Innovative Contracting Risk Management Best Practices

Michigan Department of Transportation

Innovative Contracting

Risk Management Best Practices

Final Research Report

March 11, 2022

Project Number OR#20-004

TECHNICAL REPORT DOCUMENTATION PAGE

1. Report No.

SPR-1711

2. Government Accession No.

N/A

3. Recipient’s Catalog No.

N/A

4. Title and Subtitle

Innovative Contracting Risk Management Best Practices and

Guidance Documents

5. Report Date

December 20, 2021

6. Performing Organization Code

N/A

7. Author(s)

Andrew R. Keetley, MSCE, P.E.

Glenn A. Goldstein, MSCE, P.E., PMP

8. Performing Organization Report

No.

N/A

9. Performing Organization Name and Address

RS&H Michigan, Inc.

36524 Grand River Avenue

Suite B

Farmington Hills, MI 48335

10. Work Unit No.

N/A

11. Contract or Grant No.

Contract 2020-0673

12. Sponsoring Agency Name and Address

Michigan Department of Transportation (MDOT)

Research Administration

8885 Ricks Road

P.O. Box 33049

Lansing, Michigan 48909

13. Type of Report and Period

Covered

Final Report (August 2020 to

December 2021)

14. Sponsoring Agency Code

N/A

15. Supplementary Notes

Conducted in cooperation with the U.S. Department of Transportation, Federal Highway

Administration. MDOT research reports are available at www.michigan.gov/mdotresearch.

16. Abstract

The Michigan Department of Transportation (MDOT) has been successfully applying risk

management on innovative contracting methods and was looking to formalize and build upon

its current risk management guidance. Research was conducted to document industry risk

management best practices to provide recommendations for developing and implementing a

comprehensive Risk Management Program for the MDOT Innovative Contracting Unit (ICU).

These best practices were used to develop standardized guidance documents and tools to

better assist project managers in managing project risk to improve project delivery on a

consistent basis. A Risk Management Workbook was developed consisting of an Excel-based

tool of interactive and linked risk management process workflows and scalable templates to be

used across various project types, sizes, and throughout all phases of project development.

Risk reports provide a summary of high priority risks and the status of key project development

activities. Training and testing of the Risk Management Workbook occurred during a pilot

project risk workshop providing MDOT staff access to the tool and a demonstration of the risk

management process and workflows. A training module was produced to provide MDOT staff

a self-guided walkthrough of the tool or training can be combined with project risk workshop

facilitation.

17. Key Words

Alternative Project Delivery, Best Practices,

Contingency, Innovative Contracting, Risk

Management, Risk Register, Transportation

18. Distribution Statement

No restrictions. This document is also

available to the public through the

Michigan Department of Transportation.

19. Security Classif. (of this report)

Unclassified

20. Security Classif. (of this

page)

Unclassified

21. No. of Pages

22. Price

N/A

Form DOT F 1700.7 (8-72) Reproduction of completed page authorized

iii

DISCLAIMER

This publication is disseminated in the interest of information exchange. The Michigan

Department of Transportation (hereinafter referred to as MDOT) expressly disclaims any

liability, of any kind, or for any reason, that might otherwise arise out of any use of this

publication or the information or data provided in the publication. MDOT further disclaims any

responsibility for typographical errors or accuracy of the information provided or contained

within this information. MDOT makes no warranties or representations whatsoever regarding

the quality, content, completeness, suitability, adequacy, sequence, accuracy or timeliness of

the information and data provided, or that the contents represent standards, specifications, or

regulations.

This material is based upon work supported by the Federal Highway Administration under SPR

OR16-006. Any opinions, findings and conclusions or recommendations expressed in this

publication are those of the author(s) and do not necessarily reflect the views of the Federal

Highway Administration.

ACKNOWLEDGEMENTS

This project was funded by the Michigan Department of Transportation (MDOT). The authors

would like to acknowledge the support and effort of Mr. Ryan Mitchell, Innovative Contracting

Manager, for initiating this research and for his continuous assistance and support during the

project. The authors also wish to acknowledge Mr. Michael Townley and the MDOT Research

Advisory Panel members for their continuous support in contributing to the advancement of

this study. Their contributions towards the success of the project are greatly appreciated.

 
v 
TABLE OF CONTENTS 
DISCLAIMER .................................................................................................................. iii 
ACKNOWLEDGEMENTS ............................................................................................... iv 
LIST OF FIGURES ........................................................................................................ vii 
ACRONYMS .................................................................................................................. viii 
EXECUTIVE SUMMARY ................................................................................................ ix 
 INTRODUCTION ...................................................................................................... 1 
1  Background ....................................................................................................... 1 
2  Objectives ......................................................................................................... 1 
3  Scope ................................................................................................................ 2 
 RISK MANAGEMENT INVESTIGATION PHASE ..................................................... 3 
1  Introduction ....................................................................................................... 3 
2  Current State of Practice ................................................................................... 3 
3  MDOT Interviews .............................................................................................. 4 
4  Public Sector Outreach ..................................................................................... 6 
5  FHWA Interviews .............................................................................................. 9 
6  Contractor Interviews ...................................................................................... 12 
7  Literature Review and Desktop Survey ........................................................... 15 
7.1  Colorado Department of Transportation ................................................. 16 
7.2  Florida Department of Transportation ..................................................... 17 
7.3  Georgia Department of Transportation ................................................... 18 
7.4  Minnesota Department of Transportation ............................................... 19 
7.5  Missouri Department of Transportation ................................................... 20 
7.6  Nevada Department of Transportation .................................................... 21 
7.7  South Carolina Department of Transportation ........................................ 22 
7.8  Texas Department of Transportation ...................................................... 23 
7.9  Virginia Department of Transportation .................................................... 24 
7.10  Washington Department of Transportation ............................................. 25 
8  Peer Exchange Workshop .............................................................................. 26 
8.1  Topics ..................................................................................................... 26 
8.2  Discussion and Key Takeaways ............................................................. 26 
9  Recommendations for Risk Management Development Phase ...................... 31 
 RISK MANAGEMENT DEVELOPMENT PHASE ................................................... 35 
1  Introduction ..................................................................................................... 35 
2  Risk Management Toolbox ............................................................................. 36 
3  Risk Management Workbook .......................................................................... 37 
3.1  Risk Management Workbook Introduction (Intro Worksheet) ................. 37 

 
vi 
3.2  Risk Management Best Practices (Worksheet 1.0)................................. 37 
3.3  Risk Management Workflow (Worksheet 2.0) ......................................... 37 
3.4  Risk Management Plan (Worksheet 3.0) ................................................ 37 
3.5  Risk Management Procedure (Worksheet 4.0) ....................................... 38 
3.6  Risk Documentation (Worksheets 5.0 through 5.4) ................................ 38 
3.7  Risk Reporting (Worksheets 6.0 through 6.2) ......................................... 38 
4  Risk Management Plan ................................................................................... 38 
5  Risk Management Procedure ......................................................................... 40 
5.1  Identification Step ................................................................................... 40 
5.2  Assessment Step .................................................................................... 41 
5.3  Response Step ....................................................................................... 42 
6  Documents, Templates and Tools .................................................................. 43 
6.1  Risk Register .......................................................................................... 43 
6.2  Risk Breakdown Structure ...................................................................... 44 
6.3  Rating Guidelines ................................................................................... 45 
6.4  Risk Contingency and Schedule Impact Calculation .............................. 47 
6.5  High Priority Risks Report ....................................................................... 48 
6.6  Risk Assessment Checklist Report ......................................................... 49 
 RISK MANAGEMENT IMPLEMENTATION PHASE............................................... 50 
1  Introduction ..................................................................................................... 50 
2  Implementation Plan ....................................................................................... 50 
2.1  Training Phase 1..................................................................................... 50 
2.2  Training Phase 2..................................................................................... 53 
 CONCLUSION ....................................................................................................... 54 
REFERENCES .............................................................................................................. 55 
APPENDIX A – KEY RISK MANAGEMENT BEST PRACTICES .................................. 58 
APPENDIX B – RISK MANAGEMENT WORKBOOK .................................................... 60 
 

 
vii 
LIST OF FIGURES 
Figure 2.2-1: MDOT’s Risk Assessment and Allocation Process .................................... 3 
Figure 2.2-2: MDOT’s General Risk Assessment Process Steps .................................... 4 
Figure 3.3-1: Risk Management Workbook Layout ........................................................ 37 
Figure 3.4-1: Risk Management Plan Icon Legend ........................................................ 39 
Figure 3.4-2: Project Delivery Phase Workflow ............................................................. 39 
Figure 3.4-3: Risk Management Plan for the Project Development Phase .................... 40 
Figure 3.5-1: Risk Management Procedure Showing the Risk Identification Step ......... 41 
Figure 3.5-2: Risk Management Procedure Showing the Risk Assessment Step .......... 41 
Figure 3.5-3: Risk Management Procedure Showing the Risk Response Step ............. 42 
Figure 3.6-1: Risk Register ............................................................................................ 43 
Figure 3.6-2: Risk Breakdown Structure ........................................................................ 44 
Figure 3.6-3: Rating Descriptions and Severity Matrix ................................................... 46 
Figure 3.6-4: Assessment Rating Bounds and Values .................................................. 46 
Figure 3.6-5: Minimum and Maximum Offsets from Most Likely Values ........................ 47 
Figure 3.6-6: Contingency Calculation Used to Capture Event Driven Risks................. 47 
Figure 3.6-7: High Priority Risk Report .......................................................................... 48 
Figure 3.6-8: Risk Assessment Checklist Report ........................................................... 49 
Figure 4.2-1: Pre-Risk Workshop Questionnaire Format ............................................... 52 
Figure 4.2-2: Pre-Risk Workshop Questionnaire Qualitative Ratings Scale .................. 52 
 
 

viii

ACRONYMS

ATC Alternative Technical Concept

CDOT Colorado Department of Transportation

CMGC Construction Manager General Contractor

CPM Critical Path Method

CRA Cost Risk Assessment

CTB Commonwealth Transportation Board

DB Design-Build

DBB Design-Bid-Build

FDOT Florida Department of Transportation

FHWA Federal Highway Administration

FOPI Finding of Public Interest

GDOT Georgia Department of Transportation

ICU Innovative Contracting Unit

MDOT Michigan Department of Transportation

MnDOT Minnesota Department of Transportation

MoDOT Missouri Department of Transportation

NDOT Nevada Department of Transportation

P3 Public-Private Partnership

PDM Project Delivery Method

PDSM Project Delivery Selection Matrix

PM Project Manager

RBCE Risk-Based Cost Estimate

RFP Request For Proposal

RID Reference Information Documents

RM Risk Management

ROW Right-Of-Way

SCDOT South Carolina Department of Transportation

SME Subject Matter Expert

TxDOT Texas Department of Transportation

VDOT Virginia Department of Transportation

WSDOT Washington Department of Transportation

EXECUTIVE SUMMARY

Introduction

Risk management is a project planning and control function that includes proactive efforts to

identify, mitigate, and control risk throughout the project delivery process. The Michigan

Department of Transportation (MDOT) has been successfully applying risk management on

innovative contracting methods and was looking to formalize and build upon its current risk

management guidance.

Research was conducted to document industry risk management best practices to provide

recommendations for developing and implementing a comprehensive Risk Management

Program (“RM Program”) for the MDOT Innovative Contracting Unit (ICU). These best

practices were used to develop standardized guidance documents and tools to better assist

project managers (PM) in managing project risk to improve project delivery on a consistent

basis. Making project risk management more effective and efficient for PMs and staff will help

to improve MDOT's business practices, project outcomes, and streamline project delivery.

Key objectives included:

• Identifying national transportation project risk management best practices

• Documenting effective transportation project risk management methods that can be

applied today in Michigan

• Improving and building upon MDOT’s existing risk management guidance

• Identifying gaps in the MDOT ICU RM Program

• Focusing on customizing the guidance for PMs that are not to be an administrative

burden

• Recommending an implementation strategy for the MDOT ICU RM Program

Risk Management Investigation Phase

The purpose of the Risk Management Investigation Phase was to document risk management

best practices currently in use and develop a set of risk management best practice

recommendations for the Risk Management Development Phase. The team performed the

following activities:

• Conducted MDOT staff interviews of representatives in both traditional and alternative

project delivery.

• Performed public sector industry outreach with select transportation agencies currently

using risk management processes to solicit feedback on ongoing work and lessons

learned from their RM Programs.

• Conducted interviews with FHWA representatives to gain national and local perspective

on risk management practices.

• Conducted interviews with representatives from the local and national contracting

community for their experiences with MDOT projects and to gain their perspective on

contracts and related risk elements.

• Conducted desktop surveys of the current literature and federal and state guidance to

identify risk management best practices currently being performed at the program and

project levels on alternative delivery projects.

• Facilitated a peer exchange workshop with individuals from federal and state agencies,

and representatives from MDOT with a focus on the identification and use of risk

management best practices and identify the effectiveness of risk management tools

currently in use on those projects and programs.

The result of the Risk Management Investigation Phase was a summary of the best practice

recommendations to implement in the development of risk management tools and processes

to develop and formalize MDOT ICU’s RM Program. The following list highlights many of the

best practice findings:

• Obtain leadership support to help program acceptance, region buy-in and promote risk

philosophy.

• Develop risk management processes, guidance, and training by project phase.

• Tailor a scalable and customizable RM Program to account for project size, cost, region,

phase, and overall project risk profile.

• Develop processes and tools that are simple, standardized and documented.

• Keep risk management documentation concise and move away from large guidance

documents.

• Emphasize early project team collaboration and risk management discussions at the

inception of a project.

• Begin the stakeholder/public engagement process early and continue through project

lifecycle.

• Identify risks of greatest concern and focus the attention on critical items.

• Focus on mitigating schedule risks.

• Provide information to the group prior to a risk workshop to prepare and be ready for

interactive discussion.

• Hold risk workshops at major phases and/or milestones.

• Include subject matter experts (SME) from multiple disciplines in risk workshops to help

cover all project areas.

• Encourage discussion of opportunity risks that benefit the project.

• Utilize risk-based cost estimates (RBCE) to help determine risk-based contingencies.

• Update contingencies to reflect assumptions used in the estimates.

Risk Management Development Phase

The objective of the Risk Management Development Phase was to develop a set of formal risk

management guidance documents, templates and tools based on the best practices identified

from the Risk Management Investigation Phase. These included the following items:

• Innovative contracting guidance document for use statewide that defines risk

management practices for MDOT staff.

• Risk management templates and tools including a project risk management plan (“RM

Plan), risk breakdown structure, risk assessment matrix, and risk register.

• Specific templates, tools and forms to be utilized to support MDOT risk identification,

analysis and evaluation, response planning, mitigation, monitoring and reporting

• Training materials and conduct training on the use of templates, tools, and other

deliverables.

