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Multi-Criteria Risk-Based Decision-Making (RBDM)

Model for a Multi-Billion-Railway Program (MBRP)


THESIS SUBMITTED TO
PARIS SCHOOL OF BUSINESS, PARIS,
FOR THE AWARD OF THE DEGREE OF

DOCTOR OF PHILOSOPHY IN BUSINESS ADMINISTRATION


(EXECUTIVE DBA)
UNDER THE FACULTY OF BUSINESS ADMINISTRATION
BY

SAAD AHMED AL MUHANNADI


UNDER THE GUIDANCE OF

PROF. JOSSE ROUSSEL


DEAN OF THE EXECUTIVE DBA PROGRAM
PARIS SCHOOL OF BUSINESS,
PARIS, FRANCE

PSB Paris School of Business


59 rue Nationale
75013 Paris, France
December, 2015

DECLARATION

I hereby declare that the project entitled Multi-Criteria Risk-Based


Decision-Making (RBDM) Model for a Multi-Billion-Railway Program

(MBRP) is an original record of the Executive DBA done by me under


the guidance of Prof. Josse Roussel, Dean of the Exec DBA Program in
the Paris School of Business, Paris as part of the Executive DBA
Program. I also declare that it was not previously submitted for the award
of any academic title.

Saad Ahmed Al Muhannadi

ACKNOWLEDGMENTS
My sincere gratitude extends to beloved teacher Prof. Josse Roussel, Dean of
the Executive DBA Program in the Paris School of Business, Paris, who has
continuously guided me throughout the entire process of the research with all
constructive comments and suggestions to make this research work MultiCriteria Risk-Based Decision-Making (RBDM) Model for a Multi-BillionRailway Program (MBRP) more perfect and complete.
I am grateful to the Qatar Rail and Staffs, in particular the Head of the
Departments for being very supportive throughout my research.

My beloved Parents, thanks for your unlimited kindness and supplications.


"And say, My Lord, Have mercy on both of them as they cared for me when I was
little" Holy Quran*.

My DBA Dissertation is dedicated to the State of QATAR


My beloved family, thanks for the patience and love. I always need your love
and care for me today, tomorrow, and then. By God willing, I hope you all will
be the best generation of our family and shine your future by knowledge and
experience.

Multi-Criteria Risk-Based Decision-Making (RBDM) Model


for a Multi-Billion-Railway Program (MBRP)

This Research is related to the development of an enhanced model for Risk-Based


Decision-Making (RBDM) applicable for a Multi-Billion Railway Program (MBRP). As the
MBRP is a typical mega-project, consisting of many contractual, physical, and other
components, and stakeholder interests, its design, planning and construction have
proven to be very risky due to high costs and longtime spans. Historically, many of such
projects had enormous cost overruns and schedule slippages, and thus avoidance of
these risks through a well-established process for making decisions is a specific
challenge for my DBA research. The RBDM will employ a Multi-Criteria (MC) approach,

based on probability of occurrence and consequences of each potential risk during


design, planning and construction activities, with both internal and external impacts taken
into account.
The RBDM model applicable for MBRPs will be validated on a current scheduledriven MBRP in Qatar and compared to other available models. The construction works
for a MBRP are ranked high on the potential risk scale, particularly those carried out for
the underground structures for railway and metro lines, where many uncertainties
(geological and others) are met and need to be defined quantitatively by various
approaches. The proposed model will be used to evaluate and select the most suitable
risk treatment options for meeting the project schedule without jeopardizing the other
criteria.

TABLE OF CONTENTS
I.

AN OVERVIEW OF THE RESEARCH

01

II.

POSITIONING OF THE RESEARCH PROGRAM

07

II.1. Research Objectives

07

II.2. Research Questions

08

II.3. Research Hypotheses

09

II.4. Expected Contribution

09

III. LITERATURE REVIEW

11

III.1. Risk-Based Decision-Making Process

11

III.2. Multi-Criteria Decision-Making

17

III.3. Allocation of Risks

22

III.4. Risk Management

26

III.5. Risk Assessment Tools

29

III.6. Decision-Making Models

34

III.7. Applicability of the Existing Models

37

III.8. Requirements for a new RBDM for MBRPs

44

III.8.1. Qualitative risk analysis

44

III.8.2. Quantitative analysis of uncertainty and risk

45

IV. RESEARCH DESIGN AND METHODOLOGY

49

IV.1. Research Design

V.

49

IV.2. Methodology to be Applied

50

IV.3. Input Data

53

IV.4. RBDM Processes

55

IV.5. Output

65

IV.6. Validation of the RBDM Model

66

IV.7. Data Collection

66

IV.8. Conclusion

67

ANALYSIS OF RISK DATA A MULTIPLE CRITERIA MODEL

69

V.1. Step 1. Qualitative deterministic analysis

69

V.2. Step 2 Decision-making: Phase I

71

V.3. Step 3 Quantitative deterministic risk analysis

74

V.4. Step 4 Quantitative probabilistic risk analysis

76

V.5. Step 5 Risk treatment options (Decision making: Phase II) 80


V.6 Step 6 Risk treatment options (Decision making: Phase III) 82
V.7 Suggested risk management approach

87

V.8 General Conclusion of the study summary of the major


findings and data collection methodology
V.9 Scope of further exploration

VI. REFERENCES

87
88

89

VII. QUESTIONNAIRE

110

VII1. INTERVIEW SCHEDULE

114

LIST OF FIGURES

Figure 1: Impacts related to schedule of a mega-project

04

Figure 2: The five steps of the risk-based decision making process

11

Figure 3: Risk management process according to ISO 31000:2009

15

Figure 4: General process of risk management

17

Figure 5: Risk management model

28

Figure 6 Risk based decision-making framework for a multi-billion-railway program

52

Figure 7: Risk Data Population

54

Figure 8: Decision tree for the evaluation of risk treatment options

65

Figure 9: Risk Factors and their relative significance

86

LIST OF TABLES
Table 1: Selected types of contracts and risk sharing

23

Table 2: The contractors risk for two types of contract

24

Table 3: The risk matrix

45

Table 4 Risk Treatment Description per Level

62

Table 5: Risk Treatment Options

63

Table 6: Summary of Qualitative Deterministic Analysis of Risk

70

Table 7: Summary of Qualitative Deterministic Analysis of Risk

72

Table 8: Criteria for Prioritizing the Risk Factors

74

Table 9: Quantitative Deterministic Analysis of Risk Prioritizing the Risk Factors 75


Table 10: Quantification of Risks and Finding the Risk Degrees

77

Table 11: Risk Treatment Description per Level

79

Table 12: Risk Treatment Options

81

Table 13: Prioritized risk factors

82

Table 14: Prioritized risk factors

84

I. AN OVERVIEW OF THE RESEARCH


The management of large-scale investment projects is extremely risky and
challenging. One of the key success drivers of such (mega) projects is a proper risk
management strategy, whereby effective measures can be taken early enough to
mitigate any negative impact on schedule, cost or quality. This Research deals with the
application of the Risk-Based Decision-Making (RBDM) approach used to prevent
schedule slippage and cost overruns on mega-projects. According to the RBDM

Guidelines (USCG, 2013), the RBDM is a process that organizes information about the
possibility for one or more unwanted outcomes to occur into a broad, orderly structure
that helps decision makers make more informed management choices. It is well
established that such a process, based on adequate models can drastically improve the
decision-making process. However, applying the existing models to large (mega)
projects, such as a Multi-Billion Railway Program (MBRP) in Qatar, introduces new
challenges that should be addressed by developing new methods of approach and finetuned large-scale RBDM models.
Because of their large scale and long time-frames, mega-projects are inherently
risky, carrying their own unique risk potential. Risk management and risk-based decisionmaking are presently becoming more and more important. However, as many more and

much larger mega-projects are being proposed and built around the world, it is becoming
clear that such (mega)projects have strikingly poor performance records in terms of
economy, environment and public support (Haimes, 2007). Due to complexity and lack of
information on the MBRPs, particularly on the construction of their underground
structures, there are many challenging aspects to be addressed during the design,
planning and construction works, including their interaction with all other work
packages thus affecting the overall cost and schedule of a MBRP.
There are also different stakeholder interests in place that can impact the risks to a
great extent. For example, the MBRP in Qatar and many other multi-billion programs
worldwide are sponsored by the governments and play an important strategic and
political role to the states. Hence, the multi-billion programs involve many stakeholders

with different and changing requirements, while their acceptability threshold for timely
delivery of the projects cannot be negotiated. However, the existing RBDM models are
not suitable to address complex MBRP schedule problem, the RBDM approach to megaprojects introduces new methodological challenges in managing risks in order to enable
such risks to be either reduced, or eluded, transferred from one place to another, or
diversified and allocated to the parties best able to handle them. To develop a RBDM
model suitable for a MBRP, relevant studies will need to be conducted first in order to
investigate which elements of the existing models may be appropriate for the
development of an enhanced model specific for a MBRP and thus meet the main
objective of my research project.
As a rule, there is very little or no reliability of the overall experience from the past
projects, so that each particular project requires a tailored approach. Therefore, for

