virginia greiman bigdig

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Virginia A. Greiman

Professor of Megaprojects and Planning

Boston University

Lessons on Risk Managementfrom the Big Dig and other

Complex Megaprojects

Copyright © 2013 by Virginia A. Greiman



Founded in 1986 the Tunnel was Completed in 1994. Thecost was double the forecast and in 1995 Eurotunnelstopped interest payment on its loans resulting in a decadelong process of restructuring. Debt service will not be fully

repaid for decades.

EuroTunnel | Manages the Channel Tunnel between Britain andFrance




“While I am glad that the toll payers are finally able to cross the new eastern spanof the Bay Bridge, it is important that we examine the problems that caused the

construction of the new span to be 10 years late and $5 billion over budget,”Senator DeSaulnier, California Housing and Transportation Committee Chair,October 30, 2013




California $68 Billion High Speed Rail

California high-speed rail will connect the mega-regions of thestate, contribute to economic development and a cleanerenvironment, create jobs and preserve agricultural andprotected lands. By 2029, the system will run from SanFrancisco to the Los Angeles basin in under three hours atspeeds capable of over 200 miles per hour.




Canary Wharf Terminal One of the five £10m tunneling machines

5½ of 26 miles of tunnels now built




• 54 Designs• 132 Construction Packages

• 161 Lane Miles

• 5 Major Interchanges

• Landmark Cable-stay Bridge

• Jacked Tunnels

• Immersed Tubes

• Soil Freezing

• Deep Soil Mixing• 8 miles of Slurry Wall

• Jet Grouting

• Excavation and Parks

Boston’s Big Dig




EIS - Environmental Impact Statement ICE - Interstate Cost Estimate CSU – Cost and Schedule Update

Cost of Boston’s Big Dig

Copyright © 2013 by Virginia A. GreimanCopyright © 2013 Megaproject Management by John A. Wiley, Hoboken, NJ



Boston’s Big Dig




Megaprojects and Mega Risk

Understanding Program RiskManagement





Risk Program Structure

Project Company

OrganizationalStructure

(Project)

ContractualStructure

(Risk)

GovernanceStructure

(Finance/Authority)

Risk ManagementExecutive Team

Dedicated Staff

Decision Making

Dedicated BudgetDirect ReportCore ManagementSupport

Key takeaway - Structure Matters

Risk Allocation, Risk

Mitigation, RiskControland Risk Incentives



Seven Cost Centers

• Construction

• Program Management

• Design

• Force Accounts

• Right of Way

• Risk Management

• Geotechnical





Role:• Technology• Design• Construction• Expert Advice

Management

Consultant

Preliminary

DesignerContract

Administ rator

Construction

Manager

Integrated Project

Organization

May include both

public and private

sector employees

Private Entity Public EntityProject Company

State and Federal

Government

Advocate for thePublic

Commitment of

Funding, Services or

Both

Role:• Plan Project• Execute Project• Control Project• Close Project

Role:• Financing• Governing Board• Project Management and

oversight• Interface with Stakeholders

• Regulator

Is your PPP a Partnership or a Risk?

Copyright © 2013 Megaproject Management by John A. Wiley, Hoboken, NJ



Central Artery/Tunnel Project Risk Management Organization

Project Director

Risk Manager

WC/GL Loss Control

Claims Adjusting

Workers

Compensation& General Liability

Airport Contracts

Claims Adjusting

Airport Contractor

Liability

Builder’s Risk Claims

AdjustingBuilders’ Risk

Claims AdjustingRailroad Surety

Loss Prevention

Claims Adjusting

Professional

Liability

Employer’s Liability

Legal

Technical

Services

ProgramManager

Insurance

Brokerage

/Consultants

Safety & Health

Integrated Team

Risk Finance

OCIP Trust

Audits

Regulatory/

Utility

Claims

Services

Environmental

Consultant

Non-Wrap-Up

Broker/Insurance

Critical

Infrastructure

Risk MgtConsultant DBE Broker LondonBroker

Professional Liability

Claims Adjusting

ContractorSafety Rep.