The approach consisted of the development of a Risk Management Toolbox (“RM Toolbox”)

consisting of an Excel-based Risk Management Workbook (“RM Workbook”) of interactive and

linked Risk Management Workflows (“RM Workflow”) for each phase of project delivery. The

RM Workbook was specifically tailored for implementation by PMs to address gaps in MDOT’s

current RM Program and to improve and build upon MDOT’s existing risk management

guidance.

A key research objective was to focus on customizing the guidance for PMs to successfully

implement risk management on projects on a consistent basis, establish formal risk

management processes and procedures, and to provide PMs with a formal set of guidance

documents and tools to effectively implement risk management.

The RM Workbook is organized into the following seven sections:

• Risk Management Workbook Introduction (Intro Worksheet): Provides a general risk

overview, purpose of the RM Workbook, contents of the RM Workbook, and its use for

MDOT projects.

• Risk Management Best Practices (Worksheet 1.0): Provides a graphical summary the

key risk management best practices.

• Risk Management Workflow (Worksheet 2.0): Contains the major risk management

process steps of the RM Plan, including identification and selection, development,

procurement, and implementation.

• Risk Management Plan (Worksheet 3.0): Contains formal instructions for implementing

the major risk process steps, including Initial Risk Meeting, Risk Review and Planning,

Risk Analysis and Allocation Meetings, and Risk Updates and Reporting.

• Risk Management Procedure (Worksheet 4.0): For use at risk workshops, consisting of

risk identification, risk assessment, and risk response planning.

• Risk Documentation (Worksheets 5.0 through 5.4): Contains the templates and tools to

use for documenting the risk management process as part of the Risk Management

Procedure (“RM Procedure”), including a Risk Register template (“Register”), Risk

Breakdown Structure template (“RBS”), Rating Guidelines template, and a Risk

Contingency and Schedule Impact Calculation template (“Contingency Calculation”).

• Risk Reporting (Worksheets 6.0 through 6.2): Contains the reporting templates,

including a summary list of High Priority Risks and a Risk Assessment Checklist

(“Checklist”).

Risk Management Implementation Phase

The Risk Management Implementation Phase consisted of developing and delivering an

interactive training program on the RM Workbook and associated templates, documents and

tools while providing examples of best practices and lessons learned on projects and programs

in conjunction with the instruction. The development approach for the training was based on

the findings from the Risk Management Investigation Phase and Risk Management

Development Phase and to remain consistent with MDOT’s Innovative Construction

xii

Contracting Guide. The RM Program and training presentation were also developed consistent

with the seven processes in the Project Management Body of Knowledge (PMBOK) area for

risk management.

Draft versions of the RM Workbook were released throughout the Risk Management

Development Phase and Risk Management Implementation Phase to provide MDOT staff an

opportunity to train and provide feedback creating an interactive process of MDOT staff

learning to use the tools and RS&H improving the tools. This helps implement a feedback loop

for continuous improvement of the RM Program.

There were two stages developed for the Risk Management Implementation Plan. The first

stage was focused on providing risk management training using the US-131 Design-Build

Project as a pilot project in a risk workshop setting. This gave MDOT staff and the project team

the opportunity to execute early risk management activities during the project Development

Phase by observing the four-step RM Plan and utilizing the documents and tools provided

within the RM Workbook.

The project team participated in Initial Risk Meetings and documented risks in the Register. In

step with best practices, a pre-workshop survey was distributed to the project team populated

with key project risks identified in an Initial Risk Meeting. The team reviewed the existing risks

and assigned a rating level to each risk. The responses provided to this questionnaire were

used to initiate the risk identification discussions at the workshop. To continue with pre-

workshop activities and to provide project team members with additional information leading

into the workshop, RS&H set up a series of ten breakout meetings individualized per risk

category to interview SMEs on the findings from the risk survey.

The objective of the two-hour workshop was to provide a walkthrough of the RM Workbook as

opposed to a full project assessment. Three risks were selected to train the participants

through the four steps of the RM Plan and three steps of the RM Procedure in order make use

of the risk management process and demonstrate the full project Development Phase RM

Workflow. For each of the three risks, the qualitative ratings were changed in the Register and

the Rating Guidelines were modified to provide training on use of the Contingency Calculation

and the process for calculating the quantitative cost and schedule impacts of Event Driven

Risks. The result of the workshop was a draft risk register for the project team to build upon

and a list of High Priority Risks to use for RM Plan Step 4 – Risk Updates and Reporting.

The second stage of the Implementation Plan was to develop a training module in the form of a

self-guided presentation through the RM Workbook. This enabled the user to step through the

iterative process and in combination with the RM Workbook provided the instructions to

successfully integrate risk management activities into project management. The training

presentation can be customized for use on active projects enabling the training to be

conducted in conjunction with on-going project risk management activities. The RM Workbook

can be used on an active project to conduct a risk workshop and develop a risk register for the

project. The training can be combined with a project risk workshop facilitation, where training is

provided as a morning session followed by a project workshop in the afternoon.

1. INTRODUCTION

Risk management is a project planning and control function that includes proactive efforts to

identify, mitigate, and control risk, including risk response planning, throughout the project

delivery process from early project planning through the identification and selection,

development, procurement, and implementation phases.

Many transportation departments use innovative contracting methods to reduce the costs of

constructing facilities, accelerate project completion schedules, manage project risks efficiently

and to obtain greater certainty regarding future costs. Techniques to identify, evaluate, avoid

and manage risks are critical in achieving this goal.

Michigan Department of Transportation (MDOT) selected RS&H to research and document

industry risk management best practices to identify gaps in current risk management practices

and provide recommendations for developing and implementing a comprehensive Risk

Management Program (“RM Program”) for the MDOT Innovative Contracting Unit (ICU).

MDOT was looking to formalize and build upon its current risk management guidance to better

assist project managers (PM) to manage project risk to improve project delivery on a

consistent basis.

1.1 Background

MDOT has been successfully applying risk management on innovative contracting methods for

several years and has learned many lessons that should be documented. Risk management

processes and procedures have been improved but due to the limited staff within the unit and

the demanding project workload, risk management guidance has not been formalized or

documented. This research provides recommendations and guidance documents to

standardize and formalize the MDOT ICU risk management procedures, making project risk

management more effective and efficient for PMs and staff, improving MDOT's business

practices, reducing project risk to improve project outcomes and streamlining project delivery.

1.2 Objectives

MDOT ICU was seeking to research risk management best practices to develop and formalize

its project risk management procedures and template. The contract deliverables included a

formal set of documented risk management instructions, templates, tools and training

documents.

The study will also improve the institutional understanding of the importance, benefits, and

practicality of risk management and provide guidance to educate and train staff to implement

the recommended best practices.

Documenting the risk management best practices that have been effectively utilized in

Michigan, in other states or internationally for future use in Michigan will help MDOT better

manage project risk to improve its project delivery program.

Key research objectives included:

• Improve and build upon MDOT’s existing risk management guidance.

• Focus on customizing the guidance for PMs that are not to be an administrative burden.

• Identify national transportation project risk management best practices.

• Document effective transportation project risk management methods that can be

applied today in Michigan.

• Identify gaps in the MDOT ICU RM Program.

• Recommend an implementation strategy for the MDOT ICU RM Program.

1.3 Scope

The activities performed under this contract included conducting research and documenting

industry risk management best practices, then providing recommendations for developing and

implementing a comprehensive RM Program for the MDOT ICU.

The deliverables for this contract are intended to foster wider education and buy-in from PMs,

staff, and consultants for MDOT staff to better manage project risk on a consistent basis from

early project planning through the identification and selection, development, procurement, and

implementation phases.

The MDOT ICU currently manages project risks based on project size and complexity, except

for Federal Highway Administration (FHWA) classified Major Projects at $500M and above, for

which FHWA-required risk management protocols are observed.

The scope of work was identified in the project request for proposals (RFP) as follows:

• Conduct a survey of the literature (such as federal and other state guidance documents

as well as scholarly research, industry journals and publications) to identify risk

management best practices.

• Conduct a state of the practice survey of other DOTs.

• Evaluate MDOT’s current state of the practice and documentation needs, including

outreach to Michigan contractor and consultant professional organizations.

• Conduct a peer exchange for technology transfer between identified best practice

states/agencies.

• Develop an innovative contracting engineer’s guidance document for use statewide that

defines risk management practices for MDOT staff.

• Develop risk management templates and tools including, but not limited to, project Risk

Management Plan (“RM Plan”), risk breakdown structure, risk assessment matrix, and

risk register.

• Develop specific templates, tools and forms to be utilized to support MDOT risk

identification, risk analysis and evaluation, risk response planning, risk mitigation, risk

monitoring and reporting, and instructions/training documents for use of all templates

and tools.

• Develop training materials and conduct training on the use of templates, tools, and other

deliverables.

• Develop a research report with summary of findings and recommendations.

2. RISK MANAGEMENT INVESTIGATION PHASE

2.1 Introduction

The purpose of the Risk Management Investigation Phase was to document risk management

best practices currently in use by state agencies and develop a set of risk management best

practice recommendations for the Risk Management Development Phase.

The Risk Management Investigation Phase consisted of the following activities:

• Conducted MDOT staff interviews

• Performed public sector outreach

• Conducted contractor interviews

• Performed literature review and a desktop survey

• Facilitated a peer exchange workshop

These activities are described below. The recommendations for the Risk Management

Development Phase are found at the end of this chapter.

2.2 Current State of Practice

The goal of the Risk Management Investigation Phase was to build upon the current state of

practice, identifying any gaps to identify opportunities to make improvements to the RM

Program at MDOT.

Risk management guidance for the MDOT ICU is in MDOT’s Innovative Construction

Contracting Guide. Appendix C within this guide includes guidelines for the procurement of

design-build (DB) projects and describes a risk assessment and allocation process in the

figure below.

Figure 2.2-1: MDOT’s Risk Assessment and Allocation Process

The guide also provides “General Risk Assessment Process Steps” as shown in Figure 2.2-2.

Figure 2.2-2: MDOT’s General Risk Assessment Process Steps

2.3 MDOT Interviews

Six representatives from the Planning, Design, Construction, and Operations Divisions

involved in both traditional and alternative project delivery were interviewed in small group

sessions for their perspective on the current MDOT risk management procedures and to gain

insight into lessons learned.

Representatives were asked about each of the following topics. The bullet points that follow

represent suggested strategies for a more effective RM Program based upon the responses

and conversations.

1. How are you currently using risk management and to what extent is it being used

within your agency or unit? If risk management practices are not being implemented,

what are some strategies to promoting the use of risk management?

• Risk management is used on large projects as required by FHWA, but not currently on

traditional projects.

• MDOT ICU Leadership reviews Risk Management Reports and keeps the team

accountable to carrying out a risk management approach to projects.

• Need a risk management champion to make sure the teams are working together in a

collaborative environment and holding the teams accountable to carrying out the RM

Program.

• Need a goal/objective - the why - to be clear to the project team.

• Need a documented risk management guide that is not overly lengthy and is user

friendly.

• Need to provide training on a regular basis that focuses primarily on the benefits and

then the process.

2. Do you think MDOT’s current risk management practices are working effectively on

your projects or programs or across the agency as a whole? If not, what are some of

the key hurdles, deficiencies, or barriers that you face implementing risk

management successfully? If not, what are your recommendations for improvements

to overcome those challenges and/or deficiencies?

• Provide better delineation of roles & risks between DOT and contractor. There are grey

areas that could use better definition.

• Find the right balance between prescriptive and performance criteria.

• Provide both DOT and industry training for innovative contracting expectations and

administration.

• Provide a standard program that can be used in all regions and provide consistency

between projects.

• Need more education and widespread release of risk management resources to

improve adoption throughout the DOT.

• The RM Program should be flexible based on both project size and cost but also

location so that risks can be better customized.

• It is important that the RM Program be presented in an easily digestible format, a simple

framework, and that champions for the program are located throughout the

organization, not just at the upper levels.

3. At what stage(s) of project delivery are you using risk management, such as within

the planning process or during the Development or Implementation Phases

(construction and operations)?

• An RM Program can benefit both traditional and innovative project delivery type projects

and should be developed with all project phases in mind.

4. In your experience, what are some of the areas that MDOT could do better in more

effectively responding to risk and mitigating risks before they become issues (e.g.,

scoping, schedule, cost, financing and funding, public/stakeholder involvement)?

• The public and stakeholders tend to be the biggest risk to the project scope, schedule,

and budget and need attention in an RM Program.

5. Do you think more project team coordination and the use of risk management tools

are needed during early project planning and development to address risk?

• Risk management efforts should be scaled based on where you are in the project

lifecycle.

6. How do you think we can customize and tailor our risk management tool kit to meet

the challenges of this new COVID-19 era?

• Training sessions and RM Program rollout should be held online and encourage

engagement through small breakout sessions.

7. What are the key risk items that you feel need to be better addressed in the RFP

documents to reduce the number of claims and disputes (e.g., definition of design

and construction requirements, right-of-way (ROW), environmental commitments,

railroad coordination, differing site)?

• Define who owns railroad risks when plans change between planning and construction.

• Geotechnical and underground elements tend to be the biggest risks.

8. Do you think the DOT could do better in more effectively responding to schedule risk

on projects (e.g., planning – time determination schedule, progress and payment –

schedule process requirements in the RFP, tracking progress – contract time

administration, informing – stakeholder coordination)?

• Emphasize the importance of developing high quality contract time determination

schedules to set a project up for success.

• Reevaluate the significant risk (liquidated damages) put on the contractor for not

meeting the schedule.

• Provide the ability to revise the schedule as delays occur or change orders are

processed.

• Encourage all projects, not just the major ones, to focus on mitigating schedule risks.

• Ensure critical path method (CPM) scheduling specifications are added to all projects,

provide value, and are fair.

2.4 Public Sector Outreach

Industry outreach interviews were conducted by the RS&H team with select transportation

agencies currently using risk management processes, including state departments from

Colorado (CDOT), Florida (FDOT), Minnesota (MnDOT), Texas (TxDOT), and Virginia (VDOT)

programs. The RS&H team contacted public agency representatives to solicit feedback on

ongoing work, current and emerging practices, and most importantly to identify any current

gaps and lessons learned from their RM Programs.

Representatives were asked about each of the following topics. The bullet points that follow

represent suggested strategies for a more effective RM Program based upon the responses

and conversations.

1. Do you think the DOT’s current risk management practices are working effectively

on your projects or programs or across the agency as a whole? If not, what are some

of the key hurdles, deficiencies, or barriers that you face implementing risk

management successfully?

• Consider automating the risk management process where possible to make it more user

friendly.

• Have a consistent application of risk management among projects/procurements.

• Create an incentive or a requirement to use scalable processes on all projects to help

instill a culture of risk management.

• Develop risk register templates to be used across the enterprise for consistency.

• Ensure tracking of risks at all project phases (identification and selection through

operations).

• Emphasize risk management practices between milestones.

• Have regularly scheduled risk management check-ins with PMs to give them the tools

needed to successfully manage their project’s risk.

• Reporting tools should highlight the current active risks and should also reflect on

previously identified risks (whether they have become issues or have been effectively

mitigated) as well as potential future risks.