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testing the model to be developed, the case of Doha Metro construction in of Qatar will
be used. For that purpose, both, quantitative and qualitative (mixed) methods will be
used for analyzing the risk data collected both through my field work and through the
search of academic literature and other sources. Following the stakeholders preference,
priority is given to the overall project schedule criterion, but without compromising cost
and other criteria. The schedule slippage of the underground works due to many
uncertainties in place can be transferred to the other work packages, of a MBRP.
In early phase of planning of any mega-project, several alternatives are commonly
considered. These alternatives can include different layouts of the infrastructure, different
combinations of tunnel and bridges or different construction technologies. The early
design phase and the decisions taken at that time have the decisive role on the cost of

the MBRPs and mega-projects in general. The optimal solution is commonly selected
based on a cost benefit analysis, which appraise costs and benefits expected during the
project life (Lee Jr., 2000; HM Treasury, 2003; Flanagan and Jewell, 2005; Nishijima,
2009). For including the non-monetary factors such as traffic safety and social or
environmental impacts into the decision-making, the multi-criteria analysis (MCA) can be
utilized, which includes the economic efficiency as one of the criteria (Morisugi, 2000;
Vickerman, 2000).
One of the most important factors influencing the decision whether and how a
MBRP is to be built is the estimated time and costs of construction (Reilly, 2000).
Realistic estimate of construction time is equally important. The construction time
significantly influences the construction costs, because substantial part of the costs
comprises of the labor and machinery costs, which are time dependent. Additionally, the

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construction often requires restrictions in operation of existing infrastructure and


therefore causes secondary costs and is negatively perceived by pubic. Delays of
opening of a MBRP operation are in general economically and politically problematic.
However, to manage the construction schedule of a mega-project is extremely difficult.
From the complexity of a mega-project presented in Figure 1 as presented by Smith
(1998), it is clear that too many (direct and indirect) impacts must be taken into account
to be able to estimate the schedule slippage, for example.

Figure 1: Impacts related to schedule of a mega-project

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The evaluation of uncertainties is crucial information for making decisions. Knowing


them, the decision maker can decide whether the uncertainty is acceptable, whether
some measures to reduce the uncertainty must be taken or whether to select another
option. The need of probabilistic prediction of construction time and costs and their
communication with the stakeholders has gradually been recognized and the demand for
applicable probabilistic models is apparent.
There are only few methods and models for quantification of uncertainty in
construction time and cost prediction for infrastructure in general (Flyvbjerg, 2006), or for
tunnels in particular, e.g. the Decision Aids for Tunneling (DAT) developed at MIT
(Einstein, 1996), an analytical model presented by Isaksson and Stille (2005) or a model
combining Bayesian networks and Monte Carlo simulation proposed by Steiger (2009).

Probabilistic models have not been widely accepted in the practice so far. A first reason
is that there was not real demand for the quantitative modeling of uncertainties and risk,
because decision makers were not used to work with such information. A second reason
is that the existing models often did not provide a realistic estimate of the uncertainties
and they therefore did not gain acceptance among the practitioners. However, this
situation seems to be changing in the recent years and both the demand and the
reliability of the model results have increased.
For reliable predictions, it is essential to realistically estimate the parameters of the
probabilistic model. At present, such estimates mostly rely on expert judgment. However,
these can be strongly biased and unreliable. Therefore, the expert estimates should be
supported by analysis of data from previous projects. pakova (2012) introduces an
advanced Dynamic Bayesian Networks (DBNs) model which takes over some modeling

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procedures from existing models and extends the scope of the modeled uncertainties
and aims at developing models for quantification of uncertainties in the construction
process of a linear infrastructure such as rail or roads.
In focus of my research is a schedule-driven mega-project, MBRP in Qatar. This
Research is related to the development of an enhanced RBDM model applicable for
selection of the most suitable risk treatment option(s) for meeting the schedule of a
MBRP without jeopardizing the other criteria of the program. As the MBRPs, as well as
any other typical mega-project, encompass many contractual, physical, and other
components, and stakeholder interests, their design, planning and construction have
proven to be very risky due to high costs and longtime spans. Historically, many of such
projects had enormous cost overruns and schedule slippages, and thus avoidance of

these risks through a well-established process for making decisions is a specific


challenge for my DBA research.

The proposed research is based on a combination of empirical data and literature


review, leading to the development of an analytical (quantitative) framework, followed by
a case-study survey. Relevant literature and data are for this research are proposed to
be collected authentic sources, like Government publications are reports, including
online sources like EBSCO, JSTOR and such other academic databases.
The research process of building a new RBDM model applicable to the MBRPs will
be, based on my previous and current experience in MBRP management. I will continue
to investigate the relevant RBDM models applicable in the current MBRP. Next, based on
my review of the existing decision-making models, especially by taking reference from

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several RBDM models and by combining them, the new RBDM model, applicable for a
MBRP will be built. In the meantime, I will collect the internal and external risk data to
validate the model.

II. POSITIONING OF THE RESEARCH PROGRAM


II.1 Research Objectives
The objective of this research is to provide tools for the analysis of MBRP
construction uncertainties and risks. The particular aims are to exploit the RBDM
methodology to arrive at the models that are the best suited for mega-projects. For the

above purpose, relevant studies will be conducted to enhance the existing RBDM
models or to develop new ones, with the mandated objective of this project viz.
addressing the question of selecting the most suitable risk treatment options; for the
particular case of meeting the schedule of a MBRP without jeopardizing the other criteria
of the program. The major objectives of this research are as follows:
1. Investigate in detail the existing RBDM models and use them to develop an
enhanced model for risk management of a schedule-driven MBRP.
2. Using the proposed RBDM model, evaluate and select the most suitable risk
treatment options for meeting the schedule of a MBRP without jeopardizing the other
criteria of the program.

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3. Assess the validity of the proposed model by using the Qatar Rail implementation
project as a case study.
This research aims at developing models for quantification of uncertainties in the
construction process of a MBRP. Specifically, the models are to be developed for
probabilistic assessment of the construction time. However, probabilistic models have
not been widely accepted in practice so far because the existing models often did not
provide a realistic estimate of the uncertainties and they therefore did not gain
acceptance among the practitioners. But, this situation is changing in the recent years
and both the demand and the reliability of the model results have increased. However,
only a few methods and models can be used for quantification of uncertainty in
construction time and cost prediction for MBRPs (Flyvbjerg, 2006), or for their

components such as tunnels in particular, for which an analytical model was developed
by Isaksson and Stille (2005) or a model combining Bayesian networks and Monte Carlo
simulation proposed by Steiger (2009) and recently a Dynamic Bayesian network (DBN)
model of tunnel construction process developed by pakova (2012).
II.2. Research Questions.
The main research question is as follows:
How to select the most suitable risk treatment options for meeting the
schedule of a MBRP without jeopardizing the other criteria of the program?
In order to answer the main question, the following sub-questions, which are linked
to the research objectives, should be addressed first:

Research sub-questions linked to the objective #1:

1.

What are the risks, which may prevent or deter the timely completion of a MBRP?

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2.

Which of the existing RBDM models may be risk-specific for a MBRP?

3.

What are the limitations of the existing RBDM models when used for a MBRP, and
what could be the possible solutions to overcome these limitations?

4.

Which benefits of the existing RBDM models can be used to design a new
enhanced RBDM model for a MBRP?

Research sub-questions linked to the objective #2:

5.

How should the schedule-specific risks be valuated within particular risk treatment
options?

6.

How should the proposed RBDM model be used to select the most suitable
(optimal) risk treatment option for meeting the schedule of a MBRP?

Research sub-questions linked to the objective #3:

7.

Which all data collection mechanisms and validation techniques should be used

while going for validation of the proposed RBDM model for a MBRP?
8.

How should the validity of the proposed model for a MBRP be assessed?

II.3. Research Hypotheses


The proposed RBDM model will be based on three hypotheses.
Hypothesis 1: The optimal risk treatment option provided by the developed model
can minimize the risks associated with the MBRP measures in terms
of the variance from the scheduled figures and actual figures collected
through a case study of MBRP.
Hypothesis 2: The optimal risk treatment option provided by the developed model in
respect of meet the schedule criterion will not have significant
adverse impact as regards the optimal results based on other criteria.

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Hypothesis 3: The proposed RBDM model can be validated when applied in practice
through a case study on the current MBRP in Qatar.
II.4. Expected Contribution
The main scientific contribution which is expected from this research project will be
an enhanced RBDM model and computer tool applicable to schedule-driven megaprojects such as the MBRP in Qatar for selection of the most suitable risk treatment
option(s) for meeting the required project be schedule without jeopardizing the other
criteria. The RBDM will employ a Multi-Criteria (MC) approach, based on the probability
of occurrence and consequences of each potential risk during design, planning and
construction activities, with both internal and external impacts taken into account. The
RBDM model applicable for MBRPs will be validated on a current MBRP in Qatar, which

is believed to suitable to serve as a realistic criterion to validate the model, given that the
main stakeholders, including the owner, the general design contractor, the strategic
program management contractor, and the construction contractors, are highly project
schedule driven and are ready to adopt RBDM techniques. Although the model will be
designed to be project-agnostic, the case study will both demonstrate the accuracy and
effectiveness of the proposed methodology and help in fine-tuning the model steps with
an aim make it applicable for other mega-projects. The validation of the performance of
the proposed model will also identify its limitations, which could then open the door for
future improvements. A comprehensive comparison with the existing models will be also
included.

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III. LITERATURE REVIEW


This section is a review of the literature relevant to the research area under study.
Accordingly, it starts with the literature related to risk-based decision making process,
various models that are used for decision making by ensuring optimal levels of various
risks involved, process of risk management including the step-by-step procedure

involved, the relevant ISO standards applicable in project management setting etc. are
discussed in this section.
III.1.

Risk-Based Decision-Making Process

The risk-based decision making (RBDM) process is composed of five major steps, as
shown in the Figure 2, adapted from Mayers et al (2002).

