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    BLDG3012 - Week 1 PDF

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    Qingyang Pan
    This document provides an introduction to a university course on construction commercial risk, health and safety. It outlines the course learning outcomes which include explaining risks and uncertainties, developing risk assessment tools, and presenting a risk management plan. The weekly course schedule is presented, covering topics like risk management processes, contingency determination, and risk treatment. Project risk management is positioned as important for controlling schedule delays and cost overruns. Key causes of project failure are listed as unclear requirements, lack of resources, unrealistic schedules, and unmanaged risks. The document distinguishes between objective and subjective uncertainty and different types of risks like inherent and contingent risks. Activities are included to help students practice risk assessment.

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    BLDG3012 - Week 1 PDF

    Uploaded by

    Qingyang Pan
    132 views32 pages
    This document provides an introduction to a university course on construction commercial risk, health and safety. It outlines the course learning outcomes which include explaining risks and uncertainties, developing risk assessment tools, and presenting a risk management plan. The weekly course schedule is presented, covering topics like risk management processes, contingency determination, and risk treatment. Project risk management is positioned as important for controlling schedule delays and cost overruns. Key causes of project failure are listed as unclear requirements, lack of resources, unrealistic schedules, and unmanaged risks. The document distinguishes between objective and subjective uncertainty and different types of risks like inherent and contingent risks. Activities are included to help students practice risk assessment.

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    This document provides an introduction to a university course on construction commercial risk, health and safety. It outlines the course learning outcomes which include explaining risks and uncertainties, developing risk assessment tools, and presenting a risk management plan. The weekly course schedule is presented, covering topics like risk management processes, contingency determination, and risk treatment. Project risk management is positioned as important for controlling schedule delays and cost overruns. Key causes of project failure are listed as unclear requirements, lack of resources, unrealistic schedules, and unmanaged risks. The document distinguishes between objective and subjective uncertainty and different types of risks like inherent and contingent risks. Activities are included to help students practice risk assessment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    132 views32 pages

    BLDG3012 - Week 1 PDF

    Uploaded by

    Qingyang Pan
    This document provides an introduction to a university course on construction commercial risk, health and safety. It outlines the course learning outcomes which include explaining risks and uncertainties, developing risk assessment tools, and presenting a risk management plan. The weekly course schedule is presented, covering topics like risk management processes, contingency determination, and risk treatment. Project risk management is positioned as important for controlling schedule delays and cost overruns. Key causes of project failure are listed as unclear requirements, lack of resources, unrealistic schedules, and unmanaged risks. The document distinguishes between objective and subjective uncertainty and different types of risks like inherent and contingent risks. Activities are included to help students practice risk assessment.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 32
    At a glance
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    The key takeaways are that risk management is an important part of project management to avoid cost overruns and schedule delays. Unmanaged risks can lead to projects going over budget and being delayed.

    The weekly course schedule covers topics such as risk management process, contingency determination, risk assessment techniques, risk treatment and risk-based decision making over a period of 10 weeks.

    Some of the top causes of project failure mentioned are unclear or changing requirements, lack of resources, resource conflicts and turnover of key resources.

    Built Environment

    BLDG3012 - Construction Commercial Risk,


    Health and Safety
    Welcome

    Week 1
    Introduction

    The views expressed in this presentation are


    those of Pedram Danesh-Mand and do not
    reflect or represent the official policy, position
    or recommendation of the KPMG Australia,
    Pedram Danesh-Mand Engineers Australia (EA) or Risk Engineering
    Society (RES). Any written or verbal
    Director, KPMG recommendation has a general nature and
    should not be used for any decision making
    [email protected]
    without further assessment for specific
    [email protected] project and organisation requirements.
    Course Learning Outcomes
    At the successful completion of this course, you will be able to:

    • Explain risks and uncertainties in relation to stakeholders’ objectives within the process
    of risk management.
    • Develop and apply tools to assess risks and contingencies for construction projects.
    • Analyse and evaluate risks and contingencies applicable in commercial construction
    projects.
    • Explain risk and contingency plan development and implementation.
    • Present a project Risk Management Plan.
    Weekly Course Schedule
    Construction Commercial Risk, Health and Safety

