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King County Auditor’s Office
Capital Project Risk Management
Where to look.
Will you know best practice when you see it?
Tina J. Rogers, P.E.
King County Auditor’s Office
What we will cover today
Where to look
• What prompted King County to focus on risk
• How to select the riskiest projects
• King County requirements for highest risk projects
2
King County Auditor’s Office
What we will cover today
What to look for
• Best practices – project risk management
Will you know when you see it?
• Lessons from real time assessment
• Stories from the trenches
3
King County Auditor’s Office
King County, Washington
• 2 million population
• 13th largest county in U.S.
• Elected county executive
• Nine-member county council
• Auditor – independent office of
legislative branch
• 2 of 16 focus on capital projects
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King County Auditor’s Office
Legislative perspective
• Approve funding, then in the best case
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King County Auditor’s Office
King County sewer bills likely to rise
The murky dealings of Brightwater
Big headache: County's sewer project
in court, over budget
• Worst-case scenario…
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King County Auditor’s Office
King County Council concerns
• Could we have
avoided cost overruns
& schedule delays?
• How do we focus our
oversight?
7
King County Auditor’s Office
Benefits of risk scoring
• Heightened awareness of risk management
• More transparency & accountability:
– scope changes
– schedule
– budget performance
• Better communication
• Informs Auditor’s Office
work
8
King County Auditor’s Office
How to pick your riskiest projects
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King County Auditor’s Office
King County capital programs
2015/16 capital budget: $1 billion
• Wastewater • Transit
• Solid Waste • Facilities
• Airport • Ferry
• Parks • Information Technology
• Stormwater
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King County Auditor’s Office
Start with a definition – Here is ours:
“Having characteristics that increase the
likelihood of a project being completed late
or over budget, at a potentially significant
financial or other impact to the County.”
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King County Auditor’s Office
Focus on a subset
• Size – $10 million & up
• Exemptions
– Separate oversight bodies – most IT projects
– Acquisition only – Transit fleet, open space purchase
– Risk transferred to developers
• 20 to 30 projects – not hundreds
• Early in project development
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King County Auditor’s Office
Scoring instrument development
• Engage subject matter experts
• Create an objective scoring tool
• Identify & weigh criteria that contribute to risk
• Create questionnaire
• Automatically generate score & graph results
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King County Auditor’s Office
Criteria – What contributes to risk?
Weighted for high influence
• Total Project Cost Estimate
• Schedule Constraints
• Property Acquisition & Use
• Unusual Design or Engineering Challenges
• Unusual Construction Challenges
• Agency Commitment to Project
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King County Auditor’s Office
• Project Phase
• Cost Estimate Class
• Permitting
• Public Impact During Implementation
• Public Interest
Criteria – What contributes to project risk?
Weighted for average influence
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King County Auditor’s Office
• Project Delivery Method
• Number of Prime Contractors Managed
• Market Conditions
• Agency Experience with Project Type
Criteria – What contributes to project risk?
Weighted for low influence
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King County Auditor’s Office
My agency’s commitment is uncertain. The potential benefits of the
project have not been demonstrated and/or additional funding is
required and the likelihood of full funding approval cannot be predicted.
My agency’s commitment could change. The project offers well
documented benefits and, although additional funding is needed,
approval is likely.
My agency’s commitment is unconditional. The project is of the
highest priority, offers proven benefits, and all necessary funding is in
place.
What is the agency’s commitment to this
project?
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King County Auditor’s Office
My agency’s commitment is uncertain. 25
My agency’s commitment could change. 16
My agency’s commitment is unconditional. 4
What is the agency’s commitment to this
project?
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King County Auditor’s Office
Externally Imposed Deadline: Has a deadline which can’t be missed
without violating the terms of a court order, grant, or other legally
enforceable agreement involving a substantial financial impact.
Public Deadline: Has a publicly committed deadline which can’t be
missed without causing adverse financial, operational, or public service
delivery impacts.
Internal Deadline: Has an internally published deadline which can’t be
missed without causing adverse…impacts.
Soft Deadline: Has no deadline or a deadline which can be missed
without causing adverse…impacts.
Which schedule situation most closely
matches this project?
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King County Auditor’s Office
Externally Imposed Deadline: 25
Public Deadline: 16
Internal Deadline: 9
Soft Deadline: 4
Which schedule situation most closely
matches this project?