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Step 1

Step 2

Step 3

Step 4

Step 5
Source: Mayers et al (2002)

Figure 2: The five steps of the risk-based decision making process


As a good guidance through my future research, these steps are briefly outlined below:
Step 1 Establish the decision structure

Understanding and defining the decision that must be made is critical. This first
component of risk-based decision making is often overlooked and deserves more
discussion. The following steps must be performed to accomplish this critical component:
Step 1a Define the decision. Specifically describe what decision(s) must be made.
Major category ies of decisions include (1) accepting or rejecting a proposed facility or
operation, (2) determining who and what to inspect, and (3) determining how to best
improve a facility or operation.
Step 1b Determine who needs to be involved in the decision. Identify and solicit
involvement from key stakeholders who (1) should be involved in making the decision or
(2) will be affected by actions resulting from the decision-making process.

20

Step 1c Identify the options available to the decision maker. Describe the choices
available to the decision maker. This will help focus efforts only on issues likely to
influence the choice among credible alternatives.
Step 1d Identify the factors that will influence the decisions (including risk factors).
Few decisions are based on only one factor. Most require consideration of many factors,
including costs, schedules, risks, etc., at the same time. The stakeholders must identify
the relevant decision factors.
Step 1e Gather information about the factors that influence stakeholders. Perform
specific analyses to measure against the decision factors. Some common decision
analysis tools could help to structure the overall decision-making process.
Step 2 Perform the risk assessment
The risk assessment is the process of understanding (1) What bad things can happen,

(2) How likely they are to happen and (3) How severe the effects may be. The key to risk
assessment is choosing the right approach to provide the needed information without
overworking the problem. The following steps must be performed to assess risk:
Step 2a Establish the risk-related questions that need answers. Decide what
questions, if answered, would provide the risk insights needed by the decision maker.
Step 2b Determine the risk-related information needed to answer the questions posed
in the previous step. For each information specify (1) Information type needed, (2)
Precision required, (3) Certainty required and (4) Analysis resources (staff-hours, costs,
etc.) available
Step 2c Select the risk analysis tool(s). Select the risk analysis tool(s) that will most
efficiently develop the required risk-related information.

21

Step 2d Establish the scope for the analysis tool(s). Set any appropriate physical or
analytical boundaries for the analysis.
Step 2e Generate risk-based information using the analysis tool(s). Apply the selected
risk analysis tool(s). This may require the use of more than one analysis tool and may
involve some iterative analysis (i.e., starting with a general, low-detail analysis and
progressing toward a more specific, high-detail analysis).
Step 3 Apply the results to risk management decision making
To reduce a risk, actions must be taken to manage it in a way to provide more
benefit than they cost. They must also be acceptable to stakeholders and not cause
other significant risks. The following steps must be performed to manage risk:
Step 3a Assess the possible risk management options. Determine how the risks
can be managed most effectively. This decision can include (1) accepting/rejecting the

risk or (2) finding specific ways to reduce the risk.

Step 3b Use risk-based information in decision making. Use the risk-related


information within the overall decision framework to make an informed, rational decision.
This final decision-making step often involves significant communication with a broad set
of stakeholders.
Step 4 Monitor effectiveness through impact assessment
Impact assessment is the process of tracking the effectiveness of actions taken to
manage risk. The goal is to verify that the organization is getting the expected results
from its risk management decisions. If not, a new decision-making process must be
considered.
Step 5 Facilitate risk communication

22

Risk communication is a two-way process that must take place during risk-based
decision making. At every step in the process, encourage stakeholders to identify the
issues of importance to them and present their views on how each step of the process
should be performed. Stakeholders should agree on the work to be done in each phase
of the risk-based decision-making process. They can then support the ultimate decisions
The above is in line with the standardized risk management process according to
ISO 31000:2009 (2009), Figure 3. The first, essential step of the process is establishing
of the context, which consists of (1) defining scope and aims of the risk management
process, (2) describing criteria of success and (3) explaining the constraints and
limitations, all based on the stakeholders objectives. The risk assessment contains three
steps: First, phenomena and events, which might influence the stakeholders objectives

in either positive or negative way, are identified (risk identification). Second, the causes
and likelihood of the events and their impacts are analyzed on a qualitative or
quantitative basis (risk analysis). Third, the results of the risk analysis are compared with
the acceptance criteria and with the objectives and decisions are made how to treat the
risks (risk evaluation).

23

Figure 3: Risk management process according to ISO 31000:2009


For risk treatment, four general strategies (also known as 4Ts of risk response,
pakova, 2012) can be applied: Tolerate the risk if the risk is acceptable, Treat the risk

(take measures to decrease the risk), Transfer the risk to another stakeholder or
insurance company or Terminate the activity or project, if the risk is unacceptable and
other strategies are not applicable. The implementation of the selected risk management
strategy must be properly controlled. At each stage of the process, the findings must be
properly communicated with the stakeholders. The findings and decisions should be
repeatedly revised whenever some new information is available or when the conditions
change.
Many decisions must be made regarding design, project financing and type of
contract. These decisions are made under high uncertainty, such as uncertainty in
construction cost, time of completion, impact on third party property or maintenance
costs. Assessment of these uncertainties is crucial for making the right decisions. Often,

24

the solutions that seem to be cheaper and faster based on deterministic estimates are
associated with higher uncertainties and risks. Making decisions based on deterministic
values is therefore insufficient. The construction process is affected by different types of
uncertainties. It is therefore important to distinguish between the common variability of
the construction process and the uncertainty on occurrence of extraordinary events, such
as failures of the construction process
Application of risk management in mega-projects has particularly been motivated by
increasing complexity of the construction projects and by pressure for cost savings and
for construction time reduction. Identification of risks in early design phase allows
significant reduction of life-cycle costs through improvements of the design and planning
and through appropriate treatment of the risk in the later phases. Some manuals have
been developed specifically for the underground construction and tunneling projects

(Clayton, 2001; Eskesen et al., 2004; Staveren, 2006). In these manuals, a special
attention is paid to the geotechnical risks, which play a crucial role in the underground
construction (pakova, 2012). The risk management system for the Gotthard Base
Tunnel (GBT) has been discussed by Lieb and Erhbar (2011). The overall risk
management process applied to this mega-project is presented in Figure 4.

25


Source: Lieb and Erhbar (2011)

Figure 4: General process of risk management


III.2.

Multi-Criteria Decision-Making
Decision making about mega-projects should normally include identifying objectives

and possible options for achieving the objectives, as well as the criteria to be used to
compare the options. Then follow analysis of the options, making choices, and finally
feedback. The actual outcome of each of the individual decisions at each stage is not
known with certainty. An ever-increasing complexity of mega-projects such as MBRPs
offers new and exciting scientific and technological challenges. Sen and Yang (1998)

26

examine some of the underlying issues on multi-criteria decisions and related modeling
strategies, with a view to exploring a generalized multiple-criteria approach to the
decision-making in mega-projects. Multi-Criteria Decision Analysis (MCDA) methods are
used to reduce complex problems in selection of a preferred alternative. However, Linkov
and Steevens (2008) claim that these methods do not necessarily weight the relative
importance of criteria and combine the criteria to produce an aggregate score for each
alternative.
Major transportation projects require huge physical and financial resources and are
usually funded by government or public private partnerships. In the conventional
approach to project development, government is the project promoter and financier, and
private firms, who actually conduct the project, are intended to do the best-case
feasibility studies, produce the designs, and earn additional profits by numerous change

orders later on. It is going to be harder and harder to get public and political support for
mega-projects unless they come up with better-performing delivery models. Another
critical approach is to incorporate risk analysis into early project development stage,
such as feasibility studies. Therefore, management of large scale projects presents a
special challenge for executive politics and of government more widely. Jennings (2012)
claims that, by assessing the role of executive politics in the adoption and management
of mega-projects, it is possible to undertake comparative analysis of sources of their
under-performance in relation to the role of high politics and institutions, executive
politics and the consequences of the design of project financing and administration (such
as in the balance of risk between the public and private sectors), as well as biases in
decision-making about project risks, and uncertainties that can impact upon technical

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and economic issues of mega-projects. Priemus (2010) claims that many of the
notorious interim rises in the costs of mega-projects are the result of fresh insight by
political bodies who change the scope of the project along the way to make it fit more
neatly into the spatial planning and to protect the environment against noise and air
pollution, blots on the landscape and other negative effects and concludes that missed
deadlines and deteriorations in cost-benefit ratios are often the result of changing
political views or of a perceived need for political compromises. However, Nijkamp, P.
(2008) argues that it is not so easy to draw transparent and unambiguous conclusions
from these various findings, but in general it seems plausible that uncritical beliefs in
mega-projects increase the probability of disappointments in a later stage.
Evidently, all of the direct or indirect participants tend to maintain different interests
in the same project, making it extremely difficult to properly align them for project

success. In the pursuit of successful project performance, time control is one of the most
important functions, especially in megaprojects where various risk variables cause
schedule delays. Schedule delays have been a source of great distress to both owner
and contractor mainly because time overruns are directly or indirectly connected with
cost overruns (Flyvberg et al. 2003). If a mega project is delayed, claims are often filed
between owner and contractors. In certain cases, the claims among contracting parties
escalates into severe disputes. For this reason, the analysis of schedule delays in mega
projects has received continuous interests from both researchers and practitioners.
It is very important to make distinction between the cases whether a single or
multiple criteria are to be employed. A decision problem may have a single criterion or a
single aggregate measure like cost. Then the decision can be made implicitly by

28

determining the alternative with the best value of the single criterion or aggregate
measure. The case with a finite number of criteria and infinite number of feasible
alternatives meeting the requirements belongs to the field of multiple criteria
optimization. Also, techniques of multiple criteria optimization can be used when the
number of feasible alternatives is finite but they are given only in implicit form (Steuer, R.
E. 1986). The decision-making problems when the number of the criteria and alternatives
is finite, and the alternatives are given explicitly, are called multi-attribute decision
making (MADM) problems
Franco and Montibeller (2009) note that "it is surprising that much of the MCDA
literature has paid relatively minor consideration to the processes of articulating and
defining a multi-criteria problem". In many multi-criteria models, particularly so in multiattribute utility/value models, the objectives are organized as a value tree, which

decomposes the overall objective of an evaluation into operational objectives for a more
easy assessment of decision alternatives. They also claim that the process of creating,
evaluating and implementing strategic decisions is typically characterized by the
consideration of high levels of uncertainty. Xu (2012) suggests implementation of the
Evidential Reasoning (ER) approach to be generally applied for MCDA when analyzing
multiple criteria decision making (MCDM) problems under uncertainties. Keeney (1996)
cautions, however, against over-emphasis on alternative focused thinking, distinguishing
this from value focused thinking. Liu et al. (2011) proposed a risk multi-attribute decisionmaking (risk MADM) method based on prospect theory for risk decision making problems
with interval probability in which the attribute values take the form of the uncertain
variables.

