Constructing ExcellenceBerkshire Club Meeting

Uncertainty Management:

Dealing with Risk and Value

Emma Major

Major Value Consultancy Ltd

Introduction

Uncertainty Management: Dealing with Risk and Value

Project Managers are well versed in the process of schedule risk management;

but how many project managers also identify, analyse and manage the positive opportunities on

schedules?Perhaps it is time for project managers to see Value and Risk Management of project schedules as the

two sides of the same uncertainty coin.

Risk Management

The process through which uncertainty is controlled is over the life of a project

Risk Management Process

– Identify the Risks

– Analyse the risks - probability and impact

– Quantify the risks - effect to the project

– Develop Risk Response Plans

– Construct a Risk Register

– Manage the process throughout the project

Value Management Process

Background & Preparation

for the Workshop

Background & Preparation

for the WorkshopInformation Stage

Information StageFunction Analysis

Function AnalysisIdea Generation

Idea Generation

Idea DevelopmentIdea Development

Decision BuildingDecision Building

Action PlanAction Plan

Idea EvaluationIdea Evaluation

How? Why?

Function Analysis

Records Storage

Library

Car Park

Training Room

Quality Facility

Self Catering

SafeSecure

Easy to Clean

Showers

Appearance

Provide Capacit

y

Use of Redundant

Facility Durability

Co-locate

Facilities

User friendly

RestLeisure

Smoking

Improve

Morale

Counselling

Facility

Quick and Easy Access

Open view

(Booking On)

Comms

Satisfy Locals/

Authority

Maintenance

Buildability

Abuse Resistant

Meet Statutory

Requirements

Minimise Disruption

during construction

Speed of Constru

ction

Flexibility

33 Trains per hour

ToiletsMale/

Female

Mobility Impaired

Uncertainty Management

How does Risk Management deal with the negative risks?

How does Value Management manage the risks?

Why Uncertainty Management?

Why identify uncertainties?– Optimise project delivery– Reduce abortive work – Increase value– Develop the relationship between positive

uncertainties (value) and negative uncertainties (risks)

When to Commit?

80%

COST

TIME

Concept Feasibility Design Construction Use

When is the best Opportunity?

COST

TIME

Concept Feasibility Design Construction Use

Potential for change

Resistance to change

Cost of change

Implementing Uncertainty Management

Project Stage/Phase Value Activity Risk Activity Benefits for the Project

Definition/Feasibility VM Strategy RM Strategy Consensus of project strategy

Concept Outline VM Outline RI and RA Identification of the option that most closely meets objectives

Preliminary Design VM RI, RA and RM Guaranteeing maximum value and minimum risk for the project

Detailed Design VE RI, RA and RM Guaranteeing maximum value and minimum risk for the option

Procurement VE RA and RM Assists contracted selection

Delivery VM RM Incentivises contractor

Project Completion VM Review RM Performance Review and Evaluation

Key: VM – Value Management VE – Value Engineering RM – Risk Management RI – Risk Identification RA – Risk Analysis

Linking Risk and Value Analysis

– Agree the project function– Identify uncertainties that impact outcome– Evaluate the uncertainties into a prioritized listing– Develop the uncertainties to understand probability

and impacts on the project and its function– Decide which of the uncertainties to manage in the

short, medium and long term and assess the impact– Develop an action plan with managers– Review uncertainties and repeat

Benefits for Management

– Optimised projects and businesses– Achievement of Best Value– Clarity and transparency of decision making– Greater understanding of the risks involved– Reduced resource requirements due to the

resultant economies of scale – Raised awareness of the relationship of value

opportunities and their associated risks

Heads or Tails

Uncertainty Management

Questions?

Interactive Worked Example

Building a House Extension

Brief:Extend a house to double the size of the kitchen and provide a

conservatory style dining room

Process

1 - Agree the Function of the Project

2 - Identify uncertainties

3 - Rank uncertainties

4 - Develop management responses and actions for the key uncertainties

5 - Uncertainty Analysis

6 - Review the outcome from the process

Function Analysis

• What is the project function?– Increase Space

• Extend Kitchen– Provide storage– Additional sink– Informal dining

• Provide Dining Room– Entertaining Space– Conservatory– Garden doors

Identification

• Identify Uncertainties

• Negative– Disruption to the household– Delivery is later than expected

• Positive– larger extension possible than envisaged– remodelled garden provided if work

undertaken in summer

Ranking

-9 -6 -3 H (3) 3 6 9

-6 -4 -2 M (2) 2 4 6

-3 -2 -1 L (1) 1 2 3

H(-3) M(-2) L(-1)

Prob

Impact L (1) M (2) H (3)

(50-100K) (10-50K) <(10K) Cost <10K 10K-50K 50K-100K

(1 - 2wks) (3d - 1wk) < (3days) Time < 3 days 3d - 1wk 1 - 2wks

Management

• How do you minimise the risks and ensure the opportunities occur?

– Review the project in line with the uncertainties

– Action Planning– Uncertainty Manager to ensure benefits

are achieved

Uncertainty Analysis

• Evaluate the actual time and cost changes that could be achieved

• Model these using Monte Carlo Risk Analysis Software

• Include an uncertainty range within the project to ensure accurate reporting

Heads or Tails

Uncertainty Management

Questions?

For further information Emma Major

Major Value Consultancy14 Allonby Close, Lower Earley

Reading RG6 3BY. UK

emma@majorvalue.co.uk+44(0)118 926 0673