Risk Analysis and Management Model for the Whole Project Life Cycle RisksBy Ahmed Nadeem

Presented to Prof. Moheeb El.Saied

Introduction• What is Project Risk?

An uncertain event or condition if occurs, has a positive or a negativeeffect on at least one project objectives, such as time, cost, scope orquality.

Typically, we get more concerned about threats than opportunitiesbecause they are what may prevent project managers from achievingtheir goals.

• What is Risk Management?

Preparation, identification, analysis, response and management tomanage potential risks in the construction project.

Successful Project Objective• Achieving project scope.

• Completing project on time.

• Finishing project within budget.

• Ensuring technical requirements.

So, construction managers need to be equipped with and efficient decision-support tools in order to decide which project alternative should they go withand which major action should be taken upon the occurrence of any of theexpected or unexpected risks.

Risk Analysis Techniques for Construction Management

Risk Analysis Technique Schedule

Risks

Budget Risks

(Cost)

Technical Risks

(Quality)

SRS: Schedule Risk System (Mulholland and

Christian 1999) Yes No No

JRAP: Judgmental Risk Analysis Process

(Oztasand Okmen 2005) Yes No No

PERT: Program Evaluation and Review Technique

(Malcom et al. 1959; Kerzner 2003)Yes No No

ERA: Estimating using Risk Analysis (Mak and

Picken 2000) No Yes No

Utility-Functions in Engineering Performance

Assessment (Georgy et al. 2005) No No Yes

CASPAR: Computer Aided Simulation for Project

Appraisal and Review (Willmer 1991) Yes Yes No

FMEA: Failure Modes and Effects Analysis (Bouti

and Kadi 1994) Yes Yes Yes

APRAM: Advanced Programmatic Risk Analysis

model (Dillon and Pate-Cornell 2001) Yes Yes Yes

APRAM• APRAM: Advanced Programmatic Risk Analysis model.

• Used for risk analysis and management purposes considering schedule,cost and quality risks simultaneously.

• This model takes into account only the design and construction phasesof the project.

Modification of APRAM and Management Model for the Whole Project Life Cycle Risks

• APRAM was modified by Mehran Zeynalian, Bambang Trigunarsyah and H. R.Ronagh, Australia in 2013.

• The modifications were made to use this method properly in covering not onlythe initial costs of a project, but also its whole life cycle costs.

The Purpose of the Model

• These modifications are essential to specify whether the higher initial cost of aproject is economically justified by the reduction in future costs whencompared with another alternative that has a lower initial cost but higher futurecosts.

Flow Chart of the APRAM model

Case Study • A typical two-story, 384-m2 residential building.

• Location: Kerman (a high seismic region in Iran).

• Budget: $150,000 (D&C).

Implementation of the model1. Identification of possible technical design alternatives.

We have either:

• Alternative 1: CCS (Conventional Construction System): masonry wallscombined with concrete anchors.

• Alternative 2: CFS (Cold Formed Steel).

Implementation of the model (cont.)

2. Identify components of both alternatives.

ComponentsPotential Construction Alternative

CCS CFS

Foundation Strip reinforced concrete anchors Mat foundation

Structural Frame Brick and reinforced concrete anchors Cold-formed steel studs

Floor Reinforced concrete joist and filler blocks CFS joists and lightweight compressed blocks

Roofing Roofing felt Slate/tin roofing

Façade Facing brick Fiber cement board panels

Internal Cladding Hollow brick and gypsum plaster Gypsum board

Utilities Multilayer plastic pipe Multilayer plastic pipe

Thermal Insulation Not applicable Rock wool

• RB = TB – Devcost

Residual Budget = Total Budget – Total Cost of Construction Development.

• The Residual Budget then should be allocated over the technical components of eachalternative and optimized.

• We assumed that the operational cost is equal to the development cost of the project.

Implementation of the model (cont.)

3. Determine the Residual Budgets.

RB and Devcost

• We will assume that the funds will be invested based on the effective usable area of thebuilding i.e. only the net area of the building’s floors should be taken into account.

• Hence, a cost modification factor ( ) is calculated:

=( − )/

where = cost modification factor

AG= gross area of the building

Aw= total x-sec. area of the walls.

Alternatives i Devcost Total Devcost Total Modified Devcost RB Total Opercost

CCS 0.87 285/m2 $109,440 $125,793 $24,207 $109,440

CFS 0.92 300/m2 $115,200 $125,217 $24783 $115,200

Implementation of the model (cont.)

• Managerial failure: are the factorsthat lead to the project completionbehind schedule and/or overbudget.

• Technical failure: may occur eitherbefore or after the completion of theconstruction and can becategorized as technical failure inD&C or operation.