29

Multi-attribute decision making techniques can partially or completely rank the


alternatives: a single most preferred alternative can be identified or a short list of a
limited number of alternatives can be selected for subsequent detailed appraisal. This
theory allows complete compensation between criteria, when the gain on one criterion
can compensate the lost on another (Keeney and Raiffa 1976). After having determined
for each pair of alternatives whether one alternative outranks another, these pairwise
outranking assessments can be combined into a partial or complete ranking. In most of
the approaches based on the Multi-attribute Utility Theory (MAUT), the weights
associated with the criteria can properly reflect the relative importance of the criteria only
if the scores aij are from a common, dimensionless scale. The basis of MAUT is the use
of utility functions. Utility functions can be applied to transform the raw performance
values of the alternatives against diverse criteria, both factual (objective, quantitative)

and judgmental (subjective, qualitative), to a common, dimensionless scale. In practice,


intervals [0,1] or [0,100] are used for this purpose.
Besides the above simple additive model, Edwards (1977) also proposed a simple
method to assess weights for each of the criteria to reflect its relative importance to the
decision. First, the criteria are ranked in order of importance and 10 points are assigned
to the least important criterion. Then, the next-least-important criterion is chosen, more
points are assigned to it, and so on, to reflect their relative importance. The final weights
are obtained by normalizing the sum of the points to one. However, as Edwards and
Barron (1994) pointed out, the comparison of the importance of attributes is meaningless
if it does not reflect the range of the values of the alternatives as well. They proposed a
variant that in the course of the comparison of the importance of the criteria also

30

considers the changes from the worst utility value level to the best level among the
alternatives.
In view of the foregoing it may be summarized that MDCA offers a meaningful
approach towards taking holistic and integrative project management decisions that
considers multifarious individual decisions, but at the same time ensures proper
coordination between all such decisions so that optimal performance of the project as a
whole. An integrative approach to treatment of risks of all sorts is adopted here for so
that optimal performance is ensured throughout the project management cycle.
III.3.

Allocation of Risks
Due to the various natures of risks which may be encountered in a major

construction project and the differing weights which may attach to their consequences

(and the differing treatments which they may entail), it is not uncommon to break the
risks down into commercial (business or project prerequisite and sustainability) risks,
construction (and/or operational) risks and third-party (act of God/government). However,
one of the dangers of adopting such an approach is that it can tend to reinforce an
assumed allocation of risk dependent upon the project delivery method being proposed
and the respective interests of the various stakeholders. Table 1 shows how the risk is
shared between the employer (also called: client, principal, owner) and the contractor,
depending upon the type of contract, as adapted from Flanagan and Norman (1993).

31

Table 1: Selected types of contracts and risk sharing

Source: pakova (2012)

By way of example, a contractor assessing the risks involved in bidding on a


straightforward construct only commercial office tower project may assume that socalled project risks, such as the availability of requisite planning approvals or the
principals financing, the impact of latent conditions, risks of delay and so on. While
contractors, principals and financiers will, however, each attach varying levels of

importance to various risks, a consideration of the totality of risks which may be


encountered is essential in order to determine their impact and knock on effect (Ritchie,
2007).
The context in which the contractor undertakes a risk assessment at the tender
phase is in accordance with corporate limits documented, for example in tendering
guidelines which may also detail limits of liability for key commercial risks. The contracts
will then be considered against a number of criteria, such as financial and funding risks,
construction performance risks and design risks. The issues for consideration under the
financial and funding risks include payment risk and may also extend to issues such as
maintaining positive cash flow through the life of the project; payment for on- and off-site
materials; and the possible impact of security of payment legislation. Construction

32

performance risks, on the other hand, relate to the willingness or otherwise of the
contracting party to accept general damages and consequential damages; liquidated
damages; the provision of parent company guarantees; the requirement for operating
company performance guarantees; guarantees for long-term performance of materials or
equipment; and industrial relations risk.
Table 2: The contractors risk for two types of contract
Design and construct building contracts

Joint mining and civil construction

Delay in award of tender/access to site


Site conditions
Design responsibility
Ambiguities in documentation
Extensions of time
Interface risk, fit-out works

contracts
Mining lease
Purchase of fleet
Interface risk
Wall design
Scope of works/fit for purpose
Cultural heritage
Adapted from Ritchie (2007)

There are many types of contracts made for mega-projects, such as Turn-key,
Split packages, Cost plus, Build-Operate-and Transfer (BOT) etc., each with their
contract-specific risk management approach. It will therefore be necessary for modeling
purpose to take into account specific features of risks attributed to each type of contract.
A contractor assessing the risks involved in bidding on a straightforward construct
only project may assume that so-called project risks, such as the availability of requisite
planning approvals or the principals financing, are matters solely the concern of the
principal and, accordingly, focus on so-called construction risks, such as the impact of
latent conditions, risks of delay and so on. While contractors, principals and financiers
will, however, each attach varying levels of importance to various risks, a consideration

33

of the totality of risks which may be encountered is essential in order to determine their
impact and knock on effect (Ritchie, 2007)
Collaborative contracting models have been studied by Cordi et al (2012) on an
example of three railway project cases. Such a partnering practice is considered to be a
learning process as the mutual experience increases. However, when complexity
increases more sophisticated management becomes inevitable, calling also for
integration with core project processes, but partnering tools and systems do not seem to
provide much guidance.
To be successful, a project must meet financial, technical and safety requirements
and it must fulfill a time schedule. The criteria of project success from the point of view of
different stakeholders can be contradicting and finding an optimal solution is a
challenging task. Many decisions must be made regarding design, project financing and

type of contract. These decisions are made under high uncertainty, such as uncertainty
in construction cost, time of completion, impact on third party property or maintenance
costs. Assessment of these uncertainties is crucial for making the right decisions.
The stakeholders consider every risk which they identify as being relevant to the
project as a whole, and thereafter seek to categorize those risks by the manner in which
they are proposed to be treated, rather than seeking to fit risks into general categories
or seek to allocate them at the outset to the respective stakeholders as matters of
concern only for the other project participants. Instead of simply pricing for risks, there
are other opportunities for mitigating risks either by their elimination, retention, reduction
or transference. Often these mitigation strategies, particularly risk transference, are given
effect contractually via the use of such means as contractual exclusions, limitations of

34

liability, indemnity clauses, risk transference, guarantees, performance bonds and


insertion of a risk premium.(Mead, 2006.,Mead et.al, 2007.)
Often, the solutions that seem to be cheaper and faster based on deterministic
estimates are associated with higher uncertainties and risks. Making decisions based on
deterministic values is therefore insufficient (Spackova,Olga., 2012).All phases of a
MBRP construction are influenced by numerous uncertainties that can be categorized in
two groups: usual uncertainties in the course of design, construction and operation and
occurrence of extraordinary events (failures) causing significant unplanned changes of
the expected project development. Distinguishing between the two types of uncertainties
is necessary, because the principal divergence of their nature requires different
approaches to their analysis. It is further evident that the usual uncertainties influence
the occurrence of extraordinary events, (pakova, 2012). These dependences must

therefore be considered in the quantitative risk analysis.


III.4.

Risk Management

The mega-projects such as multi-billion railway programs (MBRPs) are multifunctional,


enormous in size, lengthy in life time, expensive and highly uncertain. This makes the
management of such projects extremely risky and challenging. Therefore, one of the key
success drivers of mega-projects is a proper risk management strategy whereby
effective measures can be taken early enough to mitigate any bad impact on cost,
schedule, or quality. Sen and Yang (1998) claim that "The risk-based decision-making
(RBDM) can improve the decision-making process". However, applying them on megaprojects, such as MBRPs, introduces new methodological challenges that should be
addressed.