    • Week 1: Introduction to Project Risk Management (Assignment 1)


    • Week 2: Risk Management Process (ISO 31000)
    • Week 3: Contingency Determination
    • Week 4: Contingency Management (RES Contingency Guideline) (Assignment 1)
    • Week 5: Risk Management Plan (RMP) (Assignment 2)
    • Week 6: Risk Assessment Techniques (ISO 31010)
    • Week 7: Risk Assessment Techniques (ISO 31010)
    • Week 8: Risk Treatment
    • Week 9: Risk-based Decision Making (RBDM)
    • Week 10: Assignment 2 Presentations (Assignment 2)
    Week 1 – Agenda
    • Course Introduction
    • Project risk management as part of project management
    • Introduction to Risk Management
    • What may happen if projects risks are not appropriately managed?
    • Risk management approaches and methodologies
    • Assignment 1 hand out and introductions / Q&A
    Our Actual Performance
    Engineering Projects Oil and Gas Projects
    42% behind schedule 81% behind schedule

    Ref: CIOB, 2007


    Our Actual Performance
    High-rise Building Projects Power Generation Projects
    67% behind schedule 66% behind schedule

    Ref: CIOB, 2007


    We are fine in Australia?!
    • Cost overrun in our transport infrastructure projects since 2001 is about $28B – about a
    quarter of the projects’ total value!!
    • 2 out of 7 recommendations:
    Improve your risk and contingency management

    Ref: The Grattan Institute, 2016


    Top Causes of Project Failure
    • Requirements: Unclear, lack of agreement, lack of priority, contradictory, ambiguous,
    imprecise
    • Resources: Lack of resources, resource conflicts, turnover of key resources, poor
    planning
    • Schedules: Too tight, unrealistic, overly optimistic
    • Planning: Based on insufficient data, missing items, insufficient details, poor estimate
    • Risks & Opportunities: Unidentified or assumed, not managed

    Ref: Strategies for Project Recovery, A PM Solutions Research Report, pmsolutions survey, 2011
    Risk or Uncertainty?
    Risk Definition
    Effect of uncertainty on objectives, ISO 31000
    An effect is a deviation from the expected – positive or negative
    Risk vs. Issue
    • RISK might happen, so it’s a function of consequence and likelihood
    • ISSUE has already happened, so it’s only consequence/s.
    Types of Uncertainty
    • Objective Uncertainty
    • Subjective Uncertainty
    Objective Uncertainty
    • Objective Uncertainty associated with cost and schedule model parameters is a
    measure of source data variability. If the cost estimating or its input(s) are derived from
    statistical analysis of relevant historical data, the uncertainty associated with the cost
    estimate or schedule can often be characterized “objective”, meaning derived using a
    repeatable, proven process.

    • Two objective methods for estimating uncertainty:


    – Developing parametric equations through regression analysis
    – Fitting distributions to normalized historical data or estimate
    Objective Uncertainty – example
    Rain Data

    Figure 1: Average Rainfall Annual 1961 – Figure 2: Average Number of Rain Day
    1990 Bureau of Meteorology exceeding 5 mm Bureau of Meteorology
    Subjective Uncertainty
    • In the context of cost and schedule estimating, many decisions that heavily influence the
    risk analysis will be subjective in nature, meaning they are based more on “subject
    matter expert (SME) opinion” than rigorous statistical analysis. Uncertainty is
    characterized as “subjective” when there is a lack of actual data and information to
    characterize it objectively.
    Project Overruns & Uncertainty
    • Key factors contributing to project cost overrun and/or schedule delays:
    – Hard Factors
    » Scope Variations
    » Technical

    • Soft Factors
    – Cognitive Biases
    – Strategic Misrepresentation
    – Organisational Culture

    Ref: Contingency Guideline, 2nd Edition, Risk Engineering Society (RES)