4. Identify technical and managerial risks.

Estimated Failure Risks ProbabilitiesProbabilities of Technical Failure Events of CCS during the D&C Life Cycle

Alternative 1: Conventional construction system

# Technical failure risk Probability

1 Weak cast-in-place foundation concrete 0.25

2 Spalling of frame concrete 0.10

3Lack of appropriate vertical and horizontal

anchors to brick wall connections0.15

4 Use of poor cement mortar 0.35

5 Poor floor concreting 0.20

6 Poor shuttering 0.10

7 Lack of appropriate insulation 0.20

8 Facade distortion 0.35

9 Poor utilities performance 0.20

10 Improper design 0.05

Probabilities of Managerial Failure Events of CCS during the D&C Life Cycle

Alternative 1: Conventional construction system

# Managerial failure risk Probability

1 High reworks and change orders 0.15

2 Late delivery of cement 0.05

3 Late delivery of reinforcement bars 0.05

4 Increase in the price of cement 0.25

5 Increase in the price of reinforcement bars 0.25

6 Inclement weather 0.20

7Using additive material or extra protection

facilities due to climate changes0.45

Estimated Failure Risks ProbabilitiesProbabilities of Technical Failure Events of CFS during the D&C Life Cycle

Alternative 2: Cold-formed steel frame

# Technical failure risk Probability

1 Weak cast-in-place foundation concrete 0.25

2 Improper manufacture of CFS members 0.10

3 Improper erection of connections 0.15

4 Lack of appropriate insulation 0.35

5 Facade distortion 0.20

6 Poor utilities performance 0.10

7 Improper design 0.20

8 Improper galvanizing 0.35

Probabilities of Managerial Failure Events of CFS during the D&C Life Cycle

Alternative 2: Cold-formed steel frame

# Managerial failure risk Probability

1 High reworks and change orders 0.05

2 Late delivery of cement 0.05

3 Late delivery of reinforcement bars 0.05

4 Increase in the price of cement 0.10

5 Increase in the price of reinforcement bars 0.10

6 Inclement weather 0.05

7Using additive material or extra protection

facilities due to climate changes0.10

8Increase in the price of cold-formed steel

sheets0.10

9 High cost of skilled professionals 0.20

10 Excessive essential in-site galvanizing 0.05

Estimated Failure Risks ProbabilitiesProbabilities of Technical Failure Events of CCS during the Operating Life Cycle

Alternative 1: Conventional construction system

# Technical failure risk Probability

1 Waterproof roofing failure 0.02

2 Facade faulty 0.05

3 Utilities faulty 0.05

Probabilities of Technical Failure Events of CFS during the Operating Life Cycle

Alternative 2: Cold-formed steel frame

# Technical failure risk Probability

1 Waterproof roofing failure 0.01

2 Facade faulty 0.02

3 Utilities faulty 0.03

Types of failures• Technical and managerial risks are divided into two parts—total and

partial risks.

• Total technical failures (TTFs): the possibilities that might cause thebuilding to be classified as unusable according to the specifications.

• Partial technical failures (PTFs): failures that render the building usable,but only at a degraded level of functionality.

• Managerial risks (PMF): the probabilities for which the project cannot becompleted within the assigned budget and provided timetable. timetable.Residential buildings in the target area are usually built withconsiderable cost and time overruns. Therefore, all identified managerialfailure risks are categorized as partial managerial failures.

Implementation of the model (cont.)

•

Implementation of the model (cont.)

6. Assign a portion of the RB to each possible failure.

Alternative 1: Conventional construction system

# Technical failure risk Probability p(Fi | Techrein)

1 Weak cast-in-place foundation concrete 0.25 0.25 × Exp[−4.621 ∝]

2 Spalling of frame concrete 0.10 0.10 × Exp[−3.151 ∝]

3Lack of appropriate vertical and horizontal anchors to

brick wall connections0.15 0.15 × Exp[−5.776 ∝]

4 Use of poor cement mortar 0.35 0.35 × Exp[−8.664 ∝]

5 Poor floor concreting 0.20 0.20 × Exp[−11.55 ∝]

6 Poor shuttering 0.10 0.10 × Exp[−4.951 ∝]

7 Lack of appropriate insulation 0.20 0.20 × Exp[−9.902 ∝]

8 Facade distortion 0.35 0.35 × Exp[−6.931 ∝]

9 Poor utilities performance 0.20 0.20 × Exp[−13.86 ∝]

10 Improper design 0.05 0.05 × Exp[−34.66 ∝]

• The model uses arisk/cost function thatassumes that theprobabilities of failures ofa system diminishexponentially as theresidual budget is spentto increase therobustness andperformance of thesystem.

where is the portion ofthe RB used as aninvestment to improve thefailure probability of theevent Fi.

Ks is an assessableconstant.

Variation of Risk Probability w.r.t. the RB investment

Probabilities of different technical failure statesduring the D&C life cycle versus fractions ofRB for CFS

Probabilities of different technical failure statesduring the D&C life cycle versus fractions ofRB for CCS

Allocation and Optimization of allocated RB

•

Allocation and Optimization of allocated RB

•

Technical Failures of CCS and CFS

Probabilities of technical failures Costs of technical failures

Managerial Failures of CCS and CFS

Probabilities of managerial failures Costs of managerial failures

Implementation of the model (cont.)

7. Choice of Optimum Alternative and Corresponding Residual Budget

The minimum expected

failure costs for each

allocation of the residual

budgets to technical and

managerial reserves is

evaluated using the eqn.

Result

Probabilities of failures Cost of failures

Thank you!• QUESTIONS?