• Risk management training should be enterprise-wide and for all levels to create a

culture of risk management.

• Risk management training/resources should specifically address traditional project

delivery vs. innovative contract delivery methods.

• Continuously update training and resources to properly roll out new tools or processes

and ensure staff are aware of these resources and actively utilize them.

• Better define the expectations for risk owners so that they may better understand their

responsibilities towards chasing down risks and the level of effort needed for certain

types of risks.

2. In your experience, what are some of the areas that the DOT could do better in more

effectively responding to risk and what are your recommendations for

improvements?

• Implement risk management early.

• Focus on training.

• Highlight risk management during the pre-procurement and procurement phases.

• Be more transparent about risks not only within the DOT, but also externally with the

contractor/proposers.

• Manage stakeholder risk by engaging them early in the project lifecycle.

• Consider not transferring risk to the contractor on items that could impact the timely

completion of the project or significantly influence the bid price. Be more prescriptive

where needed.

• Manage project funding risks by updating the cost estimates frequently, at least

annually.

3. Are there any key risk items that you feel need to be better addressed in the DOT

alternative project delivery RFP documents?

• Preserve the DOT/contractor relationship by continuously reassessing risk allocation.

4. Pre-planning and coordination

• Perform early pre-planning and coordination to help mitigate risks such as utility

coordination and concept drawings.

5. Risks within the RFP

• Use boilerplate language. Changes to this language cannot be modified without

approval with appropriate justifications.

6. Workshop experience

• Provide a range for costs and an adjectival rating to help facilitate workshops.

• Risk workshops with multi-discipline participation is the key to help identify risks and

impacts.

7. Training and meetings

• Need to train newer PMs on risk and show more experienced PMs a more progressive

approach.

• Hold regular meetings with well-qualified staff participating and documenting the

response to risk questions.

8. What were some of the key hurdles or barriers that were faced at its inception and

what strategies did you use to overcome those challenges?

• Obtain DOT Central Office leadership support to help regions buy in to and adopt risk

management processes.

9. Do you approach risk the same way for different delivery models such as design-bid-

build (DBB), DB, public-private partnerships (P3), and construction manager general

contractor (CMGC)?

• Approach risk differently depending on delivery method.

• The risk profile should be evaluated and considered in the selection of a delivery model.

10. What are several best practice techniques that have proven successful for the

consistent implementation of an RM Program? What are some things that you have

tried, but that did not work out well?

• Prior to the risk workshop, provide information to the group to prepare and be ready for

interactive discussion.

11. What are some approaches that you have implemented that allow for multiple

disciplines to discuss risks from an agency, program, and project perspective to

better identify, assess and manage risk and address uncertainty in the life of a

project, within a program or across an organization?

• Include multiple disciplines at workshops for beneficial interactions. This allows

participants to think how other risks can affect their specific areas or disciplines.

12. What role does industry have on your risk management guidelines and procedures?

• Include industry review to provide feedback on issues related to risk, contracts, and

scope.

13. How are risks incorporated into your cost estimating and schedule programming of

projects?

• Analyze high risks to determine if the project should proceed or if other contract

measures should be taken.

• Utilize risk metrics to determine if additional scope or field surveys are needed to better

determine geotechnical issues, additional ROW needs or other impacts to the schedule.

• Utilize risk measurements to determine the level of contingency on a project.

• Cost estimates should be stripped of risk and contingencies and then provide a

separate risk cost that can be documented and quantified to better manage the costs as

the project develops.

14. Other strategies

• Educate industry on the risk management methods the DOT has developed for their

program, contract language, contract template and precedent allocations to enable

industry to align their internal risk assessments.

• Actively develop lists of common/typical risks from lessons learned that can be used as

a foundation for risk register development and risk workshop discussions.

• Gather lessons learned at the end of each project phase.

• Address risk exposure regarding contract compliance with a distinct plan or action that

outlines who is responsible for verifying that contract requirements are being met and

who is responsible for administering consequences if they are not.

• Utilize risks to help drive what the RFPs need to include.

• Do not overcomplicate the risk management approach and keep it scalable.

• Find a champion to help prioritize the use of risk management and overall culture.

2.5 FHWA Interviews

Three representatives from the Office of Innovative Program Delivery and Michigan Division of

the Major Projects Team were interviewed to gain FHWA’s national and local perspective on

risk management practices.

Representatives were asked about each of the following topics. The bullet points that follow

represent suggested strategies for a more effective RM Program based upon the responses

and conversations.

1. What has been your experience of applying the principles of risk management on

projects and programs at MDOT? What are some of the key hurdles or barriers that

were faced implementing risk management at MDOT and what strategies did you use

to overcome those challenges?

• Employ formal risk management procedures on all projects, not just alternative delivery

ones.

• Have a documented approach to risk management so that PMs know their expectations

and what they need to do and when throughout the project lifecycle.

• Before implementing an RM Program, focus on education so that staff understand the

goals and become familiar with the process. Get buy-in from staff and set expectations

early emphasizing the importance of active participation.

• Emphasize diversity: Have a diverse group of people involved in the risk management

discussions.

• Spend the time to dive into the uncommon/unique aspects of a project to better

understand them and identify the associated risks.

• Don’t stop at the initial risk assessment, continue to hold follow-up meetings as the

project develops and establish a schedule for follow-up activities as part of the risk

management process.

2. In your experience, what do you think agencies could do better in more effectively

responding to risk and mitigating risk before they become issues (e.g., scoping,

schedule, cost, finance and funding, and public/stakeholder involvement and

awareness)?

• Continue coordinating with the public and stakeholders from the beginning of the project

and through the project lifecycle. Make sure political figures are included early in the

stakeholder/public engagement process to head off any complications down the line.

• Encourage a focus on detailed costing and scheduling for non-traditional components of

projects. Bring in more expertise as needed to get this right.

• Encourage more flexibility in schedule revisions if it will help to mitigate unforeseen

risks.

3. Do you think more project team coordination and the use of risk management tools

is needed during early project planning and development to address risk?

• Emphasize early project team collaboration: Start having risk management discussions

at the inception of a project (planning phase) with staff representing all phases of the

project (environmental, planning, development, construction, and operations). Continue

discussions throughout project lifecycle.

• Provide guidance on how detailed the risk discussions should be at each project phase

(environmental, planning, development, construction, and operations).

4. Do you think agencies can do a better job implementing their risk management

guidance and incorporating FHWA guidance, tools, and research into their

management of projects and programs (e.g., Second Strategic Highway Research

Program Risk Management Solutions, enterprise risk management)?

• Focus on developing a common awareness with all DOT staff of the tools available and

the benefits of having an RM Program.

• Tailor risk assessment tools to the risk severity of the project.

• All high-risk projects should follow a formal risk management process for documenting

project risks regardless of the overall cost.

5. How do you think we can customize and tailor our risk management tool kit to meet

the challenges of this new COVID-19 era?

• Hold training sessions to roll out the new program where MDOT leadership can explain

some of the history of why the program was developed so staff can gain a better

understanding of the goals and intent for the organization.

• Encourage engagement with the material and enable staff to ask questions and provide

feedback.

• Have structured breaks so that the sessions are more focused and productive.

6. What were some of the key hurdles or barriers that were faced at its inception and

what strategies did you use to overcome those challenges?

• Better understand risk relationships during the risk assessment process. Different

project risks work together and affect each other.

7. What requirements are project or division required to follow as part of your RM

Program?

• Process should be scalable and work not only for major projects but also on smaller

projects, which are most of what DOTs develop.

• For each project, establish a risk management budget based on the level of risk and

size of the project.

8. Whose responsibility is risk management on a particular project?

• All disciplines involved with a project have the responsibility to identify and mitigate

risks.

9. What methods and strategies has your team used to promote a risk management

culture at the agency, program, or project level?

• Inform participants that some qualitative risks can be assessed outside the quantitative

model, like market risks and political risks. Not all risk can have a derived cost.

• Need more education on the differences between “escalation” and “inflation” when

costing risk.

10. What strategies has your agency or team developed to incorporate risk management

into project and program management that have added value and benefited decision-

making and planning?

• Build consistent training across the agency.

11. Do you feel there are improvements you would like to make in your RM Program?

And if so, what are they?

• Need more understanding of the basic principles and terminology, fundamental risk

concepts and processes, and the relationship between different risks.

• Set a budget for risk management and risk assessment processes.

12. From a leadership perspective, have you had a “champion” in a key leadership

position that promoted the RM Program? If so, what are the keys to developing a

comprehensive RM Program and gaining the support of leadership at the division

level and in other areas of the agency?

• Find a champion that understands the benefits of a strong risk management process.

• Leadership needs to embrace and support risk management to help the program be

accepted and promote the philosophy of risk.

13. What are several best practice techniques that have proven successful for the

consistent implementation of an RM Program? What are some things that you have

tried, but that did not work out well?

• There needs to be buy-in from the PM to initiate and continually monitor risks using the

risk register.

• Aim for increased levels of interaction between multiple disciplines within a virtual

workshop environment.

14. What are some approaches that you have implemented that allow for multiple

disciplines to discuss risks from an agency, program, and project perspective to

better identify, assess and manage risk and address uncertainty in the life of a

project, within a program or across an organization?

• Demonstrate real project experiences in training sessions so that participants can see

how the risk processes and procedures work.

15. Other strategies

• Need a formal process for documenting lessons learned. Should expect each PM to

contribute to a lessons learned database and should be a checkbox included in project

closeout.

2.6 Contractor Interviews

Representatives from the contracting community, including both local and national contractors,

were interviewed for their experiences with MDOT projects and to gain their perspective on

contracts and related risk elements.

Representatives were asked about each of the following topics. The bullet points that follow

represent suggested strategies for a more effective RM Program based upon the responses

and conversations.

1. Alternative Technical Concepts (ATC) process – Do you feel proper confidentiality is

being maintained during the process? Have you experienced any conditional

approvals making incorporation of the ATCs into the proposal difficult? Have you

experienced a resistance to incorporating new innovations? Has the Department

provided adequate and timely feedback to incorporate ATCs into proposals?

• The innovative MDOT ICU team should maintain an active role throughout the DB pre-

bid process of every project to ensure a consistent level of engagement, confidentiality,

and approval. This is required to reestablish contractor’s confidence and salvage the

existence of ATCs in the bidding process. MDOT should also extend the timeline of the

entire bid process for DB projects to provide contractors with sufficient opportunity to

investigate, price, approve and incorporate ATCs into their bids.

2. Pre-bid questions and responsiveness – Do you think the Department provides

sufficient clarity and timely responses to questions to reduce risk and uncertainty in

the RFP documents to prepare a competitive bid? Is there anything the Department

could do differently to provide a more competitive bidding environment? Have you

experienced any instances where your questions have gone unanswered, not

posted, or found to be in error while building the project?

• A higher level of priority is needed with MDOT responses to pre-bid questions. The

contractor’s MDOT contact person needs to have proper and timely access to key

members of the MDOT Design and Construction teams to gather a proper, complete,

and contractual response to any inquiries.

3. Use of Reference Information Documents (RID) – Is the use of RID as reference

documents adequate/appropriate for bidding purposes or do you feel there should

be a greater ability to rely on information provided by the Department? What items

within the RID would you consider adequate/inadequate? Which items within the RID

reduce bidder risk? Which would you consider most important?

• MDOT ICU team should work to establish a set standard of deliverables that will be

included in all RID documents being provided.

4. Stipend – Is the process for establishing the stipend amount appropriate? If not,

what recommendations do you have?

• MDOT ICU should limit shortlisted bidders to three to provide renewed interest,

competitiveness, and resources to the bidding teams.

• MDOT should establish a set criterion for determining stipend amounts based upon the

descending order of a project’s complexity, scope, location, and cost.

5. Use of at-risk or shared-risk items in DB contracts – Have you found the use of these

items to be too widespread or too limited? Do you feel they should be incorporated

into the project’s critical path method? Should the unit prices be set or left blank for

the bidder?

• Shared-risk items should follow standard pay items and specifications to ensure bid

pricing is more accurate. MDOT should include the basic assumptions that were used in

the determination of the shared-risk items so greater clarity is provided to the contractor

on the circumstances surrounding the work to be performed. MDOT should mandate

that shared-risk items are to be included, when applicable, into the projects CPM

schedule and evaluate extension of time related to these items per the standard

specifications.

6. Risk pool – Are the shared-risk amounts and thresholds provided in the RFP

documents to address contract risk appropriate (for example, unidentified utilities,

utility owner delay)? What are the key risk items that you feel need to be better

addressed in the RFP documents?

• The contract obligations regarding utility coordination needs to be revisited. MDOT

should detail out the contract assumptions regarding the utilities and they should be

reflected in the CPM schedule. Any loss or gain directly attributed to the utility company

will be shared but any lack of coordination will rest with the contractor. Example: Utility

company will need two weeks to design their relocation plan after the contractor has

provided approved ready for construction drawings. Once approved, the utility company

will take four weeks to schedule and complete their work. Those assumptions are

detailed in design books and included in the CPM.

7. Third party coordination (e.g., utilities, railroad) – Are the contractor obligations

related to these third parties clearly spelled out in the bid documents? Do you feel

the level of responsibility / risk is proper? What improvements / suggestions do you

have for these issues?

• The contract obligations regarding utility coordination needs to be corrected. MDOT

should detail out the contract assumptions of when utility design will start (e.g., 70%,

ready for construction), along with a firm timeline for their design and relocation efforts

so it can be properly reflected in the CPM schedule. Any loss or gain directly attributed

to the utility company will be shared but any lack of coordination will rest with the

contractor.

8. Construction schedule – Does the Department in its RFP documents provide

achievable completion deadlines for projects in conjunction with reasonable damage

amounts for failure to achieve those deadlines?

• Contract time determination schedules should be required on all major projects and all

DB projects. Contracts should not require a contractor to perform “at risk” work to meet

the project schedule. A set policy of partial submittals, packages, staging or segments

of work must be established by MDOT to provide contractors a clear set of assumptions

when bidding/scheduling the project.

9. Project cost – Is there an optimum project cost for you to engage in a project

solicitation? Is there a project size considered too large for you to submit a

competitive bid on?

• Advanced planning and a publication of the bid pursuit calendar is needed on all major

projects to avoid overlapping pursuits. Failure to address this issue will result in a

decrease in competition, and raise risk and pricing. This is especially a significant issue

within the disadvantaged business enterprise community.

10. Is the Department’s use of miscellaneous quantities troublesome? Do you feel it

increases risk on the contractor? Do you have suggestions/improvements for its

use?

• The variance of a unit price can be ten times depending on the assumptions made on

the circumstances surrounding the work being performed. Having ten areas of curb

measuring ten feet each all over the project is substantially more expensive than one

single run of 100 feet of curb. MDOT should strive to include the assumptions that went

into the determination of the quantities to provide some clarity to the contractor so they

can provide more accurate pricing. The current practice is resulting in contractors

pricing miscellaneous work items at a significant premium that may be unnecessary if

MDOT clarified the circumstances surrounding the quantity.

