Single scenario
 Multiple scenarios
 Portfolio analyses
Mustafa Mohamedali - WSDOT/SAEO 13/38

14. Evaluating Uncertainty…
 Base Case Scenario (If everything goes according to plan…)
 Critical Path = S > A > C > E
Activity B
 Total Duration = 16 mths
3 mths - $ 5m
 Total Cost = $40 m
Activity A Activity C
10 mths - $ 12m 6 mths - $ 8m
Start End
Activity D
8 mths - $ 15m
Mustafa Mohamedali - WSDOT/SAEO 14/38

15. Evaluating Uncertainty…
 Risk Realization #1: 20
%
 New Critical Path = S > A > B > E
Activity B
 Duration = 18 mths
8 mths - $ 6m
 Cost = $46 m
Activity A Activity C
10 mths - $ 12m 6 mths - $ 8m
Start End
30
%
Activity D
12 mths - $ 20m
Mustafa Mohamedali - WSDOT/SAEO 15/38

16. Evaluating Uncertainty…
 Risk Realization #2:
 New Critical Path = S > C > E
Activity B
 Duration = 20 mths
3 mths - $ 5m
 Cost = $47 m
5%
Activity A
10 mths - $ 12m Activity C
4 mths - $ 5m
Start End
10
%
Activity D
20 mths - $ 25m
Mustafa Mohamedali - WSDOT/SAEO 16/38

17. Evaluating Uncertainty…
 Assessing uncertainties in cost & schedule for each
activity:
 Project team
 Independent SMEs
P%
$
Activity X Activity Y Activity Z
Mustafa Mohamedali - WSDOT/SAEO 17/38

18. Evaluating Uncertainty
 Aggregating cost and schedule risks
for the whole project
Activity B
Activity A Activity C
Start End
Activity D
$
}
Proj Aggr
Mustafa Mohamedali - WSDOT/SAEO 18/38

19. Sample Project Flowchart
Costs to Date
0
Remaining
Water Line 12B
Utility Relocation
Agreements 12B
Materials ROW Plan 10
Investigation and Approval Initial F – 2 mo.
1 3 Ad / Bid /
Water Line
Award Slope Cut+
Relocation
ROW 11 Rock Cut
12A
F – 4 mo. Acquisition 15
Design 9
Complete Approval
Design Phase 12B
6 F – 2 mo.
5
Other
PSE Improvements
NEPA/SEPA 8 16
2 Other
Utility Complete
Relocation 17
F – 5 mo. Bridge
13
Permitting And Related
7 Water
Wetland Mit. Line CN
Site Approval 14
4
Notes:
• Assumes single design/bid/build contract.
• SEPA is DNS. NEPA is DCE.
• Significant portion of water-line relocation will be under WSDOT contract.
•
Mustafa Mohamedali - WSDOT/SAEO the Award date slips past xxxx, construction will not start until xxxx of the following year.
If 19/38
• Fish window for Activity 14: In-water work is prohibited between July 1 and October 15.

20. Risk Elicitation
 Sample of table developed during risk elicitation
Mustafa Mohamedali - WSDOT/SAEO 20/38

21. Model Output
 Probability Distributions for Total Project Cost and Schedule
Milestones
Mustafa Mohamedali - WSDOT/SAEO 21/38

22. Model Output
 Sample of output from model run: COST
 Current Year Year of Expenditure
0.3 0.25
0.25 0.2
0.2
0.15
Probability
Probability
0.15
0.1
0.1
0.05
0.05
0 0
185
125
135
145
155
165
175
195
175
115
125
135
145
155
165
Total Project Cost (2006 $M) Total Project Cost (YOE $M)
Mustafa Mohamedali - WSDOT/SAEO 22/38

23. Model Output
 Sample of output from model run: SCHEDULE
0.4
0.35
0.3
0.25
Probability
0.2
0.15
0.1
0.05
0
Jul 2014
Jul 2012
Jul 2013
Jan 2012
Jan 2013
Jan 2014
Apr 2012
Apr 2013
Apr 2014
Oct 2012
Oct 2013
Project Completion Date
Mustafa Mohamedali - WSDOT/SAEO 23/38

24. Model Output
 Ranked risk register
Mustafa Mohamedali - WSDOT/SAEO 24/38

25. The Workshop Process
 Process flow chart Start
Internal Workshop
i Orientation Request
Microsoft Word
Document
Prep Session Workshop Reporting
CRA/CEVP Orientation
i CRA/CEVP
i Preliminary Results
Introduction
Draft Report
Project Brief & Issues Project Brief & Issues
of Concern of Concern in Detail
Workshop Report
3 > 6 months
Draft Review & Finalize
Design/Construction Design/ Construction Mitigated Updated
Activity Flow Chart Activity Flow Chart and
Scenarios with Base
Durations
End
Estimate Format
Evaluate Uncertainty
Validate Base Cost in Cost & Schedule
Workshop Participation
Risk-Management
Microsoft Excel Review Risk Register
Mustafa Mohamedali Worksheet
- WSDOT/SAEO Strategies 25/38

26. Cost/Risk Leads & Independent
SME Responsibilities
 Independent expert judgment & validation
 Support the project team develop a base cost estimate
 Flowchart of activities for the project
 Elicitation and guidance on cost and risk uncertainties
 Run models on scenarios; provide results and reports in
timely fashion
 Ranked risk register for cost and schedule
Mustafa Mohamedali - WSDOT/SAEO 26/38

27. Facilitator Responsibilities
 Review workshop needs with project teams.
 Review SME workshop participation and initiate invites.
 Align consultants for the workshop as required.
 Manage consultant task order and invoice process.
 Develop action items and agreements after each session.
 Coordinate inputs and track progress for reporting of
results.
 Obtain feedback and implement process improvement.
Mustafa Mohamedali - WSDOT/SAEO 27/38

28. Project Team Responsibilities
 Project Information
 Project location maps, overheads, etc.
 Project cost estimate & backup
 Design & construction schedule or flow chart (high
level)
 Logistics
 Venue
 Refreshments
 Workshop support
 Participant invitation & coordination
Mustafa Mohamedali - WSDOT/SAEO 28/38

29. How does your team estimate cost
and schedule…
?
Mustafa Mohamedali - WSDOT/SAEO 29/38