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Son-La Dam Construction in Vietnam: Go/No Go Analysis
PF3204 Project Risk Management
Risk and Decision Analysis Example#2
1
Outline
Statement of the problem Development of objective function Development of influence diagram Data attribute table & Acquisition of Data Sensitivity analysis Preliminary decision tree analysis Current status and future work
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Statement of the Problem(Check the situation scenario posted to IVLE for more details)
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Project Scenario
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Project Scenario
Vietnam is experiencing a more rapid rise in demand for electricity than economic growth.
Vietnams energy demand heavily relies on coal fired generating plant
Vietnam government is deciding whether or not to do the great hydro expansion.
Son-La Dam will be the biggest project in this hydro expansion
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The Proposed Son-La Dam
Normal Water Level 265 m
Dam Height 177 m
Volume of Reservoir 25.4 billion m3
Surface of Reservoir 440 km2
Installment Capacity 3,600 MW
Energy Production 14,124 GWh/year
Project Estimated Cost $2.3 billion
Project Life Cycle 50 years
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Positive Impacts Energy production: 14,124 GWh/year Economic benefits
New opportunities for regional socio-economic development
Revitalize the economy of north-eastern region of Vietnam
Water supply for production Flood stream control Reduction of air pollution and carbon dioxide
emissions Improvement of microclimate Opportunity for recreation and tourism
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Negative Impacts Environmental and social impacts
Inundated areas: 40,500 ha (Agriculture land: 9,650 ha, Forestry land: 3,900 ha)
Resettlement: 95,600 people, $700 million Loss of infrastructures: Houses (1,600,00 m2) and Roads
(300km)
Ecological Impacts - Deforestation
Dam safety issues Serious threats from earthquake Construction quality issues from workmanship
Political issues8
The Son-La Dam project: Go/ No Go
Decision Maker? A Vietnam government agency
Decision to be analyzed?
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Development of Objective Function
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Overview of Decision Criteria
Decision Criteria to be concerned Project Benefits Project Costs Environment issues Safety Social Impacts Politic Issues Cultural Concern
Hierarchy of Objectives Technique Approach11
Overview of Criteria Considered
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Final Criteria Incorporated
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Criteria Weighting Using AHP1. Establish the hierarchical structure (as last slide)2. Compare the major categories in pair-wise fashion,
ranking each pair on a scale of 1 to 5 according to the criteria: 1: The two factors contribute equally 2: One factor is slightly favored over the other 3: One factor is moderate favored over the other 4: One factor is strongly favored over the other 5: One factor dominates
3. Finding the normalized matrix
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Criteria Weighting Using AHP
Pair-wise comparison tableReturn onInvestment
OptimizeSafety
MinimizeConflicts
OptimizeEnvironment
Return onInvestment 1 2 2 3
OptimizeSafety 0.5 1 1.2 2
MinimizeConflicts 0.5 0.8 1 2
OptimizeEnvironment 0.33 0.5 0.5 1
Sum 2.33 4.3 4.7 8
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Criteria Weighting Using AHP
Normalized weights of objective criteria
Return onInvestment
OptimizeSafety
MinimizeConflicts
OptimizeEnvironment
RowSum Average
Return onInvestment 0.43 0.47 0.43 0.38 1.69 0.42
OptimizeSafety 0.21 0.23 0.26 0.25 0.95 0.24
MinimizeConflicts 0.21 0.19 0.21 0.25 0.86 0.22
OptimizeEnvironment 0.14 0.12 0.11 0.13 0.49 0.12
Sum 1 1 1 1 4 1
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Final objective function model
Weights of objective criteria
Final Objective function
Objective Criteria Weights
Return on Investment 0.42
Optimize Safety 0.24
Minimize Conflicts 0.22
Optimize Environmental Issues 0.12
Maximize Values to the Project Owner =
0.42*Return on Investment +
0.24*Maximize Safety+
0.22*Minimize Conflicts +
0.12*Minimize Environmental Issues17
Development of Influence Diagram
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Influence Diagram Development Procedure Brainstorm advantages (positive impacts),
disadvantages (negative impacts), and consequential events from decision.
Identify causal or driving factors relevant to advantages, disadvantages, and consequential events.
Employ graphical network to illustrate factors and relationships.
Continue until comfortable with level of detail.
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Preliminary Influence Diagram
Objective Variables
Calculation Variables20
Data Attribute Table & Acquisition of Data
Ref. # Variable or Data Element Variable TypeBest Unit
of MeasureVariable Value(s) or
Range Best Source(s) of Information
Current Reliability of Information/
Source
Need to Modify Data?