11. Are you experiencing issues with sole source suppliers/subcontractors – contract

language, delivery dates, payment terms, etc.?

• The utilization of sole source suppliers or subcontractors should be avoided wherever

possible. When unavoidable, MDOT should establish a set of standards or protocols

that should be used to properly vet the firm being listed. MDOT should not provide

special consideration or wave any prequalification requirements to ensure the prime

contractor is not taking on unnecessary risk.

12. Other strategies

• MDOT needs greater investment in their prebid geotechnical investigations. A

significant premium is being paid via contractor’s conservative bid time assumptions vs

upfront complete geotechnical analysis.

• One-on-one meetings need a set attendee list (e.g., geotechnical, bridge specialist,

interchange geometrics) so the meetings are productive and directives timely. They can

be cancelled if not needed.

• In the RFP, MDOT should list out the conflicted designers and consultants on the DB

projects. In addition, we are seeing waivers provided that clearly violate the conflict of

interest either with construction engineering & inspection pursuits (being able to cover

substandard design) or as a part of the DB team (unfair bid advantage).

• Advanced and more reliable notice on upcoming DB projects. Information is selectively

being released that is severally impacting competition.

2.7 Literature Review and Desktop Survey

RS&H conducted desktop surveys of the current literature for industry best practices, federal

guidance, and state guidance. The team reviewed available reports and studies to identify risk

management best practices currently being performed by state departments, including CDOT,

FDOT, Georgia (GDOT), MnDOT, Missouri (MoDOT), Nevada (NDOT), South Carolina

(SCDOT), TxDOT, VDOT, and Washington (WSDOT), as well as FHWA.

The research focused upon risk management practices at the program and project levels. All

of the reviewed agencies have some level of documented risk management approach.

However, the risk approach varied by project delivery, level of guidance provided, and

available tools to perform risk management.

Literature review of agency documentation focused on alternative delivery, including DB and

P3 programs. It was noted if agencies provided risk assessment for traditional DBB delivery,

however, processes have not been detailed.

The following sub-sections summarize the information gathered from the state agencies and

provides agency hyperlinks to relevant information. The information is organized by the type of

documentation, tools and risk processes that the agency has available, project phases that

utilize risk management, general information regarding the agency’s organization, training

opportunities, and use of risk with cost estimating and schedules, if made available.

2.7.1 Colorado Department of Transportation

www.codot.gov/business/project-management/scoping/risk-management

Documentation

• Design-Build Manual, September 2016: Contains risk management processes

• P3 Management Manual, November 2020: Contains risk management processes

• Risk management guidance directly on CDOT website pages

Tools

• Project Delivery Selection Matrix (PDSM): Used for assessing project delivery method

• Risk Assessment Tool: Provides the risk register template

• Risk Library: Database within Risk Assessment Tool of over 70 common risks

• Project Cost Planner Tool: Develops risk-based cost estimates (RBCE) using historical

data in a statistical format

• @Risk: Third-party software utilized for Monte Carlo analysis on major projects

Risk Process

• Follows five-step process (identification, analysis, planning, allocation, control)

• Risk library to populate risk register

• Qualitative: Adapted from FHWA with 5-point scale; probability > 90% added to estimate

• Scalable: Low-risks project areas require low level of development to address; high-risk

project areas need more significant development

• Risk registers: Required for major DB projects and region decision to maintain for smaller

projects; required for all P3 projects

• Risk register is used as a checklist during RFP development

Phased Approach

• Initial Project Development: PDSM process to determine delivery method; develops RM

Plan as part of project delivery plan

• For P3 recommendation, report with key risks presented to the High Performance

Transportation Enterprise Board

• For P3, risk register updates and workshops in six phases: project development, pre-

procurement, procurement, implementation, operations, and handback

• Implementation: Maintain risk register through construction; regular risk meetings

Risk Management Organization

• Alternative Delivery Program: DB projects

• High Performance Transportation Enterprise: P3 projects

• State divided among five CDOT Regions that support each department. Each region

develops projects and leads cost estimating and risk assessment efforts for their projects

• Workshops facilitated by each department; regions provide subject matter experts (SME)

Training

• Developed training program for all major DB projects

Cost Estimates and Schedules

• Parametric estimating using Project Cost Planner Tool during initial design development

• 30% contingency is standard

• Probabilistic RBCE using @Risk P70 level to determine contingency

2.7.2 Florida Department of Transportation

www.fdot.gov/programmanagement

www.fdot.gov/designsupport/toolbox/default.shtm

Documentation

• Project Delivery Methodology Risk Initiation Review Checklist, May 17, 2013

• Risk Based Graded Approach Worksheet Development Guidelines, March 29, 2019

• Guide to Including Project Risks/Unknowns in Long Range Estimate

Tools

• Risk Based Graded Approach Worksheet Template

• Risk Register Template

• Risk Analysis Modeling Tool: Determines Project Risks/Unknowns in Long Range

Estimate based on risks

Risk Process

• No formal guidance/procedure or mandate

• Follows four-step process (identification, assessment, response, monitoring)

• Risk assessment required only if adding contingency amount to the long range estimate

• Qualitative: Risk Based Graded Approach Worksheet; probability in 20-25% increments

• Scalable by project cost

• Cost < $100M and if not requiring workshop: Use Risk Analysis Modeling Tool; qualitative

• Cost between $100M - $500M: Workshop; quantitative register; commercial risk modeling

• Complex project or cost > $500M: Consultant-led risk analysis workshop

• Acquires permits and ROW prior to DB contract award

Phased Approach

• Project Planning: Use Project Delivery Methodology Risk Initiation Review Checklist so

processes are covered

• Project Initiation: Use Risk Based Graded Approach Worksheet

• Procurement: P3 RFP templates; some risk mitigation built in

Risk Management Organization

• Centralized office with seven districts and the Florida Turnpike Enterprise

• Statewide Risk Management Team: Implement quantitative analysis at the project level

during project development; includes State Value Eng, State Estimates Eng, State PM

Eng, District Util Admin, District Court Eng

• Regional Risk Management Teams: Includes District Value Eng, District Estimates Eng,

Design PM, Construction PM; monthly teleconferences with Statewide Risk Management

Team; identifies and supports workshops

Training

• Initially provided quarterly training to directors, PMs, and design engineers

• Holds training expo on entire risk management process once a year

• Provides quarterly training on its recorded modeling tool

Cost Estimates and Schedules

• Utilizes initial contingency at 5% increments up to 25% for estimating

• Uses RBCE; replacing the traditional cost contingency with a risk-based contingency

2.7.3 Georgia Department of Transportation

www.dot.ga.gov/PS/Innovative/DesignBuild

www.dot.ga.gov/PS/Innovative/P3

Documentation

• Plan Development Process, Revision 3.2, December 16, 2019

• Design-Build Manual, March 1, 2018

• P3 Manual, October 22, 2020

Tools

• Utility Risk Matrix

• Risk Allocation Matrix Template: Located within the Design-Build Suitability Assessment;

not qualitative or quantitative; identify risks, assign owner, and provide mitigation strategy

• Design-Build Suitability Assessment: Used for DB candidacy

• Design-Build Project Scalability Memo: Project ranking system to categorize DB projects

representing varying levels of complexity and risk ranging from low to high

• Comprehensive Risk Assessment for Transportation software – use at GDOT Office of

Innovative Delivery to perform systematic risk analysis; incorporates typical risks in

planning estimates

Risk Process

• No formal guidance/procedure; risk management is located within DB documentation

• Provides outline for early risk management for DBB delivery

• Develop independent utility RM Plan to identify utility risk factors

• Follows four-step process (identification, assessment, response, monitoring), although

template does not provide qualitative or quantitative assessments

• Project team meets frequently to update the RM Plan

Phased Approach

• Preliminary/Scoping Phase: Risk discussion during Project Team Initiation Process

• Innovative Delivery PM prepares Design-Build Suitability Report and Risk Matrix

• Pre-Procurement: Initial workshop for comprehensive risk analysis; consider facilitator

Risk Management Organization

• Office of Innovative Delivery: DB delivery

• P3 Division

Training

• Training not identified that covers risk or estimating processes

Cost Estimates and Schedules

• Uses RBCE using percentage-based contingency

• Integrates risk management decisions into cost estimates and project schedules

2.7.4 Minnesota Department of Transportation

www.dot.state.mn.us/designbuild/index.html

www.dot.state.mn.us/pm/processes.html

www.dot.state.mn.us/pm/cost.html

Documentation

• Guidance is not consolidated; processes across several individual documents

• Cost Estimating and Cost Management Technical Reference Manual

• Cost Estimation Process Improvement and Organizational Integration Project – Risk and

Contingency

• Project Risk Management Process

• Project Risk Management Reference

• Risk and Contingency Fact Sheet

• Total Project Cost Estimating Potential Guidelines

• Length, Width and Depth Cost Estimating Guidance

Tools

• Risk Register Template

• Risk Checklists

• Total Project Cost Estimate Template

• Length, Width and Depth Cost Estimating Template

• Acumen Risk: Monte Carlo for small and medium projects and works well with scheduling

• @Risk – Third-party software utilized for Monte Carlo analysis on major projects

Risk Process

• Risk management is located within short documentation on website

• Follows four-step process (identification, assessment, response, monitoring)

• Utilizes red flag lists and risk checklists

• Four-Tiered Scalability: Uses risk and complexity and not cost to define a project and

determine quantitative requirements; split into minor, moderate, and major

• Minor: Identification

• Moderate: Risk register; response; qualitative assessment

• Major: Workshop; quantitative assessment; RM Plan; Monte Carlo

Phased Approach

• Delivery Method Selection Approach: Initial risk assessment

• Plan Project Development Phase: Complete risk register

Risk Management Organization

• DB part of MnDOT Office

Training

• Available for the cost estimating module

Cost Estimates and Schedules

• Uses RBCE with percentage-based contingency

• Minor: Percentage-based contingency

• Moderate: Contingency based on three-point estimating; possible use of Acumen Risk

• Major: Three-point estimate and Monte Carlo simulation

2.7.5 Missouri Department of Transportation

www.modot.org/design-build-information

epg.modot.org/index.php/Category:149_Project_Delivery_Method_Determination_and_Risk_A

ssessment

Documentation

• Engineering Policy Guide, Category 149, March 28, 2014

Tools

• Risk Assessment Brainstorm Worksheet: Register list

• Risk Assessment Worksheet: Calculate risk factor to sequence risks

Risk Process

• No formal guidance/procedure; documentation located within Engineering Policy Guide

• Follows three-step process (identification, assessment, allocation)

• Qualitative assessment: Calculate Risk Factor using impact (0-6), effort (0-6), and

probability (0-1)

• Scalable by project cost

• Cost > $10M and high-risk project: Monte Carlo

• Cost > $25M: Workshop

• Risk management process is not built into DBB delivery

Phased Approach

• Project Delivery Method (PDM) Determination Process: Utilizes high-level risk assessment

• Procurement: Risk Assessment Workshop: Detailed risk assessment; includes core team

members, SMEs, and optional facilitator

Risk Management Organization

• DB part of MoDOT Office

Training

• Training not identified that covers risk or estimating processes

Cost Estimates and Schedules

• Cost and schedule impacts are not identified

2.7.6 Nevada Department of Transportation

www.nevadadot.com/doing-business/documents-and-publications

Documentation

• Project Delivery Selection Approach

• Risk Management and Risk-Based Cost Estimation Guidelines

• Project Management Guidelines, 2010

• Project Estimation Wizard Instructions

Tools

• Risk Register Template

• Risk Tracking and Analysis Tool for Small and Medium Size Projects: Quantitative Risk

Tool

• Project Estimation Wizard

Risk Process

• Independent thorough risk management guidelines

• Applies to DBB and DB delivery

• Provide risk assessments on all projects; develop RM Plan

• Follows four-step process (identification, assessment, response, monitoring)

• Scalable by project cost

• Cost < $10M: Qualitative assessment

• Cost from $10M - $25M: Qualitative required; suggests quantitative workshop

• Cost between $25M - $100M: Qualitative required; Cost Risk Assessment (CRA)

workshop

• Major projects and costs > $100M: CRA workshop; quantitative assessment; consultant-

facilitated; internal and external SMEs in time slots

Phased Approach

• Use project delivery selection approach with high-level review of risk components.

• Project risk cost updates every one to two years with possible CRA workshop

Risk Management Organization

• Centralized agency

• Project Management Division for major projects > $100M and innovative delivery

Training

• Training not identified that covers risk or estimating processes

Cost Estimates and Schedules

• Qualitative risk allowance percentages are set between 3% (low risk) up to 15% (high risk)

2.7.7 South Carolina Department of Transportation

www.scdot.org/business/design-build.aspx

Documentation

• Design-Build Procurement Manual, February 28, 2017

• 2018 Design-Build Peer Exchange, February 4, 2019

Tools

• Project Delivery Selection Matrix Template (SCDOT internal only)

• Risk Matrix (SCDOT internal only)

• Project Cost Estimate Guidelines and Template (SCDOT internal only)

Risk Process

• Processes are not documented

• Utilize feedback from SMEs to determine high, moderate, and low risks.

• Allocate risks to either SCDOT, DB team, or both and discuss mitigation strategies

• Does not typically acquire permits, early ROW acquisition, or early utility relocation prior to

DB contract execution.

