Launch Slideshow

Not-so-risky business

Not-so-risky business

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    Daniel Berman

    Built in the mid-1960s, the Factoria Transfer Station in Bellevue will be replaced with a larger and enclosed facility. The project’s expected to cost the King County (Wash.) Solid Waste Division $90 million.

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    Daniel Berman

    Rogers (left) and Hague at one of King County’s 10 transfer stations.

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    King County Dept. of Natural Resources and Parks

    Working in or near private right-of-ways is another major cost risk factor for seemingly straightforward projects like trail creation.

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    King County Department of Natural Resources and Parks

    To the layman, existing utilities are a straightforward aspect of construction. But they’re a potential complication that can greatly affect project cost.

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    Daniel Berman

    To lower the number of truck trips to and from the factility and improve payload efficiency, King County’s new Factoria Transfer Station will have a garbage compactor.

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    King County Department of Natural Resources and Parks

    If managed rigorously, legislators and constituents celebrate a project that was delivered as close to budget and deadline as expected.

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What drives risk?

One basic challenge was defining what constitutes a “high-risk project.” Working with the county council and program managers, Rogers came up with:

    “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.”

A joint agency group made up of six high-level appointees from the council and the county executive, plus key policy staff, was formed. Using this definition, the Real Estate and Major Capital Project Review Group formalized reporting procedures and forms and obtained council approval to move forward.

CHART: Project Risk Scores - 2010 to 2012

Ultimately, 15 factors having high, average, and low influence on risk were identified:

High Influence

  • Total estimated project cost—only projects estimated over $10 million are scored; several projects were estimated to exceed $100 million and those higher costs are reflected in risk scores.
  • Schedule constraints—the council is concerned here with the consequences of delays. For example, will delay impact grants or court-influenced deadlines?
  • Property acquisition and use—if property had to be acquired, this was judged to automatically create risks due to NIMBYism, permitting issues, and other unpredictable factors.
  • Unusual design and/or engineering challenges.
  • Unusual construction challenges.
  • Agency commitment to the project.

Average Influence

  • Project phase—earlier phases are considered to be higher risk.
  • Cost estimate class—early in a project, cost estimates can be very rough, and thus very inaccurate.
  • Permitting
  • Public impact during implementation
  • Public interest

Low Influence

  • Project delivery method—some delivery methods transfer more risk to developers.
  • Number of prime contractors
  • Market conditions—will engineering and construction phases last so long that market conditions could change dramatically?
  • Agency experience with project type—if experience is minimal, can the agency somehow acquire the necessary expertise?

An electronic form called the Capital Project Assessment Score Summary is automatically generated and provides a snapshot of most important project information. Project managers complete a questionnaire annually beginning with early in the planning process, before a lot of funding is committed, through the time they set a baseline at the end of preliminary engineering. Results are automatically compiled into a database and submitted to the county clerk and county auditor offices.

Next page: The subjective CAN be made objective