1 Go / No Go Decision Decision2 Return on Investment Objective $ Benefits & costs comparison3 Benefits Objective $ Sub-criteria data4 Annual Savings Objective $ $500 million Consultant firm & design firm Reliable5 Local Economy Revitalization State H/M/L H/M Economist & consultant firm Moderate6 More Job Market and Opportunities State H/M/L H/M Economist & consultant firm Moderate7 Local City Growth State H/M/L H/M Economist & consultant firm Moderate8 Inprovement of Fluvial Navigation State H/M/L M/L Environmentalists & geologists Low9 Opportunity for Recreation and Tourism State H/M/L H/M Economist & consultant firm Moderate10 Water Supply State m3 25.4 billion m3 Design firm Reliable11 Costs Objective $ $4 billion (+-10%) Sub-criteria data Reliable12 Massive Construction Cost Calculation $ $2.3 billion (+-10%) Design firm Reliable13 Compensation and Resettlement Cost Calculation $ $700 million (+-10%) Owner & consultant firm Reliable14 Commission for Russian Technologies Calculation $ Design firm & Russian contractor Low
15 Economic Loss due to Submerged Agriculture Land
Calculation $ Consultant firm Low
16 Operation and Maintenance Cost Calculation $ Design firm Low
17 Productivity Changes of Estuaries State H/M/L H/M/L Environmentalists & hydrological experts
Low
18 Cost for Earthquake Prevention Calculation $ Design firm Low19 Project Life Cycle State Year 70 - 90 years Owner & design firm Moderate20 Inflation State % 2 - 4 % Economic index Moderate21 Interest Rates State % 0.1 - 1 % Economic index Moderate22 Optimize Environmental Issues Objective H/M/L Sub-criteria data
23Regulation Flood Stream State m3/sec 15000 m3/sec Design firm & hydrological experts Reliable
24 Improvement of Microclimate State H/M/L H/M/L Meteorologists Low
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Data Attribute Table & Acquisition of Data
Ref. # Variable or Data Element Variable TypeBest Unit
of MeasureVariable Value(s) or
Range Best Source(s) of Information
Current Reliability of Information/
Source
Need to Modify Data?
25 Reduce Air Pollution State ppm M/L Environmentalists Low26 Ecological Impacts State H/M/L H/M Environmentalists Moderate
27 Hydrologic Impacts State m3 H/M Environmentalists & hydrological experts
Moderate
28 Loss of Mineral Resources State H/M/L Low Hydrological experts Moderate29 Optimize Safety Objective H/M/L Sub-criteria data
30 Forests near Reservoir Calculation ha 160,000 ha Site survey and local environment data
Reliable
31 Earthquake Possibility State H/M/L High (H/L) Historical data, meteorologist Reliable
32 Capability of Vietnamese Workers State H/M/L Low Consultant firm, historical data, interview and survey
Moderate
33 Construction Safety and Security State H/M/L H/M/LSafety laws, standards, and
regulations. Data about current jobsite conditions. Historical data
Moderate
34 Minimize Conflicts Objective H/M/L Sub-criteria data35 Social Impacts Objective H/M/L Sub-criteria data
36 Social Impacts due to Ethnic Minorities Resettlement
State H/M/L Medium (H/M/L) Socialists & human right activities Reliable
37 Social Impacts due toLoss of Agriculture Land
Objective H/M/L High Socialists, economists, and agronomists
Reliable
38 Historic Architecture Data Calculation EA, m2 Site survey and local historic data Low
39 Social Impacts due to Loss of Historic Architecture
State H/M/L High Historians Moderate
40 Water-related Diseases (Health Issue) State H/M/L M/L Medicalists Low41 Political Issues Objective H/M/L Sub-criteria data42 Political Negotiation with China State H/M/L H/M/L Politicians Low43 Economic Negotiation with China State H/M/L H/M/L Economists & politicians Low44 Break-up and Breach of Obligation State H/M/L H/M/L All stakeholders Low 22
Data Attribute Table & Acquisition of Data
Ref. # Variable or Data Element Variable TypeBest Unit
of MeasureVariable Value(s) or
Range Best Source(s) of Information
Current Reliability of Information/
Source
Need to Modify Data?