Phased Approach

• Project Definition Report: Review goals and discuss project risks

• PDM selection process or workshop: Perform risk assessment

• Risk matrix developed that refines assessment from project selection process

• Pre-Procurement: Finalize risk matrix prior to request for qualifications advertisement or

one-phase RFP

• Procurement: Utilize risk matrix in the development of the scope of work in the RFP

Risk Management Organization

• Design-Build Group: Administers DB and Alternative Delivery Methods Program

Training

• Training not identified that covers risk or estimating processes

Cost Estimates and Schedules

• Cost and schedule impacts are not identified

2.7.8 Texas Department of Transportation

www.txdot.gov/inside-txdot/division/transportation-programs/ppm.html

www.txdot.gov/inside-txdot/division/debt.html

Documentation

• Design-Build Procurement Overview Manual, April 11, 2017

• Procedure 114 – Risk Management, December 19, 2019

• Risk Management Guide for Alternative Delivery Program, December 2019

• Risk Management Guide for Alternative Delivery Program (O&M), December 2019

• Design-Build Estimate User Reference Guide, December 8, 2017

Tools

• Alternative Delivery Support Tool: Determine suitability of DB delivery method

• Risk and Issue Register

• Project Cost Estimate

Risk Process

• Independent thorough risk management guidelines

• Follows four-step process (identification, assessment, response, monitoring)

• Risk team of 8-12; District and Alternative Delivery Division identify risk “champion”

• Focus on project-specific risks and scalable by project cost

• Qualitative: Use 1-3 or 1-5 scale

• Quantitative: Monte Carlo for FHWA cost estimate review; not used for internal analysis

• Risk register updated semi-annually; quarterly on major projects

• Programmatic DB contract language: shift risk allocation to party best to manage

• Major project or cost > $500M: Consultant-led risk analysis workshop

Phased Approach

• Project Delivery: Utilize Alternative Delivery Support tool to determine DB candidacy

• Planning/Pre-Procurement: Workshop 1 or combined with Design Concept Conference;

qualitative; initial risk register; optional workshop 2

• Procurement: Workshop 3 for major projects; quantitative; update risk register

• Implementation: Workshop 4; update risk register

• Maintenance: Workshop 5; update risk register

Risk Management Organization

• Project Finance, Debt and Strategic Contracts Division

• Strategic Contracts Management Section: Alternative Delivery Division and alternative

delivery projects

• Districts: Manage risk register

Training

• Risk-Based Construction Cost Estimating: Offered monthly on virtual platform

• Project Scope Management: Risk management offered monthly

Cost Estimates and Schedules

• Uses RBCE

• Utilizes percentage-based agency costs based on historical trends

• Calculates contingency based upon event-driven risks estimating

2.7.9 Virginia Department of Transportation

www.virginiadot.org/business/alternative_project_delivery.asp

www.virginiadot.org/business/design-build.asp

Documentation

• Design-Build Procurement Manual, April 2017

• Project Risk Management, PMO-15.0, February 1, 2015

• Design-Build Requirements for Advertisement, IIM-APD-1.2, November 9, 2017

• P3 Risk Management Guidelines, March 2015

Tools

• Risk Management Worksheet: Qualitative risk register template

• Risk Register: Modified to account for qualitative and quantitative analysis

Risk Process

• Independent thorough risk management guidelines

• Risk analysis performed for all DB projects regardless of value, by law

• Follows five-step process (identification, assessment, response, allocation, monitoring)

• Finding of Public Interest (FOPI) must be in place prior to project development and a high-

level preliminary risk assessment is part of this process

• After FOPI approval, quantitative assessment with risk allocation matrix and RM Plan

• Tier II projects and construction cost > $5M: Apply project risk management practices

• Provides compensation for ROW; purchases high-risk properties up front to mitigate risk

Phased Approach

• Risks and register are reassessed at each project development phase milestone

• High-Level Screening: Initial risk discussions; seek input for list of critical risks

• Detailed-Level Screening: Informal risk workshop; initial risk register; preliminary

qualitative assessment; develop Detailed-Level Screening Report

• Development: Initial risk workshop; qualitative assessment with 1-5 scale; quantitative

expected value analysis; Monte Carlo analysis if desired; develop RM Plan

• Procurement: Second risk workshop; update register and plan; Risk Analysis Meeting prior

to RFP release; review risks with impacts before commercial close

• Implementation: Monitor risk register quarterly

• Operations: Monitor risk register quarterly

Risk Management Organization

• Design-Build Program part of Alternative Project Delivery Division

• FOPI must be approved by the Chief Engineer and Commissioner

• High-risk or cost > $100M: Risk Mitigation Plan developed and Commissioner provides

briefing to the Commonwealth Transportation Board (CTB)

• All P3 projects regardless of risk profile are briefed to the CTB

Training

• Training programs, including project management, through web-based learning system

Cost Estimates and Schedules

• Used RBCE

2.7.10 Washington Department of Transportation

wsdot.wa.gov/construction-planning/project-management/risk-assessment/home

Documentation

• Project Management Online Guide: Web-based documentation

• PDM Selection Guidance, September 2019

• Project Risk Management Guide, February 2018

• Cost Estimate Validation Process

• Project Risk Analysis Model Users Guide, March 2018

Tools

• Risk Breakdown Structure

• Sample Risk Elements

• RBCE Self-Modeling Tool

• Risk Workshop Report Summary

• Qualitative Risk Assessment Spreadsheet

• Project Risk Analysis Model

Risk Process

• Independent thorough risk management guidelines

• All projects have an RM Plan

• PM decides how to ensure risks are being eliminated or mitigated

• Follows six-step process (planning, identification, qualitative, quantitative, response,

monitoring)

• Scalable by project cost

• Cost < $10M: Qualitative spreadsheet in the Project Management Online Guide

• Cost between $10M - $25M: Quantitative; informal workshop using the self-modeling

spreadsheet

• Cost between $25M - $100M: Self-modeling spreadsheet in scoping phase and

quantitative CRA workshop in subsequent phases

• Costs > $100M: Cost Estimate Validation Process workshop; quantitative assessment;

consultant-facilitated; internal and external SMEs; DB model is recommended

Phased Approach

• PDM Selection Process: Includes risk assessment

Risk Management Organization

• Sophisticated approach with a core team of internal experts; mandated from legislature

Training

• Previously held probability and risk assessment design and cost estimation classes

Cost Estimates and Schedules

• Cost < $3M: informal process based on significant risks

• Cost between $3M - $10M: RBCE on project-by-project decision based on complexity

• Cost > $10M: RBCE

• Projects with more than a 15% contingency must go through RBCE process

2.8 Peer Exchange Workshop

Part of RS&H’s research effort included a Peer Exchange Workshop with individuals from eight

state agencies, FHWA, and representatives from MDOT. The four-hour workshop was

conducted on December 8, 2020 in a virtual setting.

The workshop focused on the identification and use of risk management best practices and

risk management tools by the participating agencies to use as best practice guidance in the

development and implementation of an MDOT RM Program. The goal of the workshop was to

assess national best practices and lessons learned from programs that are implementing risk

principles on their projects and identify the effectiveness of the tools currently in use on those

projects and programs.

2.8.1 Topics

In coordination with MDOT, RS&H identified two main topics of interest that would be

addressed at the exchange and covered over two sessions.

• The first topic during Session 1 covered the tools that are being used for risk

management and the processes that are being followed to populate and apply those

tools for a specific project.

• The second topic during Session 2 covered the organization and structure needed to

execute an RM Program effectively and instill a culture of risk management throughout

an agency.

Within each session, two state agencies were requested to prepare a presentation providing

insights into their program and covering these topics. A discussion period was held within each

session to capture the attendee’s experiences with those topics.

2.8.2 Discussion and Key Takeaways

Identified below are the key takeaways from the workshop. The project team incorporated

these into discussions with workshop participants to help determine which practices are most

important to MDOT and to prioritize MDOT’s needs.

A survey of the key takeaways was provided to MDOT participants on the importance of

implementing these strategies within the MDOT RM Program. These results are provided

within each subsection and labeled as “MDOT Feedback.”

Scalability

• Depending on project size, risk management requirements are customized for the

specific needs of the project. Risk response adjustments can be made both before and

after risk mitigation to see the change.

• The complexity of available tools can be quite different depending on the project.

• Have a minimum defined process based on project size. The PM could make the

decision to utilize a more robust risk management process as needed.

• MDOT Feedback: Projects at MDOT range from multi-year designs with nine-digit

construction prices to small two-to-three-week projects worth only tens of thousands of

dollars. A robust risk analysis is not needed for every project.

Tools

• Keep tools simple to make them user friendly and allow for teams to continue use

without major relearning on each project.

• Having a list of typical risks transferred/retained is helpful for the industry.

• CDOT utilizes two risk workbooks: qualitative first and then quantitative if project meets

criteria.

• CDOT is piloting an online PM info system called OnTrack. Risk management

processes and risk registers will reside with the project information.

• CDOT actively tracks risk management lessons learned and utilizes FHWA database.

Lessons learned reports for most alternative delivery projects are available online.

• TxDOT’s Excel-based risk and issue register sequentially follows their four-step risk

management process.

• TxDOT has a new Construction Cost Estimating Guide that includes quantifying risk-

based contingency.

• VDOT utilizes a list of typical risks to go along with their risk register.

• Tools for allocating risk for WSDOT include workshops, contract templates that cover

common risks, consistent/defined owner processes, a risk matrix, completion & general

warranty, and a risk register.

• WSDOT provides all PM resources through a web-based toolbox on their public website

to allow for easy access to documentation and training.

• MDOT Feedback: Tools should be self-explanatory whenever possible. PMs may use it

once and not have another project requiring risk analysis for a year or more.

Risk Process

• In a CDOT risk matrix, risks are not removed from registers but stricken out to keep a

running history of the risk.

• The CDOT Chief Engineer directive states that every project will complete a Project

Delivery Plan (PDP) and risk workbook is part of that plan (preliminary risk matrix).

• The CDOT Chief Engineer requires every project to have a PDP that includes a risk

management workbook and risk matrix.

• CDOT has no formal measure of risk management process but is moving in that

direction.

• Risk registers are discussed in CDOT meetings to pool resources to address and

manage risks.

• CDOT uses a handoff meeting between design and construction to discuss risk register

and transfer responsibilities for ownership.

• Utilize the red flag technique to identify risks of greatest concern and focus the attention

on these critical items for discussion at monthly meetings.

• TxDOT uses a four-step risk process on a five-point scale.

• VDOT uses a five-step process with a three-point scale – critical risks (above 6) to

address in a documented RM Plan are sent to be addressed to the CTB.

• A risk analysis is performed for all VDOT DB projects, regardless of project cost or

contract value.

• A FOPI is required for all VDOT DB projects.

• WSDOT has a great relationship with the contracting community and works in

conjunction with industry to allocate risk fairly and assign to those best fit to handle.

• Many states perform preliminary work, including cultural resources, geotechnical, and

utility investigations.

• 91% of participants either agreed or strongly agreed that their RM Program can be

improved.

• About half the participating agencies are implementing continuous formal risk

management processes in DBB delivery, outside of FHWA requirements.

• MDOT Feedback: Agree strongly with CDOT's process of not removing risks from the

Risk Workshops

• CDOT uses facilitated workshops for larger projects.

• TxDOT completes workshops for small and large projects with both internal and

external participants.

• FDOT focuses on quantitative risk workshops resulting in a risk register and tornado

diagram of the top ten risks for both cost and schedule. Initial workshops are 2½ days

with the project team, cost estimator & FHWA participating for its entirety while SMEs

are broken down into two-hour sessions. Updated workshops typically last one day.

They have completed three or four virtual risk workshops to date.

• TxDOT holds three types of workshops for both DBB and DB: Risk, Risk Update (two-

hour workshop every six months to one year), and planning for Risk-Based Contingency

Estimating (a quantitative approach using three-point estimating to determine

contingency).

• TxDOT used to have six-to-eight-hour single day workshops. TxDOT noted their

success having virtual workshops over a two-week period with an increase in

attendance. The same amount of time is spent in a workshop, but multiple two-hour

brainstorming sessions are utilized to discuss in a smaller setting. After the groups

rejoin for risk assessment, there is a gap until the risk response session, giving

additional time to prioritize risks and help prevent virtual workshop fatigue. The multi-

day workshop allows owners and facilitators time to work on workshop actions between

sessions.

• VDOT provides eight-hour or longer workshops prior to project advertising and serves

lunch to keep participants engaged for the duration.

• Timing of workshops is important and is most effective after DB training.

• TxDOT’s virtual workshops utilize a “whiteboard” recording participant feedback directly

into presentation slides for later transfer to the risk register. Adding visuals to the slides

and providing attendee polling provides an alternative way to present and receive

information and reduces virtual fatigue.

• MoDOT has had success using Menti polling for participation in virtual workshops.

• Most states cited the biggest concern for risk workshops is educating attendees,

especially younger inexperienced staff, on the risks associated with the specific delivery

method since this can play a large impact on the risk profile. Many SMEs attending

workshops have a DBB background and may not have experience with risk associated

with DB projects.

• Several agencies stated a major issue with their current workshops is the lack of time to

discuss mitigation strategies.

• Workshop participants are encouraged to consider opportunity risks that improve the

project since these are often overlooked.

• MDOT Feedback: Workshops need to be efficient use of staff time.

Organizational Structure of Risk Management

• CDOT has a decentralized organization across five regions. Each region is part of the

development of statewide processes before approval. For large projects, CDOT reports

risk workbooks to FHWA, leadership, and the Transportation Commission. Smaller

projects track and monitor risk at the region level. Significant changes in cost or

schedule are subject to a change management process with a Governance Committee.

• Educating staff on the DB processes can be a challenge in a decentralized structure as

well as passing along years of lessons learned.

• SCDOT is centralized through DB implementation. For all DB projects statewide, two

PMs develop, procure, and manage risk from project conception to contract execution.

However, the administration of the contracts is decentralized. SCDOT noted a challenge

in the continuity of risk management between pre- and post-award.

• Both TxDOT and NDOT have centralized project management offices for risk

management.

• The VDOT Alternative Project Delivery Division originally managed both P3 and DB

procurements, however the Virginia Office of Public-Private Partnerships (VAP3) was

formed and manages P3. Projects over $100M require decisions be made by the

Highway Commissioner and a briefing to the CTB.

• Risk Management at WSDOT is a collaborative process between the Strategic Analysis

and Estimating Office (SAEO), regions and construction unit. The regions act as mini

headquarters and construction is involved in industry outreach and hold AGC monthly

meetings.

• MDOT Feedback: Risk workshops could be implemented at the project level with a

statewide coordinator similar to the value engineering (VE) process. The Statewide

Coordinator involvement could be included at a project cost threshold, similar to the VE

process, or handled at the region level.

Screening Process

• To support traditional vs alternative project selection, CDOT utilizes the PDSM that

includes high level risk management. The PDSM is published to the public and the

Chief engineer has final approval of any PDSM recommendation. The Project Delivery

Plan (PDP) contains a preliminary qualitative risk matrix.

• FDOT, NDOT, TxDOT, and WSDOT utilize a similar project selection tool. For TxDOT,

risk ratings are determined at district levels and then presented to leadership. For

NDOT, risk transfer is one of the primary factors in determining delivery method.

• Initial risk assessment on MoDOT projects is part of the project delivery selection tool.

The PM utilizes the tool to help support the delivery selection.

• CDOT cautions that high level screening is great but easily manipulated and requires

training. Risk management tools are decision making tools, not justification tools. Biases

need to be recognized and documented.

• MDOT Feedback: The risk assessment process at the screening level should be

different than assessing risks for project construction because so much is unknown at

the beginning of a project.

Training

• Many agencies provide risk training for PMs. CDOT PMs receive risk training as part of

their PM training. TxDOT hosts a Project Management Institute that simulates a virtual

workshop. WSDOT provides an annual DB training summit containing 17 different

training modules, including risk management, and both internal and external parties are

invited.

• Switching to virtual training has led to a large increase in attendance.

• WSDOT provides the same risk training for both DBB and DB.

• WSDOT publishes training on their public-facing website.

• Discuss strengths and weaknesses of each delivery method. WSDOT adds that training

and specific questions in selection guidance material is helpful.

• MDOT Feedback: Training should be easy and efficient.

Risk Reporting and Transparency

• Public disclosure of risk analysis varied among states.

• WSDOT does not publish risk analysis data publicly. CDOT’s risk documents are

considered working documents and not subject to disclosure.

• MDOT stated the challenge in keeping information back due to the Freedom of

Information Act. There is a financial risk if risk information is provided to the public.

• MoDOT provides a joint risk assessment with contractors while TxDOT stated caution in

jointly assessing risks with contractors to avoid potential misuse of this information.