35

For that purpose, an integrated methodology is needed to establish the


interrelationship between schedule and cost risk factors in risk-and capital-intensive
mega-projects, as well as to develop strategies, allocate capital resources, as well as to
manage the risks, and analyze critical decisions. Analyzing the uncertainties and risk is
crucial for identifying optimal solutions in all phases of a project, and categorization of
uncertainties influencing the project is important for their proper analysis and modeling .
However, the transfer of experiences between different projects is not a straightforward
task and it cannot be easily automated. At present, the deterministic estimates are used
in the majority of cases. However, the construction community recently recognized the
limitations of the deterministic approach and more attempts are made to quantify the
uncertainties and risks.
The foundation of a risk management system is essential to evaluate risk mitigation

efforts, set priorities for risk monitoring, and create a contingency planning procedure.
Such an approach includes understanding the full complexity, resource requirements,
long time horizons, and exposure to interrelated and pervasive drivers of risk in order to
enable managers to better anticipate and manage the risks of their mega-projects and
lock in the full value of their investments. The interests of many shareholders in
megaprojects are typically very strong, which is easy to understand given the enormous
sums of money at stake, the many jobs, the national prestige, etc. Therefore, the
approach to risk management of mega-projects is differentiated from management of
smaller projects by an emphasis on those decisions and commitments that have the
greatest risk exposure and therefore requires a comprehensive identification and

36

rigorous quantification of the uncertainties that represent the biggest threats to on-time
and on-budget project delivery, Figure 5.


Source: Westney (2007)

Figure 5: Risk management model


An effective risk management requires a detailed understanding of how the risks
relate to one another; how they will respond to different management approaches; and
how much time, effort, and money will need to be invested before a meaningful impact
on the risk is achieved. Andy Jordan (2013) argues that the first step is to understand
how each individual risk interacts with othersthe relationships between risks: A
change in one risk can have a wide-ranging effect elsewhere in the organization and
understanding the relationships is a vital part of an organizational risk management
process. He claims that there are two types of relationship between risks that need to be

37

considered: Risk-driven relationships and Action-driven relationships. In the Risk-driven


relationships the risk itself is driving associated risks, so as one risk changes its profile, it
drives change in associated risks. In case of Action-driven relationships the actions are
taken to control the risk drive changes to related risks. This requires a compromise in
risk control activities. Of course, both situations may exist for the same risk. He
concludes that the risks that have the most risk-driven relationships are often the most
serious. Therefore, the only way that decisions can be made with any degree of
confidence is with a solid understanding of these relationships between the risks. In
recent years the risk based decision-making (RBDM) need has increased concurrently
with new and unprecedented mega-project development (Bruzelius et al., 2002; Priemus
et al., 2008). The success parameters for any mega-project are in time completion within
a specific budget, which meets the required technical performance (Dey, 2002), the so-

called golden or iron triangle of project management (Polydoropoulou et al., 2009).


III.5.

Risk Assessment Tools


An overview of commonly used risk assessment tools was presented by Mayers, J

(2002): Among the many risk assessment tools he included Pareto analysis, Checklist
analysis, Relative ranking/risk indexing, Preliminary risk analysis (PrRA), Change
analysis, What-if analysis,. Failure modes and effects analysis (FMEA), Hazard and
operability (HAZOP) analysis, Fault tree analysis (FTA), Event tree analysis (ETA), Event
and causal factor charting, and Preliminary hazard analysis (PrHA). However, all of these
exhibit certain limitations, particularly if applied to mega-projects, such as MBRPs.

38

Pareto analysis is a ranking technique based only on past data that identifies the
most important items among many. This technique uses the 80-20 rule, which states that
about 80 percent of the problems are produced by about 20 percent of the causes. It can
be used for any type of system, process, or activity as long as enough historical data are
available. Usually used to find the most important risk contributors so that more detailed
risk assessments can be performed later. Pareto analysis, however, has several
limitations. It focuses only on the past and offers a valuable look at key contributors to
past problems, but the exclusive reliance on historical data can be misleading. Because
the data under-represent events that have not happened yet or have occurred rarely, this
can skew decisions and resource allocations, especially when a relatively small total
number of problems has occurred. Also, recent changes may invalidate historical trends,
or at least reduce their accuracy.

Checklist analysis is an evaluation against existing guidelines in the form of one or


more risk checklists. It is useful for any type of system, process, or activity, especially
when, suitable checklists exist. Checklist analysis, however, is likely to overlook
potentially important weaknesses. Also, most checklist reviews produce only qualitative
results, with no quantitative estimates of risk-related characteristics. Such approach
offers great value for minimal investment, but it can answer more complicated riskrelated questions only if some degree of quantification is added, possibly with a relative
ranking/risk indexing approach. (Marhavilas et. al., 2011., Learningace, 2013., Osha,
2013).
Relative Ranking / Risk Indexing Technique uses measurable features of a facility to
calculate index numbers that are useful for comparing risks of different options. The

39

relative ranking/risk indexing technique can provide a high-level assessment of the risks
associated with a range of activities, which is suitable when only relative priorities are
needed, as long as a proper scoring tool exists. However, these results can be difficult to
tie to absolute risks as the relative ranking/risk indexing technique uses various indexing
tools to derive risk scores for particular activities. However, the tools are typically focused
on a particular type of risk and for broader, standardized applications; considerably more
development and validation time may be needed. Also, relative ranking/risk indexing
tools are specifically designed to focus on a particular type of risk which makes it difficult
to account for situations outside the scope of the particular tool. (Mayers, 2012, ABS
Consulting, 2010, ABS Consulting 2008).
Preliminary Risk Analysis (PrRA) is a technique used to define the risk related to
important high-risk accident scenarios and to identify the risk of the accidents. However,

because the PrRA focuses on potential accidents, the failures leading to accidents are
not explored in much detail, so that it introduces a level of uncertainty in the results. Also,
the resulting recommendations for reducing risk are typically general in nature instead of
focused on attacking specific issues.
Change analysis is used for any situation in which change from normal setup,
operations, or activities is likely to affect risks. It relies on comparisons of two systems or
activities to identify weaknesses in one of the systems in relation to the other However; it
is highly dependent on points of comparison. Also, it does not inherently quantify risks
and is strongly dependent on the expertise of those participating in the analysis, i.e. on
their ability to recognize and evaluate notable differences between the system or activity
of interest and the point of comparison.

40

What-if analysis is a problem-solving approach used to suggest upsets that may


result in accidents or system performance problems and make sure the proper
safeguards against those problems are in place. It is generally applicable for almost
every type of risk assessment application, especially those dominated by relatively
simple failure scenarios. However, it is likely to miss some potential problems, because it
relies exclusively on the knowledge of the participants and is likely to overlook potentially
important weaknesses, being difficult to audit, because there is no formal structure
against which to audit. It also gives only qualitative results and no quantitative estimates
of risk-related characteristics.(Brown et. al., 1999, Heldman, 2002)
Failure modes and effects analysis (FMEA) is a technique that generates qualitative
descriptions of potential performance problems and lists of recommendations for
reducing risks, but it can also provide quantitative failure frequency or consequence

estimates. It is generally used as a system-level and component-level risk assessment


technique, applicable to any well-defined system. However, examination of human error
is limited as it addresses potential human errors only to the extent that human errors
produce equipment failures of interest, while the miss-operations that do not cause
equipment failures are often overlooked. Also, its focus is on single-event initiators of
specific equipment failures, which are analyzed one by one, so that important
combinations of equipment failures may be overlooked. The, examination of external
influences is limited to those events only that produce equipment failures of interest and
accounts for possible effects of equipment failures only during one mode of operation or
a few closely related modes of operation.

41

Hazard and Operability (HAZOP) analysis is used mostly as a system-level risk


assessment technique and generates primarily qualitative results, although some basic
quantification is possible. The HAZOP technique requires a well-defined system or
activity as it is a rigorous analysis tool that systematically analyzes each part of a system
or activity. It is rather time consuming as it systematically reviews credible deviations,
identifies potential accidents that can result from the deviations. However, such detailed
analysis focuses on one-event causes of deviations so that, if it objective is to identify all
combinations of events that can lead to accidents of interest, more detailed techniques
should be used.
Fault Tree Analysis (FTA) is a technique that visually models how logical
relationships between equipment failures, human errors, and external events can
combine to cause specific accidents of interest. The probabilities and frequencies can be

added to the analysis to estimate risks numerically. It is generally applicable for almost
every type of risk assessment application, but examines only one specific accident of
interest so that, to analyze other types of accidents, other fault trees must be developed.
Also, quantification requires significant expertise because using fault tree analysis results
to make statistical predictions about future system performance is complex, so that
analysts often become so focused on equipment and systems that human and
organizational issues are not taken adequately in their models. (GRI, 2011, FAA &
Eurocontrol, 2007).
Event Tree Analysis (ETA) is a technique that logically develops visual models of the
possible outcomes of an initiating event by the use of decision trees. Probabilities and
frequencies can be added to the analysis to estimate risks numerically. It is suited to

42

almost every type of risk assessment, but it is limited to one initiating event, leading to
overly optimistic estimates of risk.
Event and Causal Factor Charting is used to understand how an accident occurred
by finding the underlying root causes of the key contributors and to make
recommendations for fixing the root causes. It is most commonly used when the accident
scenario is complicated, involving a chain of events or a number of root causes.
However, it does not necessarily ensure that the root causes have been identified,
unless the causal factor is the root cause. Also, using event charting can overwork
simple problems.
Preliminary Hazard Analysis (PrHA) is a technique that focuses on finding hazards,
assessing the severity of accidents that could occur involving the hazards, and on finding
protective features for reducing the risks of the hazards. This technique is typically

conducted early in the process, before other analysis techniques are practical, and thus
requires additional follow-up analyses. Also, the quality of the results of a PrHA is highly
dependent on the knowledge of the team. At the time, there are few or no fully developed
system specifications and little or no detailed design information and therefore, the risk
assessment relies heavily on the knowledge of subject matter experts. If these experts
do not participate in the risk assessment, or if the system is a new technology having
little or no early operational history, the results of the PrHA will reflect the uncertainty of
the team in many of its assessments and assumptions.(Mullai, A., 2006., ERC, 2013).
III.6. Decision-Making Models
Throughout the advancement of the construction sector more and more decisionmaking models have appeared to help construction projects to evolve toward informed

