Management and control of cost and risk for tunneling and infrastructure projects

There are many examples of large cost growths for complex projects - prominent examples include the Great Belt Link (cost growth +54% over budget), London's Jubilee Line extension (+67%), Boston's Central Artery (unknown yet, but at least 100%, probably 200%). Recently, Tunnels & Tunneling (North American Edition) asked ''Why can not engineers prepare more reliable construction estimates?'' Some of the reasons might be that conventional cost estimates do not consider that: (1) The final cost of a project is subject to many variables, assumptions and conditions; (2) These variables significantly influence the range of ''probable projected cost''; (3) A single cost number represents only one possible result and is dependent on the variables; (4) The variables are not all directly controllable or absolutely quantifiable; and (5) Better cost estimating must include potential risks and opportunities. In 2002, a new process for estimating more realistic ''ranges of probable cost'' was developed by the authors for the Washington State Department of Transportation. The Cost Estimate Validation Process, CEVP, is relatively simple in concept and consists of the following process: (1) Examine, in detail, the project estimate and determine the project's "base" costs (those costs that would occur if all goes ''as expected'') removing all variability and risk (the ''contingencies'') in a concentrated workshop using national and international experts working with the project team; (2) Identify potential risks and opportunities - probabilities and consequences (impacts or benefits); (3) Combine base costs, risk and opportunity events to create probable ranges of cost and schedule. Subsequently, the US Federal Transit Administration has evaluated the CEVP process and intends (with the Federal Highway Administration, FHWA) to require such a cost-risk process to be used for all future cost estimates, as a matter of policy, for all large, complex transportation projects under their jurisdiction. Many will agree that an early, comprehensive strategy is necessary for complex projects - but, how can such strategies be explicitly developed? It turns out that one of the ''not so secondary'' benefits of the CEVP approach is that it forces the project team to think about all risks and, in particular, long-range risks that may not be technical in nature - such as politics, local and national policies, governance issues and management continuity - all major contributors to Boston's 'Big-Dig' cost and schedule overruns. (A) "Reprinted with permission from Elsevier". For the covering abstract see ITRD E124500.


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  • Accession Number: 01011524
  • Record Type: Publication
  • Source Agency: Transport Research Laboratory
  • Files: ITRD
  • Created Date: Dec 19 2005 3:15PM