• Many states make their DB standard template contract available on their public website.

• MDOT Feedback: Risk assessment would make sense as a supporting document and

possibly as RID for DBB projects.

Cost Estimates and Schedules

• CDOT cost estimates are prepared and regions determine how they will manage and

update risks.

• Risks removed on CDOT projects remain in the register to enable the contingency

carried by those risks to be removed from estimates.

• FDOT cost estimates with risk values are updated annually to feed into the work

program.

• NDOT typically updates major project risk estimates annually as part of the financial

plan update requirements. Non-major projects receive updates at major milestones up

to implementation and depending on the delivery method.

• NDOT identifies and quantifies risks with the contractor to develop a “risk reserve” for

Construction Manager at Risk (CMAR) contracts.

• NDOT collects historical construction estimates through the large volume of DBB

projects.

• Both NDOT and TxDOT utilize three-point estimating.

• TxDOT sourced FHWA guidance to quantify risk-based contingency which assists with

predictability on projects.

• ScDOT uses risk-based percentage contingency estimating on projects less than

$500M and risk-based probabilistic contingency-based estimating on projects greater

than $500M.

• VDOT provides design-builders with a scope validation period to validate design and

identify concerns of completing the design within the contract price. This helps alleviate

risk being included in bids for scope issues that cannot be reasonably identified prior to

award. VDOT‘s scope validation process can help lower contingency and reduce the

number of claims.

• WSDOT has a snapshot of risks pre-mitigated vs post-mitigated to assess impacts to

cost and schedule and effectiveness of their RM Program on a specific project.

• MDOT Feedback: Estimates, especially job programming estimates, need to account for

risks.

Building a Culture of Risk Management

• When discussing building or changing a culture, CDOT relies heavily on the ADKAR

change management model: Awareness, Desire, Knowledge, Ability, Reinforcement.

• Although staff retainment has been an issue for FDOT, “the passion for the program is

what kept the program going.” Risk is not formally built into the FDOT organization and

can be found within only 10% of FDOT position descriptions, although it should be in

more roles.

• Through their approach to risk management, WSDOT has seen a major culture shift

towards risk management at the DOT.

• Because CDOT is decentralized, it is difficult to develop a risk culture, so they aim for

five different “normalized” cultures across the regions.

• Having a risk champion allows for clarity on risks and ultimately learning lessons.

MoDOT supports this being a separate DOT position.

• Building a culture is “less about the tools and more about the expertise of people

involved in the process.”

• MDOT Feedback: MDOT fosters a risk adverse culture and needs to continue to work

towards building a culture of managing risk.

2.9 Recommendations for Risk Management Development Phase

As an interim deliverable to culminate the Risk Management Investigation Phase, RS&H

provided MDOT with an Interim Summary Research Report summarizing the findings from the

Risk Management Investigation Phase.

The report included a summary of the best practice recommendations to implement in the Risk

Management Development Phase. The report and the recommendations were reviewed with

MDOT prior to beginning Risk Management Development Phase work.

Below is a summary of the risk management best practices recommendations identified in the

Risk Management Investigation Phase that RS&H, in coordination with MDOT, utilized in the

Risk Management Development Phase to develop and formalize MDOT ICU’s current risk

management practices.

Phased Approach

• Track risks and continue risk discussions throughout the project lifecycle.

• Develop risk management processes and associated documentation by project phase.

• Provide guidance and training for risk discussions at each project phase.

• Utilize handoff meetings to transfer risk ownership responsibilities between phases.

• Document lessons learned at the end of each project phase.

Scalable Process

• Simplify the risk management approach and keep a simple risk management

framework.

• Tailor a scalable and customizable RM Program to account for project size, cost, region,

phase, and overall project risk profile.

• Employ formal risk management procedures on both traditional and innovative project

delivery type projects.

• Consider a risk management budget on each project based on the level of risk and

project size.

Documentation and Tools

• Develop processes and tools that are simple, standardized and documented.

• Keep tools simple to make them user friendly and allow for teams to continue their use

without major relearning on each project.

• Develop a risk register template to be used across the enterprise for consistency.

• Keep risk management documentation concise and move away from large guidance

documents.

• Maintain a list of lessons learned and include typical risks that have been transferred or

retained.

• Actively develop lists of common/typical project risks from lessons learned to facilitate

risk register development and risk workshop discussions.

Project Team Responsibilities

• Emphasize early project team collaboration and risk management discussions at the

inception of a project. Include staff representing multiple phases of the project.

• Hold regularly scheduled meetings with SMEs to document status of risks.

• Establish a schedule for project follow-up activities and discussions as part of the risk

management process.

• Identify risks of greatest concern and focus the attention on critical items at monthly

meetings.

• Utilize risk discussions to help drive what needs to be addressed in the project RFP.

• Report on retired risks or risks that have become issues to update lessons learned and

contingencies.

Risk Workshops

• Provide workshops for small and large projects and scale participation accordingly,

provide guidance for frequency, duration and participants for project teams to consider.

• Provide information to the group prior to the workshop to prepare and be ready for

interactive discussion.

• Prepare workshop guidance for a virtual platform, including tips to avoid virtual fatigue.

• Consider a multi-day workshop or longer, especially in a virtual setting.

• Hold workshops at major phases and/or milestones. Schedule follow-up workshops at

set durations during longer project phases.

• Include SMEs from multiple disciplines to help cover all project areas.

• Encourage project-specific discussion and encourage increased levels of interaction

between multiple disciplines within a workshop environment, either virtual or in-person.

• Encourage discussion of opportunity risks that benefit the project.

• Provide a standard range for costs in workshops and an adjectival rating guide.

• Include time to discuss risk mitigation strategies.

Training

• Provide consistent risk management training enterprise-wide and for all levels to create

a culture of risk management and successful execution.

• Besides processes, include benefits and goals of risk management, as well as

fundamental risk principles, concepts, terminology, and financial understanding (e.g.,

escalation vs. inflation).

• Distinguish how risk management is different between traditional project delivery and

innovative contract delivery methods.

• Include relationships between risks and how different project risks work together and

affect one another.

• Include real project experiences to help participants understand the applications,

processes and concepts, so they can relate to their experiences too.

• Provide consistent risk management training between project phases.

• Define expectations for agency risk owners so they may better understand their

responsibilities towards risk identification, resolution, and level of effort.

• Provide online training sessions prior to risk workshops and encourage engagement

through small breakout sessions.

• Update training and resources to keep up with new processes and tools.

Industry and Stakeholders

• Begin the stakeholder/public engagement process early and continue through project

lifecycle.

• Enhance relationship with industry and the contracting community to allocate risk fairly

and assign to those best fit to handle.

• Educate industry on the risk management methods developed by the agency so they

may align their internal risk assessments and assumptions.

• Consider industry review to provide feedback on issues related to risk, contracts, and

scope.

• Consider providing design-builders with a scope validation period to validate design and

identify concerns of completing the design within the contract price.

• Use boilerplate language to help risk management remain consistent between projects

and procurements.

• Provide clear delineation of risk ownership between agency and contractor.

Cost Estimates and Schedules

• Update estimates and contingencies based on retired risks or risks that have become

issues and have a consistent way to reflect assumptions and contingencies used in the

estimates.

• Manage project funding risks by updating the cost estimates annually and at major

milestones.

• Utilize RBCE to help determine risk-based contingencies.

• Build risk management processes into the project schedule.

• Focus on mitigating schedule risks.

Leadership Support and Risk Culture

• Obtain leadership support to help program acceptance, region buy-in and promote risk

philosophy.

• Establish a risk management champion and supporting staff throughout the agency to

help prioritize the use of risk management processes and promote the overall culture.

• Ensure project PMs initiate and continually monitor risks using the risk register and

other risk management tools.

• Get buy-in from staff and set expectations early emphasizing the importance of active

participation and potential required risk reporting to help ensure effective and broad use

of risk management throughout MDOT.

• Provide widespread release of risk management resources to improve adoption

throughout the agency.

3. RISK MANAGEMENT DEVELOPMENT PHASE

3.1 Introduction

After receiving feedback from MDOT on the recommendations in the Interim Summary

Research Report, RS&H received notice to proceed to begin the Risk Management

Development Phase.

The objective of the Risk Management Development Phase was for the RS&H team to develop

a set of formal risk management guidance documents, templates and tools based on the best

practices identified from the Risk Management Investigation Phase to improve and build upon

MDOT’s existing risk management guidance and to fill gaps in MDOT’s current risk

management practice.

RS&H coordinated the development of the specific risk management guidance documents,

templates and tools with MDOT and presented a recommended implementation strategy for

MDOT consideration at a meeting on January 25, 2021. The approach consisted of the

development of a Risk Management Toolbox (“RM Toolbox”) consisting of an Excel-based

Risk Management Workbook (“RM Workbook”) of interactive and linked Risk Management

Workflows (“RM Workflow”) for each phase of project delivery incorporating the

recommendations from the Risk Management Investigation Phase. The proposed approach

was reviewed with MDOT for consideration at the meeting. MDOT provided feedback before

concurring with the approach and issuing notice to proceed.

A key research objective was to focus on customizing the guidance for PMs to successfully

implement risk management on projects. The risk management guidance documents,

templates and tools were intended to foster wider education and buy-in from PMs, project team

staff, and MDOT consultants, and not to be an administrative burden. They will be an

additional tool in the PM’s project management toolbox to mitigate and control cost, schedule

and quality risks on projects on a consistent basis from early project planning through the

identification and selection, development, procurement, and implementation phases.

The development of the templates and tools was intended to provide PMs with the specific

templates and tools needed to support MDOT risk identification, risk analysis and evaluation,

risk response planning, risk mitigation, risk monitoring, and risk reporting for each of the project

delivery phases. RS&H provided user instructions for use of all templates and tools, developed

training materials, and conducted training on the use of the templates and tools.

In addition to conducting interviews with MDOT staff during the Risk Management Investigation

Phase, RS&H conducted a survey of MDOT staff to develop a list of key recommended best

practices from the Risk Management Investigation Phase to incorporate into the development

of the RM Toolbox consisting of risk management templates and tools including, but not limited

to, project RM Plan, risk breakdown structure, risk assessment matrix, and risk register, as

described below.

3.2 Risk Management Toolbox

The RM Toolbox of documents and tools developed for use by MDOT PMs consists of an RM

Workbook of RM Workflows and interactive links, as described in this Section 3, and a training

module developed for training, as described in Section 4.

The RM Workbook consists of an RM Plan template, a Risk Management Procedure (“RM

Procedure”) and associated risk management documents and tools developed in association

with the feedback received from MDOT and the best practices identified in the Risk

Management Investigation Phase. The development of the RM Toolbox was specifically

tailored to meet the objectives stated in the RFP for implementation by PMs addressing gaps

in MDOT’s current RM Program and to improve and build upon MDOT’s existing risk

management guidance.

The key best practices used in the development of the RM Toolbox included:

• Focus on providing risk management guidance, processes and tools for PMs that are

not to be an administrative burden.

• Prepare a comprehensive RM Plan for PMs.

• Define a formal process for PMs and project team to follow.

• Provide flexibility for PMs to customize process.

• Identify PMs as champions (champion a continuous process).

• Focus on specific steps to transition between phases.

• Develop easy-to-use interactive, user-friendly workflows.

• Include a continuous feedback loop for lessons learned.

• Schedule regular training to educate team on the process and use of the proposed RM

Toolbox and RM Plan.

• Provide guidance on incorporating risk contingency into cost estimates.

• Update current guidelines incorporating risk management best practices from the Risk

Management Investigation Phase.

• Develop risk management tools for PMs that can be referenced from the guidelines.

• Provide a single RM Plan template for PMs for projects by phase.

• Ensure that risks are effectively managed.

• Prepare formal and detailed process steps by project phase for PMs with flexibility to

customize.

• Customize by phase with project-specific risk profile assignments (level of effort "tiering"

based on project phase, project, size, complexity, and risk attributes).

• Formalize enterprise risk management approaches using a holistic approach to support

decision-making and improve successful achievement of MDOT ICU’s strategic goals

and objectives.

• Emphasize establishing a risk management culture and embedding risk management

practices within the existing MDOT ICU’s business processes to build trust from

stakeholders and buy-in from internal and external project team members.

• Focus on clearly defining the organizational roles and responsibilities within MDOT to

identify project, program and agency risks early to promote awareness of risk, and

provide team members with the tools to address risk resulting in better decision-making

and fewer surprises.

A draft copy of the RM Workbook documents and tools was prepared and submitted to MDOT

for interim review in March, July, and November 2021.

3.3 Risk Management Workbook

The RM Workbook was developed to establish formal risk management processes and

procedures and to provide PMs with a formal set of guidance documents and tools to

effectively implement risk management for each project delivery phase. The RM Workbook

consists of interactive and linked RM Workflows with step-by-step instructions.

The RM Workbook is organized into seven sections across 17 worksheets. The tabs at the

bottom of each worksheet are color-coded and labeled to guide the user to the appropriate

location within the risk management process, as shown in Figure 3.3-1. Screenshots of the RM

Workbook and associated worksheets can be found in Appendix B.

Figure 3.3-1: Risk Management Workbook Layout

3.3.1 Risk Management Workbook Introduction (Intro Worksheet)

This section provides a general risk overview, purpose of the RM Workbook, contents of the

RM Workbook, and its use for MDOT projects.

3.3.2 Risk Management Best Practices (Worksheet 1.0)

This section provides a summary of the key risk management best practices identified in the

Risk Management Investigation Phase and coordinated with MDOT for use by PMs on

projects. These best practices are intended as supplemental guidance for PMs to consider

facilitating implementation of the formal RM Program as PMs navigate the RM Workbook and

implement the process steps. A list of the key risk management best practices that are

provided in the RM Workbook is provided in Appendix A.

3.3.3 Risk Management Workflow (Worksheet 2.0)

This section provides an RM Workflow of the major risk management process steps of the RM

Plan within each of the project delivery phases:

• Identification and Selection

• Development

• Procurement

• Implementation

3.3.4 Risk Management Plan (Worksheet 3.0)

This section provides the formal instructions for implementing the major process steps defined

in each of the RM Workflows. Individual plans are provided for each project delivery phase.

The use of the RM Plan is described in more detail in Section 3.4.

3.3.5 Risk Management Procedure (Worksheet 4.0)

This section describes the formal risk management process for use at risk workshops,

consisting of risk identification, risk assessment, and risk response planning. The RM

Procedure is referenced by the RM Plan, as further described in Section 3.5.

3.3.6 Risk Documentation (Worksheets 5.0 through 5.4)

This section provides the templates and tools to use for documenting the risk management

process as part of the RM Procedure. The Risk Register template (“Register”) was developed

as a tool for documenting outcomes of risk workshops and tracking project risks throughout the

project delivery process. To provide the user with guidance to navigate the formal risk

management process, the Register is set up to follow the RM Procedure and can be

customized for each of the project delivery phases. A description of each input within the

risk categories for each risk. The Register is linked to a Rating Guidelines template as well as

a Risk Contingency and Schedule Impact Calculation template (“Contingency Calculation”).