Safety PartnerManagement

Automobile

LiabilityLondon Airport

Contractors/Excess

Prof. Liability/GL Excess

Insurance

Carriers

Claims Handling

ServicesCore

Managers

Support





CA/T Project Insurance Wrap-up

Coverage’s ($609M) (2006 CA/T Project Finance Report)

262

215

48

11

8

5

60

0 100 200 300

Administrative Costs andSafety Mitigation

Railroad Protective Liability

Airport Contractors’ Liability

Professional Liability

Builders’ Risk

General Liability/ExcessLiability

Worker's Compensation

Copyright © 2013 Megaproject Management by John A. Wiley, Hoboken, NJ



What is Project Success?

• Being on Time and Budget?

• Meeting Goals?

• Achieving Sustainability?

Key takeaway - Know what success means on your project




Scope

TimeCost

Design, Risk, Safety and Quality Decisions

Traditional Iron Triangle




merging: Sustainability of economisocial and institutional benefits

Open space, parks and islands

Re-knitting neighbourhoods and entry points

Expansion of shellfish populationVentilation/air quality

Smart highway system

Economic opportunity/trained workforce/minority/women

business development

Utility corridor

Increased property values

Intermodal




The Importance of Context

Context awareness and sensitivity to context on the part of

project decision makers is vital for both the successful

planning, appraisal and delivery of MTPs and suitable

treatment of contextual risks, uncertainties and

complexities.Omega Centre, Mega Projects, 2012

Key takeaway – Environmental factors, values, mega events andpolitical influence/support remains as critical contextual factors over theentire life cycle




The Big Dig’s Risk ManagementMission Zero Accident Philosophy

Operating an integrated world-class Risk Management Program for:

• Engineering and Construction

• Loss Control• Safety and Health

To protect the Commonwealth of Massachusetts, Big Dig contractors,

consultants, workers and the general public against catastrophic loss

by:





Big Dig Safety and HealthPrograms and Practices

Substance Abuseand Prevention

Program

Shared

Responsibility

Continuous

Improvement

PracticesTraining and

BestPractices

Safety Incentive

Program (SHARE) Mitigation

Program

Emergency

Response

Public

Image

Threat

Assessment

Community

Involvement

Program

Abutter

Program

Zero Accident

Tolerance

And many more…

Owner Controlled Insurance

Program

1,344

Environmental

Commitments



Classification of Catastrophic Loss

• Mining Operations

• Ground Freezing

• Deep WaterTunneling

• Funding

• Revenue Risk

• Depression,Recession,Inflation

• Political/RegulatorRisk

• Cave-in, Collapse,Landslide

• Earthquake, Water, Wind

• Fire, Flood, Tidal Waves

• Human Error

• Terrorism

• Pollution

• Chemical Leakage

• Utility Disruption

Human Perils Natural Perils

Technological

Perils

Economic

Perils




The Role of Improvization andIntuition in Risk Management

U.S. Airways Flight 1549, Hudson River, January 15, 2009




How do you know when yourproject is in trouble?

• Costs Rising and Schedule Delays?

• Safety Violations and Lost Time Increases?

• Near Misses and Substantial Rework?

• Exposures Increasing and Claims growing?

• Ethical Problems?

• Critical long-term safety failure?

Key takeaway - All of the above are warning signs your program is at risk




Key Checkpoints for RiskManagement

• Assumptions – Do you review assumptions regularly?

• Perceptions – Are they correct?

• Constraints – Are they realistic?

• Root Causes – Have you identified the root cause of every event or just thesymptoms?

• Cultural Adaptation – Has change occurred?

Key takeaway - Risk assessments should incorporate the above checkpoints




Managing Risk and Change throughIntegration and Collaboration

“ We can’t solve problems by usingthe same kind of thinking we used

when we created them.”

