James A.

This recommended practice (RP) of AACE International (AACE) defines a quantitative risk analysis (QRA) maturity model (QRAMM) for assessing the level of capability for quantifying the uncertainty and risks associated with projects, programs and portfolios within the risk management (RM) function of a capital investment or project management organization. Maturity models for general risk management are widely published, but less common for the QRA step of RM processes (such as presented in… Show more

This recommended practice (RP) of AACE International (AACE) defines a quantitative risk analysis (QRA) maturity model (QRAMM) for assessing the level of capability for quantifying the uncertainty and risks associated with projects, programs and portfolios within the risk management (RM) function of a capital investment or project management organization. Maturity models for general risk management are widely published, but less common for the QRA step of RM processes (such as presented in chapter 7.6 the AACE International (AACE®) Total Cost Management (TCM) Framework). This RP is intended to fill that gap Show less

Affordable, powerful computing and the widespread availability of quantitative risk analysis
(QRA) software has helped democratize data analytics in project delivery. This, in itself, is great
for the project controls profession and industry at large. However, problems arise when:
a) project simulations are created without a thorough appreciation of the need for ongoing or continuing project risk management (CPRM),
b) risk analysts embark on risk computing before establishing the… Show more

Affordable, powerful computing and the widespread availability of quantitative risk analysis
(QRA) software has helped democratize data analytics in project delivery. This, in itself, is great
for the project controls profession and industry at large. However, problems arise when:
a) project simulations are created without a thorough appreciation of the need for ongoing or continuing project risk management (CPRM),
b) risk analysts embark on risk computing before establishing the foundation in a competent SRA‐ready schedule,
c) identities and parameters about risks are collected within an environment where individual SMEs cannot or will not provide their candid opinions, or more simply,
d) risk terminology or processes are invoked that generate bias or noise, undermining risk data quality, potentially, creating more harm than good.
This paper will describe the means for ensuring a mathematically unambiguous and traceable rationale for establishing contingency, with relevance that extends into and throughout project delivery, providing protection against known risk and resilience in the face of emerging risk. This approach is underpinned by integrated cost and schedule risk analysis as the primary method of modeling before project approval and, conducted in such a way that minimizes motivated
reasoning and establishes a data feedback loop to support:
1) quantitative risk management (QRM),
2) increasingly predictable projects outcomes and, ultimately,
3) a risk‐based competitive advantage. Show less

The adage goes that, "you can't manage what you can't measure". Furthermore, project teams cannot reasonably measure uncertainty if it is not clearly described. Additionally, the worthiness of an entire risk management program is in jeopardy if team members do not have faith that they are working to manage risks that matter. This paper proposes a three-step test that decision and risk management (DRM) practitioners can employ to verify risk relevance. This simple work process, focusing on… Show more

The adage goes that, "you can't manage what you can't measure". Furthermore, project teams cannot reasonably measure uncertainty if it is not clearly described. Additionally, the worthiness of an entire risk management program is in jeopardy if team members do not have faith that they are working to manage risks that matter. This paper proposes a three-step test that decision and risk management (DRM) practitioners can employ to verify risk relevance. This simple work process, focusing on authenticity, topicality and conformability, will help project teams overcome many of the pitfalls encountered when attempting to either perform realistic quantitative risk assessments, make risk-informed decisions or facilitate a long-term continuous risk management program. Show less

Economists predict that the Fourth Industrial Revolution (i.e. Industry 4.0) will cause fundamental disruption. Within the Engineering and Construction sector, a proliferation of data streams will provide new levels of diagnostic and predictive insight, increasing efficiency, decreasing uncertainty and improving the likelihood of successful project delivery. New technologies promise to make the theory of risk intelligent strategies a possibility for both companies large and small. However… Show more