43

decision-making. Decision-making models have been applied to various areas in the


construction sector, such as metropolitan construction projects (Kuo et al., 2012), project
contractual commitment (Nguyen et al., 2010), project risk identification and assessment
(Mojtahedi et al., 2009), construction on transport project outcome (Polydoropoulou et
al.,2009), mega projects cost-benefit analysis, planning and innovation (Priemus et al.,
2008), portfolio balancing of engineering (Zeng et al., 2007)and contracting projects
(Caron et al., 2007), construction project risk assessment (Deelstra et al., 2003;
pakova, 2012), project facility design, construction, and life-cycle performance (Kam et
al., 2003), and project risk management (Dey, 2002).
Besides the decision-making models specific for the construction sector, the
decision-making models are also broadly used in other industries and specific areas.
Therefore the existing decision-making models can be grouped in two categories, ones

that are generally acceptable, and others that can only be employed in specific cases.
Zhou et al. (2008) presented a study, which enable decision-making and mitigation
strategy planning of information systems in the public sector. A research on errors in
criterias weights to rank high risks in BOT (build-operate-transfer) projects is presented
by Ebrahimnejad et al. (2010). Liu et al. (2009) claim that risk evaluation of construction
program is far more complex than that of weighting risks criteria in a single construction
project, and presented Gray-AHP methods, which also consider correlation between the
projects in the program. However, a research done by Giezen (2012) shows that
reduction of complexity has a positive effect on the planning of mega infrastructure
projects.

44

Decision making involves the use of decision treesto help identify good strategies
for planning a response to a set of interdependent decisions sequenced through time.
Golub (1997) and Targett (1996) claim that decision trees have as their prime focus the
question of uncertainty about the outcomes of decisions. For problems that merit it, it is
also possible to combine decision tree modeling with the appraisal principles and in this
way develop contingent decision strategies based on multi-criteria assessment.
Appropriate analysis of the decision tree allows the decision maker to develop, from the
outset of the decision process, a contingent decision strategy (Dey, 2002).
For the modeling purposes it is convenient to distinguish uncertainties, ie. Ones that
cannot be reduced and ones resulting from incomplete knowledge of the system, but can
be reduced when additional information is available. Der Kiureghian and Ditlevsen
(2009) claim that distinguishing between the two types of uncertainties depends on the

judgment whether or not the uncertainty can be reduced in later analysis.


The risk is not a universal quantity, because the objectives of individual stakeholders
can differ and can develop during the project, and the perception of the consequences of
not meeting the objectives is also individual. Therefore, the risk must always be analyzed
with regard to the context and objectives. There are only few methods and models for
quantification of uncertainty in construction time and cost prediction for infrastructure in
general (Flyvbjerg, 2006), or for tunnels in particular (Einstein, 1996). Probabilistic
models have not been widely accepted in the practice because neither there was not
real demand for the quantitative modeling of uncertainties and risk nor the existing
models often did not provide a realistic estimate of the uncertainties and they therefore
did not gain acceptance among the practitioners (pakova, 2012). However, this

45

situation seems to be changing in the recent years and both the demand and the
reliability of the model results have increased. The need of probabilistic prediction of
construction time and costs and their communication with the stakeholders has been
recognized in recent years (Grasso et al., 2006; Edgerton, 2008) and the demand for
applicable probabilistic models is apparent.
III.7. Applicability of the Existing Models.
A particular emphasis is placed herewith on the existing risk-based decision-making
(RBDM) models that could help meeting my research objectives listed in paragraph. 2.1
of this Research, bearing in mind the need these models to be applied to mega-projects,
such as MBRP in Qatar. Mega-projects in general tend naturally to fail. Their
performance has historically been poor. However, the track records show that, while the
exposure of mega-projects to risk cannot be avoided, the risk can be managed. The

track record of transportation mega-projects reveals that the costs are usually
significantly underestimated. There are some cases of enormous cost overruns, such as
Suez Canal (1,900%), but an order of magnitude less (200%) Panama Canal (Teglasi,
2012). Seung Heon Han et al. (2009) reported that the construction of a 412 km long
high-speed railway in Korea (KTX) met numerous uncertainties and challenges during
planning and managing phase which resulted in schedule delays of 5.5 years and cost
overruns of 3.17 times over the planned budget. They discovered the following major
delay causes: (1) lack of abilities to manage hi-tech mega project; (2) changes of routes;
(3) inappropriate project delivery system; (4) a lack of scheduling tool tailored for a mega
project; and (5) redesign and changes in main structures and tunnels.

46

Merrows (1988) has developed a database on performance of 52 mega-projects


worldwide, ranging in cost from $500 million to over $10 billion (in 1984 $). From it he
developed statistical relationships of actual to estimate the cost overruns and schedule
slippage that involve different issues that may influence the cost and schedule of megaprojects of different kinds. However, for more reliable predictions it is essential to
realistically estimate the parameters and, instead of or in addition to such a deterministic
approach, employ a probabilistic approach which combines the probability of occurrence
of unwanted events and their consequences.
At present, such deterministic estimates mostly rely on expert judgment, but these
can be strongly biased and unreliable. Therefore, the expert estimates should be
supported by analysis of data from previous projects. Three different approaches are
available for estimating the failure rates: expert judgment, reliability analysis or a

statistical approach using data from constructed tunnels. Each of the approaches has its
strengths and weaknesses. Ideally, multiple approaches should be employed and results
should be compared and critically examined
Estimates of construction time and costs and of other performance parameters are
highly uncertain. Obviously, the earlier in the project the estimates are made, the higher
is the uncertainty. In spite of that, most stakeholders require a deterministic estimate of
costs and time in the current practice: these deterministic estimates are used as a basis
for decision-making and they are communicated with public. However, this approach
creates false expectations, which are unlikely to be fulfilled, and it can lead to wrong
decisions, (pakova, 2012).

47

Taghavifard et al. (2009), claim that the domain of decision analysis models falls
between two extreme cases, one deterministic and the opposite pure uncertainty.
Between these two extremes are problems at risk". Dudenhoefer et al (2006) examine
the issues of interdependency modeling, simulation and analysis and provide formalism
for these dependencies. Liu et al. (2011), proposed a risk multi-attribute decision-making
(risk MADM) method based on prospect theory for risk decision making problems with
interval probability, in which the attribute values take the form of the uncertain linguistic
variables. Their risk MADM model can support my skills for the development of a new
RBDM model, but, as it presents a method which is more in line with the actual decisionmaking behavior in all sectors, it does not entirely address the RBDM in MBRP process.
Kester et al. (2009) address portfolio management based on project selection,
termination and deletion decisions. Their model is specific for portfolio and does not

address RBDM MBRP process; however it can partially contribute to this research in
identifying whether an integrative portfolio decision-making model can provide more
success in the long run by integrating strategic and quantitative criteria consideration into
the portfolio decision-making. A case study by Giezen (2012) presents the advantages
and disadvantages of reducing complexity in mega project planning.
Belton and Stewart (2002) introduce the concept and meaning of the conflict between
different goals, objectives and criteria in decision-making involving multiple stakeholders.
This model is specific to risk based design criteria, but not suitable for the RBDM MBRP
process. However, it may direct the selection of risk data in step one of development of a
new enhanced model by addressing multiple stakeholders and criteria of a MBRP. Zhou
et al. (2008) presented a study, which enable decision-making and mitigation strategy

48

planning of information systems in the public sector. Although their methodology has not
be designed for the construction industry, the checklist presented in the study can be
enhanced and used as part of the proposed model to help a MBRP identify and assess
risks.
The risks are different if considered from the viewpoint of investor and contractor,
taking into account the contractors aversion to higher losses. When the risk is analyzed
from the viewpoint of the investor, a majority of the financial losses due to failures (i.e.
reconstruction of the tunnel and the overburden, damage to the third party property,
compensations to people) is transferred to the contractor. However, in spite of the
transfer of the risks, the delay of the commencement of tunnel operation leads to
additional costs to the investor includes costs of traffic disruption and costs of debt
financing. When the risk is analyzed from the perspective of the contractor, the

contractor is insured against the direct financial loss caused by the construction failures.
The insurance covers costs for reconstruction of the tunnel and the overburden, damage
to the third party property and compensations to the injured people. However, the
prolongation of the construction brings additional costs, which are not covered by the
insurance. These costs consist in costs of labor and machinery, which is bound to the
project and in the penalty the contractor, must pay to the investor in case of delay. The
financial loss of the contractor thus contains both the additional costs and contractors
deductible.
The human factor reflects the influence of common factors, which systematically
influence the construction process and thus introduce strong stochastic dependences
among the performance in each segment of the tunnel. These can be the quality of

49

design and planning, organization of construction works or other external influences.


Also, the quality of the construction company and the appropriateness of the technology
are uncertain in the planning phase. The uncertainty in these common factors increases
the uncertainty in estimates of the total construction time.
Research on errors in criterias weights to rank high risks in build-operate-transfer
(BOT) projects by Ebrahimnejad et al. (2010) shows that (MADM) model can help
weighting the criteria of the enhanced RBDM MBRP model. However according to Liu et
al. (2009), risk evaluation of construction program is far more complex than that of
weighting risks criteria in a single construction project, and they presented Gray-AHP
method, which involves correlation between the projects in the program. Their approach,
like the approach by Ebrahimnejad et al. (2010), can help defining criteria and, when
combined, can be used to develop an enhanced RBDM model applicable for MBRPs.