The Register and associated tools are referenced by the RM Procedure, as further described

in Section 3.6.

3.3.7 Risk Reporting (Worksheets 6.0 through 6.2)

The final section of the RM Workbook contains the reporting templates, including two Risk

Reports (“Reports”). The first is a summary list of High Priority Risks documenting qualitative

cost and schedule impacts linked to the Register. The second is a Risk Assessment Checklist

(“Checklist”) that is used to report the status of key project development activities being

tracked in the project schedule. The reporting features are further described in Section 3.6.

3.4 Risk Management Plan

The RM Plan is a comprehensive risk management tool to facilitate the implementation of risk

management and incorporate risk management principles and practices into daily project

management activities to better address risk on projects.

The RM Plan template within the RM Workbook provides the PM with a formal set of detailed

procedural step-by-step instructions to perform risk management activities for each of the

project delivery phases based on industry recognized best practices and guidance received

from MDOT staff. This can be customized by PMs for a project to include a project-specific risk

profile assignment that defines the anticipated level of effort or “tiering” of the risk management

process to be utilized based on project size, complexity, risk attributes.

There are four major process steps that are customized by delivery phase.

• Initial Risk Meeting – A transition meeting from the prior delivery phase assessing risk

management needs.

• Risk Review and Planning – A team risk meeting and performing risk management

activities.

• Risk Analysis and Allocation Meetings – Performing risk analysis.

• Risk Updates and Reporting – Monitoring and updating the Register on a monthly basis

including monthly Risk Reports.

During the project Implementation Phase, the second and third steps (Risk Review and

Planning, Risk Analysis and Allocation Meetings) are replaced by Transition Training to be

held after contract execution and prior to design commencement.

The icon legend, shown in Figure 3.4-1, provides 11 icons that are located throughout the RM

Workbook. These icons contain embedded links that take the user to the relevant section

within the RM Workbook that is associated with a specific risk management step.

Figure 3.4-1: Risk Management Plan Icon Legend

The project delivery phase workflow shown in Figure 3.4-2 contains links that when selected

takes the user to an RM Plan providing an RM Workflow of detailed actions for each of the

major process steps customized for each project delivery phase. It is important to note that

“Development Phase” and “Implementation Phase” within the context of project delivery

phases and the RM Plan denote phases within a project lifecycle and are not intended to

signify the “Risk Management Development Phase” or “Risk Management Implementation

Phase” that are the major work efforts described within Sections 2.0 and 3.0 of this report.

Figure 3.4-2: Project Delivery Phase Workflow

The detailed actions are intended to focus PMs on key steps to take for the successful

implementation of risk management on projects based on best practices and lessons learned

on recent MDOT projects, including the importance of engaging in early risk management

activities to mitigate scope, quality and schedule risk and exposure to claims during

construction. These are supplemented by references to relevant sections in the Innovative

Construction Contracting Guide describing risk management processes and procedures for

alternative delivery projects.

Figure 3.4-3 shows a portion of the project Development Phase RM Plan. Similar figures can

be found within the RM Workbook for each of the delivery phases.

Figure 3.4-3: Risk Management Plan for the Project Development Phase

3.5 Risk Management Procedure

The RM Procedure is a formal step-by-step workflow for PMs to conduct the risk management

process at risk workshops that builds upon MDOT’s current risk assessment ratings practice

described in the Innovative Construction Contracting Guide, Appendix C, as described in

Section 2.2 of this report. The RM Procedure is referenced in Step 3 of the RM Plan (Risk

Analysis and Allocation Meetings) in the RM Workbook, which is included as Appendix B.

The RM Procedure incorporates the detailed best practice process steps identified in the Risk

Management Investigation Phase for a three-step process consisting of the identification,

assessment, and response of project risks. Documentation of the RM Procedure occurs within

the Register. Figures 3.5-1, 3.5-2, and 3.5-3 provide workflows of each of the steps of the RM

Procedure.

3.5.1 Identification Step

The Identification Step includes detailed guidance for the identification of risk events that, if

they occur, are likely to affect the overall project objectives (impacts to scope, quality, schedule

and budget) including both threat and opportunity risks.

Figure 3.5-1: Risk Management Procedure Showing the Risk Identification Step

During the Identification Step, an identified risk is classified through the use of drop-down

menus within the Register. The risk is assigned a number, categories using the RBS, and

provided a phase assignment (assigned to the project phase to which the risk is applicable).

The risk is given a name, a detailed description, a trigger for initiation of the risk (when the

impacts of the risk would become a project issue to be remedied by the project team), and

identified as either a risk threat or opportunity.

3.5.2 Assessment Step

The Assessment Step includes both qualitative and quantitative assessments. This step

includes the process for determining both the probability a given risk event will occur and the

consequence of the occurrence to the project scope, schedule, cost and quality. The RM

Procedure uses a qualitative rating scale of 1 to 3, where 1=Low, 2=Medium, and 3=High, to

classify the probability and consequence in accordance with MDOT’s current risk assessment

guidance in the Innovative Construction Contracting Guide. The severity of the impact is then

calculated by multiplying the probability of occurrence by the consequence of the impact.

Figure 3.5-2: Risk Management Procedure Showing the Risk Assessment Step

For risk events which have multiple impacts to scope, schedule, cost and quality, the RM

Workbook builds upon MDOT’s current practice by adding the individual impact to calculate an

impact score to help prioritize the risks for the purpose of developing response plans, reporting

and monitoring the risks.

Part of the assessment is to consider how a schedule risk can affect the team’s ability to reach

a specific project milestone. There are 16 project milestones provided by a drop-down menu in

the Register ranging from an early project development activity through the maintenance

period. The impacted milestone may be an event within the project phase specific to that risk

or it may impact an activity further out in the schedule.

The process described in the Innovative Construction Contracting Guide is also developed

further by including guidance on performing quantitative assessments. During the Assessment

Step, the determination is made whether the risk is an “Event Driven Risk,” a risk that has a

quantifiable cost or schedule impact that will be captured either as risk contingency in the

project cost estimate or shown as a schedule impact to the project schedule. The calculation of

the quantitative cost and schedule impacts is described below in Section 3.6.

3.5.3 Response Step

The last step in the RM Procedure is the Response Step, used to develop an action plan for

addressing the risk impacts calculated in the Assessment Step. The Response Step defines

specific processes or actions intended to reduce the impact of risk threats or maximize risk

opportunities.

Figure 3.5-3: Risk Management Procedure Showing the Risk Response Step

Response strategies are assigned to each risk. For threats, the options can include to accept

the risk by taking no further action to reduce the impact; mitigate the impacts with a specific

activity or action, such as, performing additional engineering/analysis; transfer the risk to a

party who is best able to minimize the impact; or avoid the risk by changing the project plan to

eliminate the risk.

For opportunities, the options can include to accept the risk by taking no further action to

increase the risk impact; enhance the risk by increasing the probability and/or impact thereby

maximizing benefits realized for the project; share a portion of risk ownership with a party who

is best able to maximize the impact; or exploit the risk by changing the project plan to eliminate

the uncertainty associated with a risk by making sure the risk occurs.

All risks, regardless of the response strategy, are assigned an owner within the project team

who is responsible for monitoring the risk and associated response plan. Ownership should be

a specific person on the project and not a project role nor assigned to the PM. This allows for

better accountability in responding to and monitoring the risk. The owner will routinely report on

the progress of the response plan in achieving the goals of the response strategy.

A risk status dropdown menu provides options to set the status as either not started, active

(ongoing), dormant (not started), or retired (complete). Risks that are set as retired are not

factored into the contingency nor are they included on the High Priority Risk report.

Notes should be added to keep the team informed of actions to address the risk. A

contingency plan can also be established as part of the response plan.

3.6 Documents, Templates and Tools

The RM Workbook includes links and references to the risk management documents,

templates and tools associated with the RM Plan and RM Procedure. As stated in Section 3.3

of this report, the following templates are tools to facilitate documentation of risks and

outcomes when working through the RM Procedure:

• Register

• RBS

• Rating Guidelines

• Contingency Calculation

The following templates (Risk Reports) are reporting tools to highlight and prioritize active risks

and monitor key project development activities:

• High Priority Risks

• Checklist

Each of the documents, templates and tools are formatted to enable PMs to produce clean

outputs to track and monitor project risks on a monthly basis as described in Step 4 of the RM

Plan (Risk Updates and Reporting). The tools were developed to be flexible and customized to

address the needs of a specific project implementing the best practices from the Risk

Management Investigation Phase.

3.6.1 Risk Register

The Register builds upon MDOT’s current Risk Assessment Matrix referenced in the

Innovative Construction Contracting Guide incorporating the best practices from the Risk

Management Investigation Phase for developing user-friendly tools. The Register is flexible for

use during each project phase with the ability to be customized to address the specific project

needs of PMs. The Register is a documentation tool for PMs to document, track, monitor,

update and report on project risks. Figure 3.6-1 provides a portion of the Register template.

Figure 3.6-1: Risk Register

The Register is used to document the outcomes and decisions of the risk management

process described in the RM Procedure, including risk identification, risk assessment, and the

development of risk response plans, which are typically formulated at the risk workshops. In

addition, the Register is used to document contingency plans, in the event risk responses are

deemed to be ineffective, and includes options to add risk monitoring and control tracking

notes.

The Register section of the RM Workbook contains user instructions to navigate the Register

to supplement the guidance in the RM Procedure.

3.6.2 Risk Breakdown Structure

Part of the Identification Step within the RM Procedure is to assign a category and sub-

category to each unique risk within the Register. This hierarchical approach enables the team

to organize risks by subject in a consistent manner across projects, helps the team to assign

risks to SMEs from multiple disciplines, and enables the team to report the number of risks or

cumulative impact score by category.

The RBS is split between nine higher-level categories (RBS 1) and 51 sub-level categories

(RBS 2) in the Register. A drop-down menu built into the Register enables the user to select

an RBS 1 category and subsequent RBS 2 sub-category structured under the selected RBS 1

category. Figure 3.6-2 shows the two levels of the RBS.

Figure 3.6-2: Risk Breakdown Structure

When used across several projects, risks within the same RBS can be directly compared

across projects to see trends and areas for future focus. If particular risks are frequently

occurring, then system-wide responses can be developed and implemented to minimize

threats and maximize opportunities.

3.6.3 Rating Guidelines

As stated in Section 3.5 of this Report, the Rating Guidelines are referenced during the

Assessment Step of the RM Procedure. This step includes the process for determining both

the probability a given risk event will occur and the consequence of the occurrence to the

project scope, schedule, cost and quality. Qualitative assessment ratings (low, medium, and

high) are assigned a numeric quantity (1, 2, and 3) to facilitate calculating impacts and the

severity of the impact is calculated by multiplying the probability by the consequence.

The Register is linked to the Ratings Guidelines to provide the information needed to perform

the qualitative assessment rankings. Probability and consequence bounds for low, medium,

and high are defined by the user for probability, cost consequence, and schedule

consequence. These bounds are scalable to the size and duration of each project and may be

set by the management team for each project. The ratings provided in the template are

guidelines and cost consequence default settings are based on estimated project cost. Brief

descriptions for these ranges are also provided.

• Probability Rating

o 1-Low – Unlikely to occur, improbable; up to 25%

o 2-Medium – Likely to occur, from possible to probable; from 25%-75%

o 3-High – Highly likely to occur, has occurred on past projects with similar conditions;

beyond 75%

• Consequence Rating

o 1-Low – Mild, slight impact; up to 1% of project cost; up to 1 month

o 2-Medium – Moderate, significant impact; from 1-3% of project cost; from 1-3

months

o 3-High – Critical, severe impact; beyond 3% of project cost; beyond 3 months

As shown in Figure 3.6-3, ratings are assigned a color, dependent upon threat or opportunity

classification, and a severity matrix shows a heat map for the risk impact to cost and schedule.

Figure 3.6-3: Rating Descriptions and Severity Matrix

The Rating Guidelines are also linked to the Contingency Calculation to derive an initial

quantitative assessment from the qualitative assessment ratings for each Event Driven Risk,

as further described below. Sliders are provided to help the user set the Rating Values for

probability and consequences used in the Contingency Calculation and have maximum and

minimum values based upon the established bounds, as shown in Figure 3.6-4.

Figure 3.6-4: Assessment Rating Bounds and Values

As described in the following section, Minimum and Maximum values used to calculate project

contingency and project schedule impacts are defined by the project team by setting offsets

from the Most Likely value for each project phase, as shown in Figure 3.6-5.

Figure 3.6-5: Minimum and Maximum Offsets from Most Likely Values

3.6.4 Risk Contingency and Schedule Impact Calculation

As stated in Section 3.5 of this Report, the Contingency Calculation is a tool referenced during

the Assessment Step of the RM Procedure. During this step, the determination is made in the

schedule impact that will be captured either as risk contingency in the project cost estimate or

shown as a schedule impact in the project schedule. The Contingency Calculation is used to

capture these Event Driven Risks and calculate project risk contingency and project schedule

impacts. Risks that have a retired risk status within the Register are not included in the list of

Event Driven Risks. The order of risks in the Contingency Calculation aligns with the order of

risks within the Register; if risks are sorted in the Register, the risks will be presented in the

same order in the Contingency Calculation.

The Contingency Calculation shown in Figure 3.6-6 links with the Register to reference the risk

number and risk name for each Event Driven Risk. The quantitative probability of occurrence

and cost and schedule consequence rating values are defined in the Rating Guidelines based

on the qualitative values provided in the Register. The “Most Likely” cost and schedule impact

in the Contingency Calculation is based on the Rating Value entered in the Rating Guidelines.

These quantitative Most Likely cost and schedule impacts are provisional quantitative

assessments of the risk impacts and are subject to review and update by the project team to

determine the most appropriate impact of the risk for the determination of the risk contingency

and project schedule impact.

Figure 3.6-6: Contingency Calculation Used to Capture Event Driven Risks

The Contingency Calculation uses the RBCE best practice to calculate the Expected

Estimated Cost Value and Expected Estimated Schedule Value. Minimum and Maximum

values are defined by the project team within the Rating Guidelines by setting offsets from the

Most Likely value for each project phase. The weighted mean is calculated using these Most

Likely, Minimum, and Maximum values and multiplied by the probability of risk occurrence. The

sum of the Expected Estimated Cost Values and the Expected Estimated Schedule Values

results in the P50 risk contingency and project schedule impacts, respectively, where P50

represents a 50% probability that the impact will not exceed the calculated value. The sum of

the variances of the individual Event Driven Risks is used to calculate the P70 and P90 risk

contingency for the project cost estimate and project schedule.

3.6.5 High Priority Risks Report

The High Priority Risk report template is a reporting tool to highlight and prioritize active risks

for the purpose of developing response plans, and report and monitor key project development

activities. This report provides a list of “High Priority Risks,” that is, risks that are not retired

and are qualitatively rated as “High Impact” for either cost or schedule according to the

Severity Matrix provided in the Rating Guidelines. This can include both Event Driven Risks

and non-Event Driven Risks. The report is formatted to generate a report for the monthly risk

updates described in Step 4 of the RM Plan.

