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U.S. Department of Transportation U.S. Department of Transportation Icon United States Department of Transportation United States Department of Transportation

Early Risk Management Planning

Title: Risk Assessment for Transit Projects
Phase(s): Final Design
Category: Management
Date: April 22, 2009

1. Background

The Regional Transportation District’s (RTD) West Corridor (WC) Project (WCP) is a 12.1 mile light rail transit (LRT) system that runs from the existing Central Platte Valley line in downtown Denver to the Jefferson County Government Center end-of-line station in Golden, Colorado.  For much of the proposed alignment, the WCP is being built on an abandoned freight railroad Right-of-Way (ROW) owned by RTD. Most of the route will be at-grade but there will be several significant rail/highway grade separations.

There will be 12 stations along the WC; of these, six will have parking facilities. The WCP will be implemented using the Construction Manager/General Contractor (CM/GC) project approach. A Value Engineering (VE) process was complete in December 2006.

The Project Management Oversight Consultant (PMOC), in conjunction with its consultants and the Federal Transit Administration Region (FTA) VIII, held Risk Assessment (RA) meetings/reviews in July 2008 and October 2007.The Full Funding Grant Agreement (FFGA) was signed on January 16, 2009. The estimated WCP cost (as of July 22, 2008) is $709,830,000.00 in Year of Expenditure (YOE) dollars

2. The Lesson

When the grantee embraces the RA process early and uses the RA Meetings/workshops sessions to define risk area, risk levels, cost, mitigation approaches and then develops a Management and Risk Management Plan, the Grantee is able to identify and mitigate risk early and cost-effectively. This essential step helps ensure that the Capital Project will meet the Grantee’s goal at an acceptable cost and level of risk.

The WCP entered Preliminary Engineering (PE) at a time when commodity and labor costs were relatively low, but beginning to trend significantly and unexpectedly upward. In addition, property costs were escalating, although at rates well below national averages. To manage and mitigate these cost increases, risk and ensure the best possible design going forward, RTD took a number of steps including:

  • A week-long VE workshop that identified approximately $113 million in potential cost savings.
  • Using Letters of No Prejudice (LONP) to fund early construction and acquisition of selected commodities and materials such as rails and ties. This also enabled RTD to mitigate cost increases in structural steel for pre-fabricated bridges.
  • Exercising options from another contract to purchase almost all the light rail vehicles (LRV) needed for the WC at a pre-negotiated substantially lower price than would have been the case for a new procurement.

Value Engineering provided significant cost savings and established the basis and support for dealing with potentially contentious issues such as “single-tracking” (5.8 miles) from the Denver Federal Center to the Jefferson County Government Center end-of-line station.

RA meetings/workshops were valuable for bringing RTD, with its local perspective on potential issues and needed contingency, together with the PMOC and its consultants with their wide-ranging experience with transit projects across the nation. The sessions were essential to defining risk areas, risk levels, and mitigation approaches and establishing agreed upon costs for allocated and unallocated contingency.  The RA workshops proved invaluable for defining and reconciling key areas and levels of risk and reaching understandings on the levels and allocations of contingencies.

Overall, the results of the RA workshops (and related discussions and meetings) provided a good basis for the PMOC’s recommendations to the FTA on the status of the WCP and the readiness of RTD to submit its FFGA application. In addition, the Contingency Management and Risk Management Plans produced by RTD following the RA, has enabled RTD to effectively track, manage, and react to issues that may have adverse impacts on the use of contingency by using the contingency drawdown curve and other metrics. These plans were the tools that supported RTD’s lower contingency figure versus the higher contingency recommended by the PMOC for its FFGA application.

Implementing the PMOC RA workshops provided a number of key benefits:

  • By applying the new RA Program Guidance (PG documents (PG-32, PG-33, and PG-34) the scope, cost, and schedule of Major Capital Projects were thoroughly reviewed and evaluated.
  • Using PG-40 and PG-35, a contingency draw-down curve as well as a float draw-down curve were developed and established a "baseline" for subsequent and ongoing PMOC monitoring activities.
  • The “Findings” made during the RA workshops were provided as recommendations to the Grantee to enable improvement and refinement during project development.
  • Provided an unbiased reinforcement to the Grantee of the importance of “thinking through” the project from the risk/ uncertainty perspective.

Subsequent to the FFGA, construction has continued and encountered some problems. Right-of-Way acquisition has proven to be more difficult than expected; with the result that the CM/GC has had to develop “work-arounds” to stay on schedule and utility relocations were not progressed as quickly as planned. To mitigate these potential delays/risks, RTD and the CM/GC are holding regular meetings with the utility companies and the meetings have been very effective. These items and other (25 items) identified risks are being tracked in RTD’s Risk Management – Risk Register, which tracks, Probability, Cost, Time, Score and Discipline leader. The Risk Register has helped WC Risk Management Team develop procedures to identify, analyze, implement mitigation, and manage risk.

3. Applicability

The RA workshops with the prospective Grantee, the FTA, the PMOC, and the PMOC’s consultants is an essential step to ensure the Major Capital Project will meet the Grantee’s goals at an acceptable cost and level of risk. The PMOC and its consultants bring a diverse range of experiences from projects across the country and can therefore assist the potential Grantee to fully explore potential risk areas and mitigation approaches. In addition, the experiences of the outside specialists can help the potential Grantee:

  • Make informed decisions about allocating contingency
  • Assess and reevaluate costs
  • Identify and mitigate risks as early and cost-effectively as possible

4. References

  • Quarterly Progress Review Meetings reports
  • WCP monthly reports
  • RTD monthly and progress reports
  • PMOC RA Spot Report
Last updated: Sunday, January 31, 2016