45 Political Dissension during Construction State H/M/L H/M/L Politicians Low46 Tax Rate for Construction Cost Objective $ Owner & consultant firm Low47 Cultural Concerns Objective H/M/L H/M/L Sub-criteria data Low
48 Cultural Differences State H/M/L H/M/L Objective investigations & subjective interviews and surveys
Low
49 Language Barriers State H/M/L H/M/L Objective investigations & subjective interviews and surveys
Low
50 Different Laws, Standards, and Regulations Calculation H/M/L H Legal administration & design firm Reliable
23
Sensitivity Analysis
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Sensitivity Analysis
Six important variables are selected from the data attribute table. Annual savings Costs for compensation for moving residents and
resettlement process Amounts of forests near reservoir Earthquake possibility to occur Social impacts due to resettlement of ethnic minorities Regulation flood system by controlling amounts of
water released
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Sensitivity AnalysisOriginal InformationObjectives SelectedVariables Unit BaseValue UpperValue LowerValue
AnnualSavings Million$ 500 550 400
AnnualResettlementCosts Million$ 70 91 66.5
AmountsofForestsnearReservoir
ha 160,000 176,000 144,000
EarthquakePossibility H/M/L High High Medium
Conflicts SocialImpactsduetoResettlement H/M/L Medium High Low
EnvironmentalIssues
RegulationFloodStream m3/sec 15,000 15,750 12000
ROI
SAFETY
Objectives SelectedVariables Unit BaseValue UpperValue LowerValue
AnnualSavings % 100% 110% 80%
AnnualResettlementCosts % 100% 130% 95%
AmountsofForestsnearReservoir
% 100% 110% 90%
EarthquakePossibility % 100% 100% 70%
Conflicts SocialImpactsduetoResettlement % 100% 180% 50%
EnvironmentalIssues
RegulationFloodStream % 100% 105% 80%
ROI
SAFETY
Converted Information
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Sensitivity AnalysisObjective Function
Maximize Values to the Project Owner =
0.42*Return on Investment + 0.24*Maximize Safety +
0.22*Minimize Conflicts + 0.12*Minimize Environmental Issues
Sensitivity Analysis Output FormulaValues to the Project Owner = 100% + 0.42*((Annual Savings-100%) + (100%-Annual Resettlement Cost))+ 0.24*((Amount of Forest Near Reservoir-100%)+(100%-Earthquake Probability))+ 0.22*(100% - Social Impacts due to Resettlement)+ 0.12* (Regulation Flood Stream - 100%)
Objectives SelectedVariables Unit BaseValue UpperValue LowerValue
AnnualSavings % 100% 110% 80%
AnnualResettlementCosts % 100% 130% 95%
AmountsofForestsnearReservoir
% 100% 110% 90%
EarthquakePossibility % 100% 100% 70%
Conflicts SocialImpactsduetoResettlement % 100% 180% 50%
EnvironmentalIssues
RegulationFloodStream % 100% 105% 80%
% 100%ValuetotheProjectOwner
ROI
SAFETY
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Sensitivity Analysis Annual Savings
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Sensitivity Analysis Annual Resettlement Cost
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Sensitivity Analysis Amount of Forest
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Sensitivity Analysis Earthquake Possibility
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Sensitivity Analysis Social Impacts due to Resettlement
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Sensitivity Analysis Regulation of Flood Stream
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Sensitivity Analysis Spider Graph
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Sensitivity Analysis Tornado Graph
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Preliminary Decision Tree Analysis
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Preliminary Decision Tree Analysis
Social Impact
Annual Resettlement Cost
Annual Resettlement Cost
Annual Resettlement Cost
More Variables will
be studied with their
actual values and
probabilities!
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Current Status and Future Work
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Current Status
Developed an objective function model Developed influence diagram Developed a preliminary data attribute table Conducted sensitivity analysis for key
variables Structured a preliminary decision tree
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Future Work
Update the real project data and sources More specific sensitivity analysis based on
updated data Update final influence diagram Quantify several non-quantified variables Develop more specific decision tree structures Investigate and analyze historical data related to
dam construction project in Vietnam Try weighting criteria based on weighting
process for related sub-criteria 40
Preliminary Influence Diagram
Objective Variables
Calculation Variables20
Data Attribute Table & Acquisition of Data
Ref. # Variable or Data Element Variable TypeBest Unit
of MeasureVariable Value(s) or
Range Best Source(s) of Information
Current Reliability of Information/
Source
Need to Modify Data?