Economists predict that the Fourth Industrial Revolution (i.e. Industry 4.0) will cause fundamental disruption. Within the Engineering and Construction sector, a proliferation of data streams will provide new levels of diagnostic and predictive insight, increasing efficiency, decreasing uncertainty and improving the likelihood of successful project delivery. New technologies promise to make the theory of risk intelligent strategies a possibility for both companies large and small. However, studies frequently highlight that the E&C sector is a technological laggard. Additionally, for this sector, the most significant barrier to digital progress is the lack of an overall strategy. To prepare for disruptive change in the profession, this paper will explore: a) goals for data science capability improvement, b) how project controls professionals can develop and lead an effective digital strategy, c) process steps for effective data science, d) opportunities for employing machine intelligence throughout the investment funnel, e) minimally viable metrics to support decision and risk management between entities. Ultimately, the paper will advocate that the association consolidates related white papers and develops a Recommended Practice, guiding members on the skills and knowledge required to perform Total Cost Management Analytics (TCMA) and deliver effective, actionable insight that reduces capital project risk and uncertainty. Show less

Organizations who rely on the successful delivery of capital assets, need to set stretch goals that can help improve their capability and develop or maintain a competitive advantage. Dr. D. Hillson once likened the successful application of a maturity model to, "walking up the down escalator". This paper will review a high-level QRAMM or Quantitative Risk Assessment Maturity Model that describes the full spectrum of capabilities including: reactive, ad-hoc, centralized, mature and optimized… Show more

Organizations who rely on the successful delivery of capital assets, need to set stretch goals that can help improve their capability and develop or maintain a competitive advantage. Dr. D. Hillson once likened the successful application of a maturity model to, "walking up the down escalator". This paper will review a high-level QRAMM or Quantitative Risk Assessment Maturity Model that describes the full spectrum of capabilities including: reactive, ad-hoc, centralized, mature and optimized. The strategies and capabilities presented in this paper offer a Risk-based Kaizen approach, helping DRM practitioners identify performance gaps and develop plans for QRA capability improvement. Show less

This recommended practice (RP) of AACE International defines the expectations, requirements, and practices for developing a risk management (RM) quality program. This RP will identify the quality assurance (QA) process, quality control (QC) process, and related risk management auditing methods for a capital asset portfolio, program or project management organization. The RP expands on TCM sections 11.4, Quality and Quality Management and 11.5, Value Management and Value Improving Practices… Show more

This recommended practice (RP) of AACE International defines the expectations, requirements, and practices for developing a risk management (RM) quality program. This RP will identify the quality assurance (QA) process, quality control (QC) process, and related risk management auditing methods for a capital asset portfolio, program or project management organization. The RP expands on TCM sections 11.4, Quality and Quality Management and 11.5, Value Management and Value Improving Practices (VIPs) as applicable to the Risk Management process as described in TCM section 7.6. It includes practices for planning how to develop and implement a quality assurance and quality control platform and a proper auditing program for risk management within a project, a program, or a portfolio. Emphasis will be on a continuous improvement suite of tools aligned with quality management principles applied to the risk management process. Show less

This recommended practice (RP) of AACE International defines the contract risk allocation principles as applied in engineering, procurement and construction (EPC). Such principles address for example; contract basics, legal risk allocation principles, general risk allocation principles, typical contract forms, common contract risks, and quantitative contract risk assessment. Much of the discussion focuses on construction; however, the principles apply to contracts for any element of an EPC… Show more

This recommended practice (RP) of AACE International defines the contract risk allocation principles as applied in engineering, procurement and construction (EPC). Such principles address for example; contract basics, legal risk allocation principles, general risk allocation principles, typical contract forms, common contract risks, and quantitative contract risk assessment. Much of the discussion focuses on construction; however, the principles apply to contracts for any element of an EPC project.

This RP is intended to provide guidelines for making equitable contract risk allocations that reduce the potential for disputes and enhance the likelihood for project success.

