Risk management for 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, P H D, PE
Director of Enterprise Risk Management, Washington State Department of Transportation

Author Notes

OVIDIU CRETU, P H D, PE, is Cost Estimating and Modeling Unit Manager at the Washington State Department of Transportation. With more than forty years of experience, Cretu earned the Extra Mile Award with Washington State for his development and support of cost risk assessment with strategic thinking and innovation.

ROBERT B. STEWART, CVS-L IFE , FSAVE, PMP, is President at Value Management Strategies, Inc., where he has been practicing the management of value and risk for more than twenty years. During this time, he has led more than 300 value and risk studies for clients in both the private and public sectors on a wide range of products, services, and facilities--from simple product studies to multibillion-dollar transportation projects. He has authored several books on the management of value and risk.

TERRY L. BERENDS, PE, is an Assistant State Design Engineer at the Washington State Department of Transportation, where he is responsible for the statewide cost estimating, risk analysis, and value engineering programs. Berends is the cofounder of the self-modeling spreadsheet and the implementation of the risk reserve budgeting process.

Preface	p. xi
Acknowledgments	p. xix
Chapter 1 Why And What Is Risk Management?	p. 1
Introduction	p. 1
What Is an Estimate?	p. 3
What Is Uncertainty?	p. 4
What Is Risk?	p. 4
What Is Risk Management?	p. 4
Why Risk Management?	p. 5
The Limitations of Risk Management	p. 6
Objective of This Book	p. 8
Chapter 2 Project Cost And Schedule Estimates	p. 11
Introduction	p. 11
Cost Estimating Methodology	p. 14
Cost Estimating Process	p. 14
Cost Estimating Data	p. 18
Cost Estimating and Project Development Level	p. 18
Estimate Documentation	p. 24
Basis of Estimate	p. 24
Conclusion	p. 25
Chapter 3 The Risk-Based Estimate	p. 27
RBE-The Process	p. 27
Risk-Based Estimate-How It Works	p. 42
Base Cost and Schedule	p. 43
Risks as Events	p. 63
The Micro-Project	p. 87
Eastside Corridor Program	p. 90
RBE and Estimate Accuracy	p. 100
Conclusions	p. 105
Chapter 4 Risk Elicitation	p. 109
Importance of Elicitation for Project Risk Management	p. 109
Elicitation and Biases	p. 111
Risk and Base Variability	p. 121
Risk Conditionality	p. 124
Summary	p. 146
Chapter 5 Risk Management	p. 149
Introduction	p. 149
Risk Response Planning	p. 153
Value Engineering and Risk Management	p. 157
Risk Monitoring and Control	p. 164
Summary	p. 168
Chapter 6 Risk-Based Estimate Self-Modeling Spreadsheet	p. 169
Overview	p. 169
Model Accuracy	p. 172
RBES-Cost and Schedule Data Input and Output	p. 174
Risk Conditionality and RBES	p. 183
Model Outputs	p. 198
Risk Management	p. 200
Critical Issues	p. 207
Tutorials/Case Studies	p. 208
Summary	p. 229
Chapter 7 Risk-Based Estimate Workshop	p. 231
Introduction	p. 231
Preworkshop Activities	p. 234
Conditioning Workshop Par ticipants	p. 236
Workshop Objectives	p. 237
Risk Identification Process	p. 237
Postworkshop Activities	p. 244
Everyone Has Duties	p. 245
Helpful Hints	p. 249
Sample Questions to Ask	p. 249
Index	p. 253

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Table of Contents