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King County Auditor’s Office
High Public Interest: Project which is already of interest to community
or business groups, the news media, elected officials, regulatory
agencies, and/or adjacent property owners.
Routine Public Interest: Project which may become of interest to…
Low Public Interest: Project which is unlikely to become of interest to
…
Which public interest situation most closely
matches this project & site?
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King County Auditor’s Office
High Public Interest: 25
Routine Public Interest: 9
Low Public Interest: 4
Which public interest situation most closely
matches this project & site?
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King County Auditor’s Office
How did your project score?
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King County Auditor’s Office 24
King County Auditor’s Office
High-risk project selection
• Numbers don’t tell the whole story
• Committee judgment is used
• Focus suffers if too many selected
• Distribution of projects is desirable
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King County Auditor’s Office
Requirements for selected projects
• Project funding by phase
• More information to Council
• More rigorous project management practices
– Specific risk management steps
– Earned value management
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King County Auditor’s Office
Best practices – project risk management
What to look for?
– By the book
Will you know when you see it?
– Stories from the trenches
27
King County Auditor’s Office
Best Practices in Risk Management
• Definitive source –
PMBOK
• 5th edition – adopted
2013
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King County Auditor’s Office
Project Risk Management
Compiled by
Muhammad Aleem Habib
June 25, 2013
Information derived from PMBOK & Rita Mulcahy
http://www.slideshare.net/
King County Auditor’s Office
What is project risk management?
• Actively managing the risks on a project
• Being more proactive & less reactive
• Shifts focus from dealing with problems to
• Focus on preventing problems
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King County Auditor’s Office
What is a risk?
• An uncertain event that could have a positive
or negative effect on a project
– Threats
– Opportunities
• Have a probability of occurring
• 100% probability = an issue
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King County Auditor’s Office
Risk event graph
High
Low
Project Time
Deg
ree
Risk and uncertainty
Cost of changes
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King County Auditor’s Office
PMBOK’s six risk management
processes
1. Plan Risk Management
2. Identify Risks
3. Perform Qualitative Risk Analysis
4. Perform Quantitative Risk Analysis
5. Plan Risk Response
6. Control Risks
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King County Auditor’s Office
PMBOK identifies inputs, tools & outputs
for each process
• Inputs
• Tools & Techniques
• Outputs
IdentificationQuantitative
AnalysisPlanning
QualitativeAnalysis
ResponsePlanning
Monitoring &Control
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King County Auditor’s Office
Identify risks
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King County Auditor’s Office
Plan & identify risks
What a risk register might look like
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King County Auditor’s Office
Plan & identify risks
What an auditor might ask
• Do you have the resources you need to implement your plan?
• Who was involved in developing your risk register?
– Experience level
– Objectivity
– Broad perspectives
• What techniques did you use to develop risk register?
• Were lessons learned from past projects considered?
• Can we see your first risk register? Your current one?
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King County Auditor’s Office
Perform quantitative/qualitative analysis
What a risk register might look like
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King County Auditor’s Office
Perform qualitative/quantitative risk analysis
What an auditor might ask
• How did you decide on the probability of
occurrence?
• How did you estimate impact?
• How often do you update probability & impact?
• How do you use this information?
• Which are the biggest risks on this project?
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King County Auditor’s Office 40
King County Auditor’s Office
Can help assess the appropriate level of contingency
Risk Probability Impact EMV
A 20% $ (100,000) $(20,000)
B 90% $ 10,000 $ 9,000
C 5% $ 30,000 $ 1,500
D 65% $ (75,000) $(48,750)
Total $(58,250)
Quantitative analysis example:
Expected monetary value
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King County Auditor’s Office
Plan responses/control risks
What a risk register might look like
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King County Auditor’s Office
Plan responses/control risks
AvoidReduce
(Mitigate) Transfer Accept
Risk Response Options
Best Worst
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King County Auditor’s Office
Plan responses/control risks
What an auditor might ask
• Which risks are you actively monitoring?
• What are the thresholds for taking actions?
• Which risks do you plan to avoid, transfer, mitigate, or
accept?
• What is your decision making process for exploiting
opportunities?
• How are you communicating risks to policy-makers?
44