Proactive Risk Analysis

Abstract

Construction projects have to be performed in complex dynamic environments that are often characterized by uncertainty and risks. The literature contains ample evidence that many construction projects fail to achieve their time, budget and quality goals. A study by Maes revealed that inferior planning was the third major cause of company bankruptcies in the Belgian construction industry. It is possibilities that are being accommodated. It is management's job to do the planning that will accommodate the possibilities. The customer is the final judge, but internal goals should be to a higher level than customer expectations.

Proactive Risk Analysis

Introduction

We describe a methodology for risk assessment and proactive/reactive construction project scheduling. Risk management in the construction industry has mostly been used for measuring the impact of potential risks on global project parameters such as time and costs. The literature provides both fuzzy approaches, mixed quantitative/qualitative assessment and risk response methods. Unlike these approaches, we rely on an integrated methodology that not only allows for uncertainty estimation at the level of the individual project activities, but also uses this input for a proactive scheduling system to generate a robust baseline schedule that is sufficiently protected against anticipated disruptions that may occur during project execution while still guaranteeing a satisfactory project makespan performance. (Warszawski and Sacks 2004)

The methodology relies on a computer supported risk management system that uses a graphical user interface to support project management in the identification, analysis and quantification of the major project risk factors and to derive the probability of their occurrence as well as their impact on the duration of the project activities. Using estimates on the marginal cost of activity starting time disruptions provided by project management, a buffer insertion algorithm is used to generate a proactive baseline schedule that is sufficiently protected against anticipated disruptions that may occur during project execution without compromising on due date performance.

Methodology

In order to anticipate the risks involved with construction projects it is necessary to quantify them. In practice, software packages ask the project managers to quantify each activity independently. If it is a large project, this is a gigantic work. To minimize this workload we propose a new approach. (Vonder 2006)

We minimize the workload by grouping activities with similar risk profiles. This grouping simplifies the subsequent risk analysis process, which can now be performed at the activity group level rather than at the level of each individual project activity. Secondly, we identify and quantify the risks on activity group level. The quantification approach is somewhat similar to the minimalist first pass approach of Chapman and Ward . Similar to theirs, our approach expects project management to provide the probability of occurrence and the impact of the risk factors on the activities of an activity group under a best case scenario and a worst case scenario. This results in probability density functions for each risk associated with an activity group. Finally, the probability density functions of the impacts for all detected risks are projected on the individual project activities thus yielding the ...