Not many of the existing decision-making models are expected to be suitable to


address my research objectives. Nevertheless, the researcher expects some of these
models to be useful when dealing with the research objectives; e.g. The work done
Lechner et al. (2002), could be suitably replicated in the proposed study. Haimes (2007)
and ISO 31000 (2009), Kester et al., (2009), Poole and Samuel (2011). Many models
have been developed to simulate the decision making process, such as those by Targett
(1996), Alarcn and Ashley (1996),US Coast Guard R&D Center (2013), Tagfavifard et
al. (2009), Liu et al. (2011), Zhou et al. (2007), Keeney (1996), etc. These models are
sought to be incorporated or replicated in the proposed study, after suitable modifications
so as to make them fit into the MBRP framework under study. For multi-criteria decision
analysis (MCDA), available models are of Belton et al. (2002) and Franco and

50

Montibeller (2009). For BOT projects in particular there is a model of Ebrahimnejad et al.
(2010), Gray-AHP methods developed by Liu et al. (2009).
For the research on the decision-making opportunities to improve MBRP design,
construction, and life-cycle performance the model applied by Kam and Fischer (2003)
might be used. The risks treatment options in MBRP construction will refer to Mead
(2007). Standardization principles and risk management guidelines will be according to
international standards such as SM ICG (2013), ISO 31000, 2009 and ASB (2012). Risk
analysis will be carried out by the use of methodologies for industrial plants (Tixier et al,
2002) and interdependent technical infrastructures (Johansson 2010). Monte Carlo
simulation will be carried out similarly as done by Whitlock and Kalos (2008) and Centre
for Traffic and Transport. Decision-making approach will refer to these of Borchardt
(2010), Montibeller and Franco (2010), Risktec (2005), Birnbaum (2008). Environmental

risk will be modeled as presented by the U.S. EPA (2009), and Kiker et al. (2005). For
decision analysis the approach used will be similar to these of Goodwin and Wright,
(2009), Golub (1997). For the risk management in particular situations such as strategic
alliance making process, customer relationship or research the approach will be similar
to these applied by Das and Teng (1998), Papadopoulos et al. (2012) and Wood and
Welch (2010) respectively. If needed, the reliability of railway systems will be modeled
like was done by Vromans (2005). Also, an integrated regional risk assessment will be
similar to that done by Nicolet-Monnier (1996) for the situation in Switzerland.
In conclusion, the review of the literature above highlights that existing research on
RBDM in the construction industry has not specifically addressed the RBDM for mega-

51

projects such as present MBRPs have. The existing models are mainly characterized as
follows:
1. They are usually applicable for a small scale projects, or for one organization or
for one activity, and cannot directly be used to address the RBDM of a MBRP;
2. They usually lack a clear and deep understanding of the uncertain nature and
high risk required for RBDM in a complex organization such as a MBRP;
3. In probabilistic models, the decision maker is concerned not only with the
outcome value but also with the amount of risk each decision carries. However,
the probability is generally used to measure the likelihood of occurrence of a
single risky event, while in MBRPs such events may be combined.
4. They are usually too specific, either too simple and applicable for all the

organizations or too narrow i.e. they can only be employed in certain areas. As a
result, they cannot provide direct, explicit RBDM guidance to a MBRP; and
5. The existing models are mainly intended to improve the informed decision-making
of a detailed project, or specific process group in the life cycle of the project,
rather than to a comprehensive RBDM of the whole schedule-driven MBRP.
In continuing my search through the academic literature, I will look for any additional
RBDM models that could be applicable to the schedule driven mega-projects, and thus
enable my final selection of the reference ones that could support development of a new
RBDM model for MBRP, as well as to select the most suitable risk treatment options for
meeting the schedule of a MBRP without jeopardizing the other criteria of such a
program. With the above mentioned general characteristics of the existing models in
mind, those RBDM models will be selected that are most likely suitable to be enhanced

52

and combined in order to design a new RBDM model for a MBRP, which than will be
fine-tuned in a case study. The new RBDM MBRP model will be developed from a
combination of the existing frameworks for data input, process of data and data output.
Among them are the Standardization Workgroup of the Safety Management International
Collaboration Group (SM ICG 2013), Risk Treatment in Enterprise Risk Management of
the Actuarial Standards Board (ASB, 2012) and the research done by Tixier et al, (2002)
on 62 risk analysis methodologies of industrial plants. The generic framework of the SM
ICG (2013) will be used to develop the input, process and output, as well as validation of
the model. Treatment options for risks in construction, civil and mining projects (Mead,
2007) will be used to take account of the special features of MBRPs.
III.8.

Requirements for a new RBDM for MBRPs

III.8.1. Qualitative risk analysis

Both, qualitative and quantitative methods will be applied. The qualitative risk
analysis aims at identifying the hazards threatening the MBRP construction project, to
evaluate the consequent risks and to determine the strategy for risk treatment. This
analysis serves as a basis for preparation of contracts, for management of the project
and for allocation of responsibilities amongst the stakeholders or their employees and
representatives. To evaluate the risks, varying classification and rating systems
describing the probability of occurrence of a hazard and its expected consequences. The
rating of the probability and consequences is combined in a risk index or by means of a
risk matrix (Eskesen et al., 2004). The risk indices are usually calculated as product of
the probability rating and consequence rating, as presented in Table 3. The individual

53

risk for each hazard is estimated as product of the frequency and consequence. The
total projects risk is determined as the sum of individual risks. However, this approach is
likely to lead to an incorrect estimation of risk (pakova, 2012).

Table 3: The risk matrix


Consequence
Frequency
Very likely

Disastrous

Severe

Serious

Considerable

Insignificant

Unacceptable

Unacceptable

Unacceptabl

Unwanted

Unwanted

Unwanted

Acceptable

Acceptable

Acceptable

Likely

Unacceptable

Unacceptable

e
Unwanted

Occasional

Unacceptable

Unwanted

Unwanted

Unlikely

Unwanted

Unwanted

Acceptable

Acceptable

Negligible

Very unlikely

Unwanted

Acceptable

Acceptable

Negligible

Negligible

III.8.2. Quantitative analysis of uncertainty and risk


The quantitative risk analysis aims to numerically evaluate the risk in order to provide
valuable information for decisions-making under uncertainty such as the selection of
appropriate design or construction technology, efficient communicating the uncertainties
with stakeholders, as well as determination of the bid price, the time of completion and
insurance premium with a required level certainty on an objective and quantitative basis.
The selection of tools for quantitative risk analysis depends on the objectives of the risk
analysis and on the type of uncertainties, which are analysed. Compared to the
qualitative risk analysis, the quantitative risk analysis requires a clearer structuration of

54

the problem, detailed analysis of causes and consequences and description of the
dependences among considered events or phenomena.
The approaches to quantification of uncertainty and risk include Monte Carlo (MC)
simulation, Fault tree analysis (FTA), Bayesian Networks (BN), Poisson model, Analytical
solution, Event tree analysis (ETA), Bayesian Networks (BN) and others. FTA and
Poisson model is commonly used for assessment of probability of a hazard occurrence
and ETA for analysis of consequences. Several approaches for analyzing the
extraordinary events have been used in the literature and practice. Eskesen et al. (2004)
and Aliahmadi et al. (2011) assess the expected value of construction risk for different
tenderers in order to select the best contractor. Sturk et al. (1996) use a Fault tree
analysis (FTA) for the estimation of the probability that the tunnel construction harms

trees in a park, in order to select an optimal construction strategy. Jurado et al. (2012)
estimate the probability of ground water related hazards using the FTA. ejnohaet al.
(2009) presents a methodology combining FTA and Event tree analysis (ETA) for
quantification of the risk of extraordinary events in the course of tunnel construction.
Sousa and Einstein (2012) and pakova (2012) introduce a dynamic Bayesian
networks (DBN) model for modeling the risk of construction failure
Other models have been developed for modeling the usual uncertainties. In
Ruwanpura and Ariaratnam (2007), tools for simulation of the tunnel drilling process are
presented, which include Monte Carlo (MC) simulation for the evaluation of the usual
uncertainties in predicting construction time and costs. In Chung et al. (2006) and in
Benardos and Kaliampakos (2004) observed (actual) advance rates are used for
updating the predicted (computed) of advance rates and consequently the respective

55

excavation time; in respect of the remaining part of the tunnel project under their study.
While Chung et al (2006) used Bayesian analysis for their study; artificial neural
networks were employed by Benardos and Kaliampakos (2004). A well-known Decision
Aids for Tunneling (DAT) model developed at MIT for probabilistic quantification of risks
of the tunnel construction processes, uses MC simulation for probabilistic prediction of
construction time and costs, taking also into account the geotechnical uncertainties,
which are modeled by means of a Markov process (Chan, 1981), as well as the
uncertainties in the construction process.
In response to the research sub-questions mentioned before, a literature review has
been conducted to investigate to what extent the existing RBDM models could be
suitable for a MBRP. In recent years the need for RBDM has increased concurrently with
new and unprecedented multi-billion programs developed in countries like China

