The essential risk assessment guide for civil engineering, design, and construction Risk management allows construction professionals to identify the risks inherent in all projects, and to provide the tools for evaluating the probabilities and impacts to minimize the risk potential. This book introduces risk as a central pillar of project management and shows how a project manager can be prepared for dealing with uncertainty. Written by experts in the field, Risk Management for Design and Construction uses clear, straightforward terminology to demystify the concepts of project uncertainty and risk. Highlights include: Integrated cost and schedule risk analysis An introduction to a ready-to-use system of analyzing a project's risks and tools to proactively manage risks A methodology that was developed and used by the Washington State Department of Transportation Case studies and examples on the proper application of principles Information about combining value analysis with risk analysis This book is a must for professionals who are seeking to move towards a proactive risk-centric management style. It is a valuable resource for students who are discovering the intricacies of uncertainties and risks within value estimation. For professionals, the book advocates for identifying and analyzing 'only' risks whose impact are of consequence to a project's performance. JOHN MILTON, PHD, PE Director of Enterprise Risk Management, Washington State Department of Transportation
PREFACE xi ACKNOWLEDGMENTS xix CHAPTER 1: WHY AND WHAT IS RISK MANAGEMENT? 1 Introduction 1 What Is an Estimate? 3 What Is Uncertainty? 4 What Is Risk? 4 What Is Risk Management? 4 Why Risk Management? 5 The Limitations of Risk Management 6 Objective of This Book 8 CHAPTER 2: PROJECT COST AND SCHEDULE ESTIMATES 11 Introduction 11 Cost Estimating Methodology 14 Cost Estimating Process 14 Cost Estimating Data 18 Cost Estimating and Project Development Level 18 Estimate Documentation 24 Basis of Estimate 24 Conclusion 25 CHAPTER 3: THE RISK-BASED ESTIMATE 27 RBE The Process 27 Risk-Based Estimate How It Works 42 Base Cost and Schedule 43 Risks as Events 63 The Micro-Project 87 Eastside Corridor Program 90 RBE and Estimate Accuracy 100 Conclusions 105 CHAPTER 4: RISK ELICITATION 109 Importance of Elicitation for Project Risk Management 109 Elicitation and Biases 111 Risk and Base Variability 121 Risk Conditionality 124 Summary 146 CHAPTER 5: RISK MANAGEMENT 149 Introduction 149 Risk Response Planning 153 Value Engineering and Risk Management 157 Risk Monitoring and Control 164 Summary 168 CHAPTER 6: RISK-BASED ESTIMATE SELF-MODELING SPREADSHEET 169 Overview 169 Model Accuracy 172 RBES Cost and Schedule Data Input and Output 174 Risk Conditionality and RBES 183 Model Outputs 198 Risk Management 200 Critical Issues 207 Tutorials/Case Studies 208 Summary 229 CHAPTER 7: RISK-BASED ESTIMATE WORKSHOP 231 Introduction 231 Preworkshop Activities 234 Conditioning Workshop Par ticipants 236 Workshop Objectives 237 Risk Identification Process 237 Postworkshop Activities 244 Everyone Has Duties 245 Helpful Hints 249 Sample Questions to Ask 249 INDEX 253
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