    Group Activity 1
    Prepare a lump sum price for digging an underground hole.
    • 10m x 10m x 5m – Concept Design
    • No geotechnical data, assume 80% soil, 20% rock
    • Productivity rate in soil: 20m3/d
    • Productivity rate in rock: 10m3/d 10m
    • Excavator: $2000/d 10m
    • Labor: $500/d
    • Overhead including profit: $200/d
    5m
    Q&A and Break
    Inherent & Contingent Risks
    • Project cost drivers may be grouped into:
    – uncertainty (i.e. inherent risk or planned risk) around time-independent costs;
    – uncertainty (i.e. inherent risk or planned risk) around time-dependent costs;
    – risk event (i.e. contingent risk or un-planned risk) with cost impacts; and
    – risk event (i.e. contingent risk or un-planned risk) with time impacts that drive costs.
    Inherent Risks
    • Inherent Risks represent:
    – uncertainty in the scope of work and its quantities or unit rates for the items in the
    Base Estimate

    • Likelihood of occurrence: 100%

    • Examples:
    – Quantity: volume of earthworks
    – Productivity rate: rate of excavation
    Inherent Risks

    When project Base Estimate is


    being estimated, the costs are
    an uncertain quantity and the
    Base Estimate is not the only
    possible estimate.

    “most likely” (mode), “50th


    percentile” (median), or
    “expected value” (mean).
    When the number of cost
    items increases, the
    distribution of the total cost of
    the cost items approximates
    the normal distribution. This is
    known mathematically as the
    Central Limit Theorem
    (CLT).

    The theorem states that the


    average of the sum of a large
    number of independent,
    random variables with finite
    means and variances
    converges to a normal
    Central Limit Theorem (CLT) random variable.
    3-Point Estimate

    Ref: Contingency Guideline, RES, 2019


    Contingent Risks
    • Contingent Risks represent:
    – unmeasured items outside the Base Estimate (usually related to the estimation of the
    contingency allowance)

    • Likelihood of occurrence: usually < 100%

    • Examples:
    – Extreme wet weather
    – Industrial issues
    Group Activity 1 – let’s discuss again!
    Prepare a lump sum price for digging an underground hole.
    • 10m x 10m x 5m – Concept Design
    • No geotechnical data, assume 80% soil, 20% rock
    • Productivity rate in soil: 20m3/d
    • Productivity rate in rock: 10m3/d 10m
    • Excavator: $2000/d 10m
    • Labor: $500/d
    • Overhead including profit: $200/d
    5m
    Base Estimate & Base Schedule
    • Validation of
    – Quantities (most likely)
    – Productivity Rates (most likely)
    – Durations (most likely)
    – Resource Cost Rates (most likely)

    • Constraints (Contractual or Management)


    • Logic network and Work Statements, and
    • Reasonable Critical Path
    Group Activity
    • As a head contractor, W2F, is preparing its response submission for a lump sum
    building tender. All packages will be delivered by using external sub-contractors. In
    addition to obtaining a number of market quotes, W2F is also using its own internal
    benchmark data from previous similar projects.

    • As part of the estimate development, you should help W2F to assess and quantify the
    inherent and contingent risks as per table below.
    Assignment 1, due Wk4, 25%
    • Refer to Course Outline
    Additional Readings
    • ISO 31000:2018
    • ISO 31010:2019
    • Project Management Institute (PMI) Risk Management Standard
    • Risk Engineering Society (RES) Contingency Guideline, 2nd Edition, 2019
    • AACEi, Recommended Practices
    • Cognitive and Motivational Biases in Decision and Risk Analysis, Gilberto Montibeller
    and Detlof von Winterfeldt, Risk Analysis, Vol. 35, No 7, 2015
    • Edwards, P J and Bowen, P A (2005) Risk management in project organisations, UNSW
    • Uher, T and Loosemore, M (2004) Essentials of project management, UNSW Press.
    • Boothroyd, C and Emmett, J (1996) Risk management – a practical guide for
    construction professionals, Witherby and Co, London.
    • Wideman, R M (ed) (1992) Project and program risk management, PMI, London.
    • ICE (2000) Risk analysis and management for projects, ICE, London.
    • Edwards, L (1995) Practical risk management in the construction industry, Thomas
    Telford, London
    Q&A & Conclusion

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