Systemic + Project Specific Hybrid Risk Analysis Services
Parametric + Expected Value (P+EV) Hybrid Risk Analysis
For quantification of risk in smaller projects and those at an earlier stage of development (such as Concept or Pre-Feasibility) RIMPL offers the hybrid Parametric + Expected Value methodology developed by John K Hollmann of Validation Estimating LLC (represented in Australia and New Zealand by RIMPL). Described in our Knowledge Base and in great detail in John K Hollmann's book Project Risk Quantification, this methodology does not require a schedule, just:
- Base Estimate Cost
- Base Schedule Duration, together with
- Project Risk Register for the project execution phase.
- Also highly desirable inputs are the Basis of Estimate and Base of Schedule where they have been developed.
The methodology combines the assessment of systemic risk (usually the major source of uncertainty in a project) with the quantification of risk due to major project-specific risk events in the Project Risk Register. Systemic risk is quantified by shaping a parametric model of project cost and schedule risk according to workshop responses to multiple choice questions relating to the known drivers of project uncertainty. These include:
- Scope definition
- Project delivery organisation leadership and team quality
- Project Controls quality
- Project technology and complexity
A separate Workshop session is held to identify and quantify major project specific risk events (usually contained in the Project Risk Register) that drive cost and schedule uncertainty. This session excludes systemic risk events (risks of a general nature relating to how well the project is being delivered rather than focusing on risks specific to the project) as well as low probabilistic impact risks as both categories of risk are already covered by the quantification of systemic risk.
As part of the Expected Value workshop, the cost per unit time "burn rates" for time-dependent costs are estimated for the Owner's Team and for the major contracts, so that cost consequences for delay risk impacts can be estimated, assuming the schedule delay impacts of risk events to the completion of the execution phase can be quantified (after allowing for assumed proximity to the project critical path).
Both these workshop sessions are held on a single day
The systemic risk probability distributions for cost and time generated from the parametric modelling are subsequently combined with the three-point estimates of cost and schedule impacts for each major risk event in a Monte Carlo Simulation (MCS) modelling of Expected Value cost and schedule distributions. The tool generates overall forecasts of time and cost contingency for the execution phase of the project, together with probability distributions (based on log-normal distributions). The P10, P50 and P90 contingency values are thus generated simultaneously for schedule and cost.
The complete process, from receipt of inputs to delivery of draft report can be completed in less than 2 weeks.
Where a project is at Feasibility Study (FS) stage or where a good quality schedule is available at PFS stage, a P+EV assessment of contingency can be combined with a parallel Schedule Risk Analysis (SRA), providing an opportunity to optimise schedule risk or determine the schedule risk in sub-elements of the project and validate the overall schedule contingency produced from the P+EV methodology.
Parametric + Integrated Cost & Schedule Risk Analysis (P+IRA) Hybrid Risk Analysis
For larger projects, those at the Feasibility Study phase of development, or large projects during execution, RIMPL has developed a hybrid methodology that combines reference to past project performance using Parametric modelling with the full analysis capabilities of Integrated Cost & Schedule Risk Analysis (P+IRA).
This combines the advantages of the top-down parametric modelling of systemic risk with the opportunity to quantify and optimise schedule risk and therefore time-dependent costs.
Use of the methodology requires the following inputs:
- Project Base Schedule & Basis of Schedule document
- Project Base Estimate & Basis of Estimate document
- Project Risk Register
- Sufficient project information to describe the project and how it is intended to be executed, such as the Project Charter or Project Execution Plan
Usually the most preparation effort goes into ensuring that the schedule quality is technically acceptable and covers the full scope.
Also requiring significant effort is the preparation for schedule and cost risk workshops where risk factors and/or ranges are systematically assigned to sections of the schedule and the cost estimate.
Also requiring significant effort is the preparation of the risk register for assessment of major project specific risk events in the EV assessment session.
Workshops are held as follows:
- Schedule Risk Assessment (as per IRA methodology)
- Cost Risk Assessment (as per IRA methodology)
- Parametric modelling (as per P+EV methodology)
- Major Project Specific risk assessment (as per P+EV methodology)
Analysis then proceeds as shown in the flow diagram below
Flow diagram for P+IRA Hybrid Methodology
Typically, the complete process may take three weeks from initial receipt of inputs to submission of draft report. The duration may change depending on the number of iterations of modification of the inputs.