1 Go / No Go Decision Decision2 Return on Investment Objective $ Benefits & costs comparison3 Benefits Objective $ Sub-criteria data4 Annual Savings Objective $ $500 million Consultant firm & design firm Reliable5 Local Economy Revitalization State H/M/L H/M Economist & consultant firm Moderate6 More Job Market and Opportunities State H/M/L H/M Economist & consultant firm Moderate7 Local City Growth State H/M/L H/M Economist & consultant firm Moderate8 Inprovement of Fluvial Navigation State H/M/L M/L Environmentalists & geologists Low9 Opportunity for Recreation and Tourism State H/M/L H/M Economist & consultant firm Moderate10 Water Supply State m3 25.4 billion m3 Design firm Reliable11 Costs Objective $ $4 billion (+-10%) Sub-criteria data Reliable12 Massive Construction Cost Calculation $ $2.3 billion (+-10%) Design firm Reliable13 Compensation and Resettlement Cost Calculation $ $700 million (+-10%) Owner & consultant firm Reliable14 Commission for Russian Technologies Calculation $ Design firm & Russian contractor Low
15 Economic Loss due to Submerged Agriculture Land
Calculation $ Consultant firm Low
16 Operation and Maintenance Cost Calculation $ Design firm Low
17 Productivity Changes of Estuaries State H/M/L H/M/L Environmentalists & hydrological experts
Low
18 Cost for Earthquake Prevention Calculation $ Design firm Low19 Project Life Cycle State Year 70 - 90 years Owner & design firm Moderate20 Inflation State % 2 - 4 % Economic index Moderate21 Interest Rates State % 0.1 - 1 % Economic index Moderate22 Optimize Environmental Issues Objective H/M/L Sub-criteria data
23Regulation Flood Stream State m3/sec 15000 m3/sec Design firm & hydrological experts Reliable
24 Improvement of Microclimate State H/M/L H/M/L Meteorologists Low
21
Data Attribute Table & Acquisition of Data
Ref. # Variable or Data Element Variable TypeBest Unit
of MeasureVariable Value(s) or
Range Best Source(s) of Information
Current Reliability of Information/
Source
Need to Modify Data?
25 Reduce Air Pollution State ppm M/L Environmentalists Low26 Ecological Impacts State H/M/L H/M Environmentalists Moderate
27 Hydrologic Impacts State m3 H/M Environmentalists & hydrological experts
Moderate
28 Loss of Mineral Resources State H/M/L Low Hydrological experts Moderate29 Optimize Safety Objective H/M/L Sub-criteria data
30 Forests near Reservoir Calculation ha 160,000 ha Site survey and local environment data
Reliable
31 Earthquake Possibility State H/M/L High (H/L) Historical data, meteorologist Reliable
32 Capability of Vietnamese Workers State H/M/L Low Consultant firm, historical data, interview and survey
Moderate
33 Construction Safety and Security State H/M/L H/M/LSafety laws, standards, and
regulations. Data about current jobsite conditions. Historical data
Moderate
34 Minimize Conflicts Objective H/M/L Sub-criteria data35 Social Impacts Objective H/M/L Sub-criteria data
36 Social Impacts due to Ethnic Minorities Resettlement
State H/M/L Medium (H/M/L) Socialists & human right activities Reliable
37 Social Impacts due toLoss of Agriculture Land
Objective H/M/L High Socialists, economists, and agronomists
Reliable
38 Historic Architecture Data Calculation EA, m2 Site survey and local historic data Low
39 Social Impacts due to Loss of Historic Architecture
State H/M/L High Historians Moderate
40 Water-related Diseases (Health Issue) State H/M/L M/L Medicalists Low41 Political Issues Objective H/M/L Sub-criteria data42 Political Negotiation with China State H/M/L H/M/L Politicians Low43 Economic Negotiation with China State H/M/L H/M/L Economists & politicians Low44 Break-up and Breach of Obligation State H/M/L H/M/L All stakeholders Low 22
Data Attribute Table & Acquisition of Data
Ref. # Variable or Data Element Variable TypeBest Unit
of MeasureVariable Value(s) or
Range Best Source(s) of Information
Current Reliability of Information/
Source
Need to Modify Data?
45 Political Dissension during Construction State H/M/L H/M/L Politicians Low46 Tax Rate for Construction Cost Objective $ Owner & consultant firm Low47 Cultural Concerns Objective H/M/L H/M/L Sub-criteria data Low
48 Cultural Differences State H/M/L H/M/L Objective investigations & subjective interviews and surveys
Low
49 Language Barriers State H/M/L H/M/L Objective investigations & subjective interviews and surveys
Low
50 Different Laws, Standards, and Regulations Calculation H/M/L H Legal administration & design firm Reliable
23
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