This RP summarizes and clarifies contract risk allocation practices in the context of the TCM Framework and risk management processes. It has been developed as a reference or overview document and may not be relied upon as legal or specific risk action advice. In addition, it is recommended to seek the advice and input of experts in contracting, claims, and dispute resolution as appropriate. Show less

This recommended practice (RP) of AACE International defines practices for developing and implementing a risk management plan for any type of project for any project phase. A risk management plan defines how the project team intends to implement its applicable risk management process. This RP assumes the process is aligned with TCM Framework section 7.6 Risk Management (e.g. plan, assess, treat, and control risks over the project life cycle.) It is recommended that the risk management plan be… Show more

This recommended practice (RP) of AACE International defines practices for developing and implementing a risk management plan for any type of project for any project phase. A risk management plan defines how the project team intends to implement its applicable risk management process. This RP assumes the process is aligned with TCM Framework section 7.6 Risk Management (e.g. plan, assess, treat, and control risks over the project life cycle.) It is recommended that the risk management plan be part of an overall project execution plan (PEP) or similar integrated project plan to better ensure project objectives are achieved.

The risk management plan describes specific processes, procedures, organization, tools and systems that guide and support effective risk management throughout the life cycle of the project.

This RP is intended to provide guidelines (i.e., not a standard) for developing a project risk management plan. This will provide a basis for what most practitioners would consider to be good practices that can be relied upon, and that they would recommend be considered for use where applicable.

According to TCM, “the risk management plan must describe what the project or asset management team recognizes as being the risk management objective so that it may be incorporated within the overall project execution plan and/or project charter.” The time invested in preparing, documenting, and communicating a solid risk management plan will increase the success of the execution of the project. Show less

This recommended practice (RP) of AACE International defines the expectations, requirements, and practices for risk treatment. This RP follows the steps identified in RP 62R-11, Risk Assessment Identification and Qualitative Analysis. In this process, an action owner is assigned who, working with the risk team, is responsible for devising and implementing risk response plans for those risks that were not deem acceptable in the qualitative analysis screening step. It expands on TCM Framework… Show more

This recommended practice (RP) of AACE International defines the expectations, requirements, and practices for risk treatment. This RP follows the steps identified in RP 62R-11, Risk Assessment Identification and Qualitative Analysis. In this process, an action owner is assigned who, working with the risk team, is responsible for devising and implementing risk response plans for those risks that were not deem acceptable in the qualitative analysis screening step. It expands on TCM Framework section 7.6.2.3 Risk Treatment and leads into 7.6.2.4 Risk Control.

In TCM, the risk management process is applied in the strategic asset management, as defined in RP 10S-90, Cost Engineering Terminology and project control processes. In the strategic arena, the project has not yet been selected, so the treatment focus tends to be on devising alternative asset or project solutions that mitigate the risks while meeting business objectives and requirements. In project control, the risk treatment focus is more on tactical refinements (per TCM 3.3.1.4 - identify creative alternative solutions, leveraging value engineering for example, and, through a formal quantitative analysis process) of project scope, conditions, plans and deliverables as well as developing contingency plans. This RP is intended to be generic to either focus area or any project scope.

This RP is intended to provide guidelines, not a standard, for including risk management during the planning of a project or asset management that most practitioners would consider to be good practices that can be relied on, and would recommend for use. It will provide a foundation for risk control.

This RP will outline the processes and practices but is not a detailed “how-to”. In that respect it will most benefit those that are new to risk management or decision and risk management professionals who want to refresh their knowledge of recommended practices. Show less

The TCM Framework: An Integrated Approach to Portfolio, Program and Project Management is a structured, annotated process map that explains each practice area of the cost engineering field in the context of its relationship to the other practice areas.

At a time of economic uncertainty, the most successful and effective organizations offer the market predictability. In order to achieve predictability in project outturn, risk management is given equal importance alongside cost and schedule control. In turn, improved risk control and growing levels of risk intelligence are best facilitated by ongoing measurement.

In this paper, the measurement of risk will be discussed (in a project or construction and engineering context) to help… Show more

At a time of economic uncertainty, the most successful and effective organizations offer the market predictability. In order to achieve predictability in project outturn, risk management is given equal importance alongside cost and schedule control. In turn, improved risk control and growing levels of risk intelligence are best facilitated by ongoing measurement.

In this paper, the measurement of risk will be discussed (in a project or construction and engineering context) to help reinforce process integrity. Methods for the effective capture and sharing of risk data will be reviewed in conjunction with critical success factors, common key risk indicators (KRIs) and other widely held risk metrics and benchmarks. In addition, the benefit of periodic risk-based project audits will be explored.