The High Priority Risk report is linked to the Register and contains two reporting sections. The

first section is a qualitative overview table that includes the risk number, risk name, ratings for

both cost impact and schedule impact, and the overall impact score. Opportunities and threats

are color-coded according to the Rating Guidelines. Regardless of the sequence of risks within

the Register, the risks are sequenced in descending order by impact score, which is the

combined total of the cost impact and schedule impact for a risk. The second section contains

additional information in notecard format for each of the risks provided in the first section,

including project phase, RBS 1 category, risk description, risk owner, response plan, and

notes. Figure 3.6-7 shows the two sections of the High Priority Risk Report.

Figure 3.6-7: High Priority Risk Report

3.6.6 Risk Assessment Checklist Report

Impacts to the project development schedule resulting from delay in achieving project

development milestones are reported in the Checklist. The RM Workbook includes monthly

output reports of the status of development activities being tracked in the project schedule to

assess the risk on a monthly basis of not achieving defined project target milestones.

Figure 3.6-8: Risk Assessment Checklist Report

The Checklist in Figure 3.6-8 documents activities identified during the Risk Management

Investigation Phase that typically need higher scrutiny from the project team in order to be

ready to advance the project. Target milestones are defined in the project schedule for the

completion of specific activities in order to advance the project and the progress of these

activities and the percent completes are reported in the Checklist as part of the monthly

reporting in order to make the project team aware of current status and the milestones needing

to be achieved.

4. RISK MANAGEMENT IMPLEMENTATION PHASE

4.1 Introduction

RS&H coordinated with MDOT to initiate an implementation strategy that enhances MDOT

philosophies related to risk management, utilizes training of MDOT staff on the use of the RM

Workbook and tools, and provides a basis for the implementation of an RM Program. The

intent of the training program is to provide MDOT PMs and staff with a foundation for the

consistent implementation of risk management principles and practices on projects. Objectives

of the training were to:

• Engage participants through a combination of examples, lessons learned, and activities

• Stress the importance, benefits, and value of risk management as a systematic process

for identifying, assessing, and responding to risk and managing resources

• Emphasize proactive and dynamic risk management – early and often risk assessments

throughout the life of a project

• Focus on the use of risk management to build consensus and overall team

cohesiveness

• Emphasize risk management as a tool for communication and consultation with internal

and external stakeholders.

4.2 Implementation Plan

The Implementation Plan consists of developing and delivering an engaging and interactive

training program on the RM Workbook and associated templates, documents and tools while

providing examples of best practices and lessons learned on projects and programs in

conjunction with the instruction. The RM Workbook was released several times throughout the

Risk Management Development and Risk Management Implementation Phases to provide

MDOT staff an opportunity for review. RS&H has provided updates in response to review and

training feedback creating an interactive process of MDOT staff learning to use the tools and

RS&H improving the tools. This helps implement a feedback loop for continuous improvement

of the RM Program. Training for executive level staff will be done separately.

There were two stages developed for the Implementation Plan. The first stage was focused on

providing risk management training during a pilot project risk workshop by utilizing the RM Plan

to execute the RM Procedure as outlined within the RM Workbook. The second stage was to

deliver training material to MDOT on the use of the RM Workbook and the associated

documents, templates and tools.

4.2.1 Training Phase 1

In March 2021, MDOT staff determined that the first stage of training and testing using the RM

Workbook should be centered around an MDOT pilot project. The US-131 Design-Build Project

was selected as a project that would give MDOT staff and the project team the opportunity to

execute early risk management activities during the project Development Phase utilizing the

documents and tools provided within the RM Workbook. The RM Workbook was distributed to

enable MDOT staff and team members the opportunity to try out the tool and provide feedback

leading to an iterative process of learning and improving upon the developed tools through the

Risk Management Implementation Phase.

Initiating the Risk Management Plan

Part of the training and testing of the RM Workbook was to activate the four-step RM Plan for

the US-131 Project. The RM plan is used to define the risk management activities on projects

customized for each phase based on project size, complexity, and risk attributes with links to

documents and tools to perform the activities.

RM Plan Step 1 – Initial Risk Meeting

In April 2021, the team initiated the RM Plan by conducting an early Initial Risk Meeting with

MDOT leadership. During this Risk Management Pilot Project Coordination Meeting, the team

outlined the scope, schedule, roles and responsibilities for the pilot process. RS&H was tasked

with facilitating a risk workshop utilizing the risk management tools on the US-131 Project and

would share the RM Workbook for additional feedback from MDOT going into the workshop.

In early September 2021, the team held a subsequent Risk Meeting with MDOT staff to

provide an RM Workbook Training Session to present the RM Workbook contents and provide

a workbook demonstration. The presentation focused on when and how to engage in the risk

management process on MDOT innovative project delivery projects, provided a training

overview of the concise and user-friendly set of risk management documents, and utilized the

tools that define the processes needed to manage risk. The training session and overview

provided another opportunity for team members to test out the RM Workbook features and

how to use the tools during the pilot process.

RM Plan Step 2 – Risk Review and Planning

The team scheduled a risk planning meeting in late September 2021 to roll-out of the risk

activities for the pilot project with the larger project team. As part of the Risk Review and

Planning step, there were five key activities planned for this meeting:

• Review project information

• Document key potential risks in the Register

• Review project base cost and schedule

• Prepare the Checklist

• Prepare for the Risk Workshop

This meeting included an overview of the MDOT risk management process by RS&H and a

US-131 Project overview provided by MDOT staff. The team brainstormed potential project

risks and developed a set of 11 key project risks for further discussion and drafted strategies

for managing those key risks. An initial risk register was prepared using the Register in the RM

Workbook. The team also reviewed the project cost and schedule assumptions, discussed the

importance of the Checklist, and prepared for the workshop.

RS&H collected project information and prepared a pre-workshop risk survey to distribute to

team members and SMEs. In mid-October 2021, the RS&H team provided a US-131 Pre-Risk

Workshop Questionnaire to project team leaders for approval to distribute. The survey

provided a series of risk topics compiled from the Initial Risk Meeting in September, in an

abbreviated risk register format, as shown in Figure 4.2-1.

Figure 4.2-1: Pre-Risk Workshop Questionnaire Format

This questionnaire was intended to review the existing risks and identify new risks that will

impact the project and the level of threat or benefit the risk poses to the project’s success. The

questionaries were distributed to project team members and SMEs and participants were

instructed to provide a qualitative response to the risks provided using the ratings scale shown

in Figure 4.2-2, update the response plan if necessary, and add additional risks. The

responses provided to this questionnaire would be used to initiate the risk identification

discussions at the workshop.

Figure 4.2-2: Pre-Risk Workshop Questionnaire Qualitative Ratings Scale

RM Plan Step 3 – Risk Analysis and Allocation Meetings

The team prepared for the risk workshop by determining the scope of the workshop, desired

qualitative outputs, size of the workshop, and prepared an agenda. In early November 2021,

RS&H set up a series of ten breakout meetings, individualized per risk category, and lasting 30

minutes to two hours. The goal of the meetings was to provide further insight into risk

workshop expectations and to interview SMEs on the findings from the risk survey.

Questionnaire results were discussed during each meeting and results were compiled using

the Register. The breakout categories included:

• Traffic and Safety • Utilities

• Construction • Geotechnical

• ITS • Project Management

• Design • ROW

• Drainage • Environmental

The US-131 Project Development Phase Risk Workshop was held in mid-November 2021 with

MDOT staff, the project team, and SMEs. RS&H met with MDOT staff ahead of time to set the

scope for this workshop. The project is in the early stages of the project Development Phase

and the objective of the two-hour workshop was to provide a walkthrough of the RM Workbook

as opposed to a full project assessment and completion of the Register. A project overview

was provided by MDOT staff and a summary of the survey results for the key project risks was

provided.

The majority of risk identification, risk assessment, and risk response steps, as part of the RM

Procedure, were completed prior to the workshop based upon the Initial Risk Meetings and

discussion from the survey results. The Workshop was used partially as a verification of the

top priority risks. RS&H selected three risks and walked the participants through the four steps

of the RM Plan and three steps of the RM Procedure in order to delivery training on the use of

the risk management process and demonstrate the full project Development Phase RM

Workflow. For each of the three risks, the qualitative ratings were changed in the Register and

the Rating Guidelines were modified to provide training on use of the Contingency Calculation

and the process for calculating the quantitative cost and schedule impacts of Event Driven

Risks. The result of the workshop was a draft risk register for the project team to build upon, a

list of High Priority Risks to use for RM Plan Step 4 – Risk Updates and Reporting, and a draft

training presentation for MDOT to use in future training.

4.2.2 Training Phase 2

The development approach for the training was based on the inputs and findings from the Risk

Management Investigation Phase and Risk Management Development Phase and the

guidance prescribed in the 2016 FHWA Risk Management Guidance identifying the four

principal risk process steps of risk identification, risk analysis, risk response planning, and risk

monitoring and control. This guidance is widely accepted and adopted by the DOTs that were

researched during the Investigation Phase and is used as the basis for MDOT’s current IC risk

management procedures referenced in Chapter 5 of the Innovative Construction Contracting

Guide. The RM Program and training presentation was also developed consistent with the

seven processes in the Project Management Body of Knowledge (PMBOK) area for risk

management.

Training Module

The training presentation is provided as a self-guided walk-through of the RM Workbook. It

enables the user to step through the iterative process and in combination with the RM

Workbook provides the instructions to successfully integrate risk management activities into

project management. The presentation providing examples of best practices and lessons

learned on projects and programs in conjunction with the instruction.

The training presentation can be customized for use on active projects enabling the training to

be conducted in conjunction with on-going project risk management activities. The RM

Workbook can be used on an active project to conduct a risk workshop and develop a risk

where training is provided as a morning session followed by a project workshop in the

afternoon.

5. CONCLUSION

Risk management is part of a continuous project management process and should be

integrated into everyday program and project decision-making. Through formalized risk

management guidance, MDOT will be in a better position to assess and manage uncertainty,

refine project assumptions, and develop mitigation strategies so risks do not become issues.

Successful implementation of a Risk Management Program begins with providing PMs and

project teams with the tools and techniques based on best practices to make better-informed

decisions. By seeing the value of incorporating risk into program and project management

decision-making processes, MDOT is equipped to mitigate scope, schedule and cost impacts

on a continuous basis. The benefits of risk management are realized when formal risk

management is introduced on a project as early as possible and the development process

continues throughout the project lifecycle.

Research was conducted to document industry risk management best practices to provide

recommendations for developing and implementing a comprehensive RM Program. These

best practices were used to develop standardized guidance documents, templates and tools to

build upon MDOT ICU’s current risk management practices. This will better assist PMs in

managing project risk to improve project delivery on a consistent basis. Making project risk

management more effective and efficient for project managers and staff will help to improve

MDOT's business practices, project outcomes, and streamline project delivery.

The tools were developed to support MDOT risk identification, risk analysis and evaluation, risk

response planning, risk mitigation, risk monitoring, and risk reporting for each of the project

delivery phases. To support the guidance and tools, user instructions were developed for the

use of templates and tools, and training was conducted on the use of the templates and tools.

The guidance and tools are intended to foster wider education and buy-in from PMs, project

team staff, and MDOT consultants, and not to be an administrative burden. They will be an

additional tool in the PM’s project management toolbox to mitigate and control cost, schedule

and quality risks on projects on a consistent basis.

REFERENCES

“Category:149 Project Delivery Method Determination and Risk Assessment.” MoDOT

Engineering Policy Guide. Accessed Novmeber 8, 2020.

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APPENDIX A – KEY RISK MANAGEMENT BEST PRACTICES

The following risk management best practices were identified during the Risk Management

Investigation Phase and are provided within the RM Workbook. This list supplements the best

practices provided in Section 2.9:

Project Planning and Control

• Use the RM Workbook as a project planning and control tool

• Use proactive and reactive efforts to manage risk

• Remember that managing risk, addressing uncertainty, and refining and validating

assumptions is an integral part of a project’s planning, organization, and decision-

making process

• Engage in risk response planning, whether informal or formal, as a part of overall

project planning

• Develop a risk-based contingency as part of a project’s overall budget contingency

Risk Management Process

• Focus the project team on identifying, assessing and reporting on the more significant

risk items affecting the scope, schedule and cost

• Help support the transition of less experienced project personnel into the project

• Engage multiple disciplines to discuss risks on a project and assess how other risks

may affect their part in the project

• Facilitate early planning and prioritizing of items for the team to work efficiently and

initiate early mitigation

Focus on Project Team

Enable and facilitate team coordination and the ability to prioritize items. This allows the team

to be focused on the right tasks at the right time and work efficiently. A project team can make

more informed decisions when the entire team understands the risk profiles and impacts.

Risk Management Culture

Aim to establish a risk management culture and create specific guidance meeting the needs to

help develop the guidelines and training. Such a culture allows the project team to clearly see

the value of incorporating risk into project and program management decision-making and

planning to mitigate scope, schedule and cost impacts.

Flexible and Scalable Process

The overall approach and processes in the RM Toolbox are not intended to be prescriptive.

Variations based on project size, procurement duration and timing, and other issues will

require that the risk management effort be adjusted to fit each specific project. The

requirements, limitations, and actions necessary to ensure consistent reporting and the

continuous improvement of the risk program are discussed in the RM Workbook.

Risk Management as a Continuous Process

As the project moves through the project development process, more project details are

fleshed out and risk items are addressed. Risks are either no longer a problem because they

did not occur or because sufficient information is available to better assess the concern.

Additional risk items may also be discovered later during the development process. These

should be added to the list of previously known risk items with strategies developed and

worked as development continues.

Remember - the risk management process can be executed anytime for instances where

project specific or unique risks could occur that are not identified and managed as stated

previously.

Importance of Risk Management – Guiding Principles

• Establish a formal, continuous risk management process

• Reduce risk and uncertainty resulting in better pricing

• Ensure quality of project information and RFP documents

• Project manager focus

• Better cost estimates

• Foster risk culture

• Early risk identification

• Mitigation strategies so risks don’t become issues

• Minimize risk to proposers resulting in better competition

• Promote awareness of key project risks

Enterprise Risk Management

A successful risk management process involves participation at various levels of an

organization: from the project team and program levels to the agency and leadership level. Aim

to deliver an integrated, multi-tiered, comprehensive risk management approach that

communicates and addresses uncertainties of all management levels of an organization.

Lessons Learned – Continuous Improvement

Using a risk management process will improve the operation of a program by improving overall

visibility, facilitating communication, and providing an excellent basis for capturing lessons

learned. It can be challenging to implement lessons learned and best practices consistently

across a program due to a lack of a fully documented and developed formal RM Program and

in part to limited staff and resources. The key is to develop a feedback loop into the risk

management process to incorporate lessons learned for continuous improvement.

APPENDIX B – RISK MANAGEMENT WORKBOOK