- Albert Einstein




Integration on large and complexprojects: Managing the four Ps

T

The People

The

Programs

The

Processes

The

Project

Methodologies




Partnering

StakeholderParticipation

Claims & Changes

Audi t and

Oversight (OCC)

DisputeResolution

KnowledgeTransfer and

Innovation

Utility

Protection

Safety and

Health

Quality Assurance

RiskManagement

Technology

Advancement

The Programs

Central Artery/Tunnel

Project Integrated

Programs




Questions

Are you successfully integrating

• Your People?

• Your Processes?

• Your Programs?

• Your Project Methodologies?

Where can you improve?




Expectancy:

(Quantitative)

• Experts

• Experience

• Tunnel or

building collapse

• Fire in tunnel• traffic

Congestion

• Snowstorm

• Worker injuries

Risk Reality and Impact of Unknowns

• Floods

• Tunnel Leaks• Utility

Disruptions

Known risk UnknownRealized

R

• Flood Gates

Broken?

• Archivelocations?

• Subsurface

Conditions?

Realized:• Actual Losses

Incurred

• Known and

Unknown Risk

• Lessons Learned

• Best Practices

Uncertainty:• Intuitive

• Processes and

Procedures

• Controls




0

24

6

8

1012

14

16

18

RatePeople

50004500

4000

3500

3000

2500

2000

1500500

0

Peak Manpower/Year

Actuals per year

National Average

Recordable Rate




Big Dig’s Worst Disaster

2006 Ted Williams Tunnel Roof CollapseSource: NTSB Report




NTSB Findings1. Lack of understanding and knowledge in the construction community about

creep in adhesive anchoring systems.

2. Prior Incident - Failure of Powers Fasteners, Inc., to determine that the

anchor displacement that was found in the high-occupancy vehicle tunnel in

1999 was a result of anchor creep.

3. Failure of the owner to implement a timely tunnel inspection program that

would likely have revealed the ongoing anchor creep.

Key takeaway - Are we assuming ourcontractors have the requisite knowledge or do we verify experience?




Collapse of I-5 BridgeWashington State

“ The collapse of the I-5 Bridge is a wakeup call

for the entire Nation. This is a really significant

event and we need to learn from it, not just in

Washington but around the country."

Chairman, Debbie Hersman, National Transportation Safety Board




Key Questions in Quality Management

• Are cost and schedule pressures detracting from safety critical designand/or design verification?

• Is there an effective pathway to express your concerns?

• Are safety critical maintenance activities being identified and conveyed toothers by the proper authorities?

• Are inspections implemented in a timely manner?

• Have all stakeholders worked to understand root causes associated with

any unexpected results or off-nominal behaviors in development, testing orintegration?

• Are you assuming engineering accountability or are you delegating?




Challenges for Risk Managementin Megaprojects

• Weak governance

• Low bid contracts

• Schedule driven projects

• Subjectivity in risk analysis/optimism bias

• Lack of knowledge and technical competence

• Strategic misrepresentations

• Wrong perceptions

• Immature risk culture




More challenges…

• Sub-Optimal risk mitigation

• Indecision and ambiguous procedures

• Incomplete root cause analysis

• Inadequate change control and contingency management

• Absence of conflict management

• Weak stakeholder management

• Failure to focus on long term critical safety




Risk Reduction Recommendations

• Establish the highest level of commitment and create a strong riskmanagement culture!

• Develop a zero accident strategy and empower safety managers and teams!

• Integrate risk across projects and share best practices!

• Incentivize risk management from the bottom up!

• Watch out for secondary risks!




What have we learned?

Competency in decision making requires:

• adequate assessment of risk, uncertainty and complexity

• Sensitivity to context




More lessons…..

• Megaprojects require “Open Systems” due to their complex, interrelationshipswith the communities and the citizens it serves.

• Projects should focus on Sustainability and not just the iron triangle!

• Sustainability is multidimensional and extends to economic, social, institutionaland environmental benefits!




Virginia A. Greiman

Professor of Megaprojects and PlanningBoston University

617-353-6860

[email protected]

Thank You!

Questions???

virginia greiman bigdig

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