After establishing a link between risk and knowledge, the merits of a central risk management library or knowledge base for professional risk management practitioners will be considered with the goal of improving risk management implementation effectiveness at the organizational and industry level. Show less

This recommended practice (RP) of AACE International defines the expectations, requirements, and practices for identifying and qualitatively analyzing risk drivers as part of the overall risk management process. It expands on TCM Framework section 7.6.2.2 Risk Assessment, sections a) Risk Identification and b) Qualitative Risk Analysis, covering common practices and tools such as brainstorming, interviews, and checklists. It also covers documentation for and the deliverables from the process… Show more

This recommended practice (RP) of AACE International defines the expectations, requirements, and practices for identifying and qualitatively analyzing risk drivers as part of the overall risk management process. It expands on TCM Framework section 7.6.2.2 Risk Assessment, sections a) Risk Identification and b) Qualitative Risk Analysis, covering common practices and tools such as brainstorming, interviews, and checklists. It also covers documentation for and the deliverables from the process step (e.g., risk register). It does not cover quantification of risks or risk treatment planning.

Risk identification may require skills and knowledge of behavioral psychology because methods such as brainstorming and Delphi must deal with participant biases.

This RP is intended to provide guidelines, not a standard, for developing a process to identify project risks and perform qualitative risk analysis that most practitioners would consider to be practices that can be relied upon and that they would recommend be considered for use. It provides a foundation for developing risk treatment plans as described in RP 63R-11, Risk Treatment. Ideally, the risk management process provides an opportunity for all stakeholders and contracting parties to work together and manage project risk for their collective benefit. The implementation of all or part of this RP will depend on the size and complexity of the project but the basic processes described should be used in all cases. Show less

This document defines the recommended approaches to disseminate, document and share, in a systematic, structured manner, the information which is available at the completion of a Project or at Proposal completion, whether or not this has resulted in contract award or loss to a competing party.
For Projects being completed, contrary to this being thought of as the last step in the Project implementation cycle, this is actually the point where a contribution to future success and sound Risk… Show more

This document defines the recommended approaches to disseminate, document and share, in a systematic, structured manner, the information which is available at the completion of a Project or at Proposal completion, whether or not this has resulted in contract award or loss to a competing party.
For Projects being completed, contrary to this being thought of as the last step in the Project implementation cycle, this is actually the point where a contribution to future success and sound Risk Management actually begins. Before embarking upon any new Proposal, part of the pre-bid Risk Management Process should cause us to ask ourselves questions along the lines of – what happened last time?, what worked well?, what didn't go well?, what happened with this particular Client?, what happened at this particular Site, Area, Region, Country or Project-Type or Size or Similar or Technology or Contract type? Were our “As-Sold” Estimate Allowances, Contingency, Risk Allowances and Funded Liabilities adequate or deficient? Did Contract clauses which we found acceptable at signing, in the event, actually “eat our lunch“? The best source of all of this information and data is in a properly prepared and readily retrievable Project Close-Out Report and Summary of Lessons Learned from previous work.
In this document we examine what ECRI considers to be an outline of Best Practice for Proposal and Project Close-Out / Lessons Learned reporting. Show less

This article provides information on the knowledge-based proactive project risk management in the construction industry. The hard and soft benefits of project risk management are explored. The philosophy of proactive project risk management is explored. A brief history of risk management is reviewed, as well as the Hillson's risk management maturity model. Ultimately, the knowledge-based proactive risk management of KBR Inc. is discussed.
The discussion illustrates that knowledge-based… Show more

This article provides information on the knowledge-based proactive project risk management in the construction industry. The hard and soft benefits of project risk management are explored. The philosophy of proactive project risk management is explored. A brief history of risk management is reviewed, as well as the Hillson's risk management maturity model. Ultimately, the knowledge-based proactive risk management of KBR Inc. is discussed.
The discussion illustrates that knowledge-based proactive risk management is most effective when it is employed in conjunction with the continuous support and input from all functional units within an organization. It is a facet of project management from which only the most mature organizations can fully benefit. Show less