(Guangshe et al., 2011) and worldwide (Haimes, 2007, Flyvbjerg et al., 2003, Merrow,
1988, Jennings, 2012). Multi-billion or mega programs are multifunctional, enormous in
size, lengthy in life time, expensive and highly uncertain (Bruzelius et al., 2002; Priemus
et al., 2008, Westney, 2007,Kwakand Smith, 2009, Tagfavifarel et al., 2009, Riabacke,
2006). The success parameters for any multi-billion programs are in time completion
within a specific budget, which meets the required technical performance (Dey, 2002,
Lechner et al., 2002, Sjoberg, 2002), the so-called golden or iron triangle of project
management (Polydoropoulou et al., 2009).
Decision making models have been applied to various areas in the construction
sector, such as metropolitan construction projects (Kuo et al., 2012, Vromans, 2005,
Kamand Fisher, 2003, Poole and Samuel, 2011, Liu & Wang, 2009), project contractual

56

commitment (Nguyen et al., 2010, Maytorena et al., 2007, Flyvbjerg et al., 2003) or
project risk identification and assessment (Mojtahedi et al., 2009, Jordan, 2013, Sen&
Yang, 1995). The project performance model for decision making by Alarcon et al.,
(1996) presents an early methodology for modeling project performance. Throughout the
advancement of the construction sector, more and more decision-making models have
appeared to help construction projects to evolve toward informed decision-making
(Kam& Fisher, 2003,Liu &Wang, 2009, Poole & Samuel, 2011, Vromans, 2005). Besides
the decision-making models specific for the construction sector, decision-making models
are also broadly used in other industries and specific areas (Mc Kenaand Wilczynski,
2006, McDaniel et al., 1999).
Therefore the listed at the end and additional literature on the existing decisionmaking models relevant to this research will be grouped and evaluated in order to

address each of the research questions listed in paragraph II.2. However, it is necessary
to develop additional modules which would fit into the existing research gaps in the
current academic literature; and these are considered to be of added importance for the
risk assessment in respect of the MBRP and such other mega-projects. To that group
belong impacts of the number and particularly the type of contracts, relationships
between the risk ranking criteria used to select the most suitable risk treatment option(s),
involvement of the high politics and other possible risk initiating events in MBRP design,
planning, and construction.

57

IV.
IV.1

RESEARCH DESIGN AND METHODOLOGY

Research Design

In view of the foregoing discussions, it may be pointed out that the model suggested by
Tixier et al (2002) [Figure 6] augers well with MBRP because of the fact that it combines
the benefits of a comprehensive generic framework (SM ICG, 2013) with the specificity
of a large railways project like MBRP, and hence has got utmost similarity in the

objectives and research context. Hence the development of the proposed model will
follow the six steps and the methodologies by Tixier (2002), which are considered fairly
relevant to my RBDM MBRP Model (Figure 6):

The first step is the qualitative deterministic analysis of risk data during this
stage a selection of risks data will undergo a preliminary risk analysis. This step
will initially be supported by PRA theory of Nicolet-Monnier, (1996) and the
multiple criteria decision-making model by Belton and Stewart. (2002).

The step two (Decision-making I) is the selection of risk data for further analysis.
The risks will be prioritized for treatment by evaluating them against preestablished criteria, which will be supported by the decision-making model of
Ebrahimnejad et al. (2010).
58

During the step three a quantitative deterministic analysis of risk data will be
using scenario or similar theory, based on a quantitative distribution of each risks
time impact will be further analyzed (e.g. single point, uniform or triangle
distribution). Selection of the proper distribution will be similar to that done by the
Centre for Traffic and Transport in Denmark by the use of the Monte Carlo
Simulation method for the risk analysis.

In the step four the quantitative probabilistic analysis of risk data will be
conducted - during this stage a quantitative approach to the risks data will be
undertaken by using a distribution of all risks time impact through Monte Carlo
Simulation as presented by Whitlock and Kalos, (2008).

Step five is the selection of risk treatment options (Decision-making II) during

this stage decision should be made on how to minimize potential downside but
also maximize the potential upside of opportunities by using a pre-established
criteria with the support of ISO 31000 (2009).

Step six evaluates the treatment options through Decision Tree Theories
(Decision-making III) - during this stage the models of ISO 31000 (2009)
combined with Risktec (2005) will be applied to evaluate the available treatment
options through a decision tree analysis.

IV. 2

Methodology to be applied
In order to address my second research objective (to propose an enhanced RBDM

model for a MBRP and select the most suitable risk treatment options for meeting the

59

schedule of a MBRP without jeopardizing the other criteria of the program) and to select
among the existing RBDM models, those that could be used in the steps needed to
create a new model for MBRP, a framework is designed and presented in Figure 6.
As shown in Figure 6, the framework is composed of three sections. Section one
contains the risk data input. In Section two the process steps of the development of an
enhanced RBDM model are given. Section three presents the output of the enhanced
model. It is based on a combination of the Standardization Workgroup of the Safety
Management International Collaboration Group (SM ICG 2013) and a research done by
Tixier et al, (2002) on 62 risk analysis methodologies of industrial plants. For that
purpose the generic framework of the SM ICG (2013) will be used as guide to create the
input, process and output, as well as for validation of the model, while the development

of the model will follow the six steps and methodologies by Tixier (2002), which are
relevant in the sense of guiding the design of the RBDM MBRP model.
Figure 6: Risk based decision-making framework for a multi-billion-railway program

60

61

IV.3. Input Data


To meet objective 3 of this Research, the risk data will be thoroughly collected, after
being standardized using standard and time-tested procedures like the six times
evaluating, six party management and an unified platform method proposed by Liu et.al
(2014) or the one used by Sarkar, D (2010) to meet requirements of the RBDM model for
MBRPs as follows:
Standardize risk data for collection:

In order to collect, aggregate and combine risk data from different sources, it is
necessary to standardize the risk data before collecting (SM ICG, 2013). The quality of
the risk data used for the RBDM model will also be assessed. All risk data used will be
checked for credibility and should be completely unbiased. Hence standard risk manual,
plans, procedures, processes and taxonomies will be developed for the case study on
MBRP in Qatar according to the international standards such as COSO (2004),ISO
31000 (2009)and Project Management Institute, Inc. (2013) as well as implemented
across the organization (CMS, 2013) and configured in the risk database (ARM, 2013).
Example standardization needed for the risk data collection: all risk data will be captured
into the risk database which auto generates fields for risk id, risk treatment plan id,
fallback plan id and allocation of risk owner and / or treatment owner. A particular

62

emphasis will be placed at the Stakeholders involvement in the MBRP risks. For that
purpose, relevant data (e.g. high policy, national prestige, etc.) will also be taken into
account.
Collect risk data:
As it is unknown in advance which single risk and risk factor can have an impact on the
program schedule, a sample risk data, including external and internal risk data sample
on all level of the organization and during all phases and stages, will be collected from
the risk data population, as shown in Figure 7:
Sample Risk Data

Figure 7: Risk Data Population


The risk data will include:

Rail Sector risk data [best practice, academic research such as Zhou et al.
(2007)].

63

Enterprise risks data (e.g. policies, procedures, processes, internal lessons


learned, Incident / accident investigations, audits);
Business functions risks data and Program risks data, bearing in mind that the risks

within a program are greater than the sum of risks from the individual projects. This
magnification occurs because of the potential compounding risks created by the ongoing and accumulating effects of the multiple projects within the program.. To
handle this, a thorough risk analysis of the Program will be conducted, with
particular attention paid to those risks that affect the schedule. For instance, a delay
in one project can ripple through the entire Program and magnify the time impacts
upon subsequent or related projects (PMI, 2013);

Projects and Business Functions Departments risks data; and

Contractors and sub-contractors risks data.

IV.4. RBDM Processes

Standardized risk data that would have been collected will be used for the RBDM
process through steps 1 to 6 (Section 2 in Figure 6)

Step 1 Qualitative deterministic analysis of risk data


The standardized risk data that will be collected in the Section 1 require a selection
through preliminary risk analysis (Nicolet-Monnier, 1996) against the multiple criteria
decision-making model (Belton et al., 2002). Preliminary risk analysis is a qualitative
technique, which involves a disciplined analysis of the event sequences, which could
materialize a risk. In this technique, the possible undesirable events will be identified first
and then analyzed separately. For each undesirable event, possible treatment actions
will then be formulated. The result from this methodology provides a basis for

64

determining which risks should be looked into more closely and which analysis methods
are most suitable. With the aid of a probability / consequence diagram or risk matrix, the
identified risks will be qualitatively scored and ranked against the MBRP multi criteria,
allowing measures to be prioritized to prevent the risk to materialize. All criteria,
quantitative as well as semi-qualitative, will be evaluated even though the schedule
impact is the preferred criterion as mentioned in the introduction.
Qualitative Risk Assessment of risk data will be carried out with an objective to
priorities the identified risks for further action in the next step. All risks will be assessed
by defining their probability of occurrence and the corresponding impact to the multiple
criteria: schedule, cost, reputation, health & safety, security, environment, legal, and
quality & performance. The Inputs to Qualitative Risk Assessment could be too large, but
the following will be addressed in the qualitative risk assessment process only:

Organization-wide factors, including published information such as commercial


databases, academic studies, benchmarking, or other industry studies;

Program/project scope statement such as program/project assumptions, which


generally, by their uncertain nature, should be evaluated as potential causes of
program/projects risks;

Organizational

process

assets

from

which

data

about

risks

on

past

program/projects and the lessons learned is obtained;

Program/project plans; and

Program/project implementation plan from which an understanding of the


schedule, cost and quality management plans may be obtained as well as the
work breakdown structure (WBS) and assumptions used.
65

A pre-defined rating system will be used in the probability and impact assessment
process to perform the qualitative analysis to prioritize the risks. The level of probability
for each risk and its impact on each criteria will be evaluated based on documents, event
records, or verbal information obtained during the interviews or meetings with
responsible teams/persons and on the assumptions recorded which justify the levels
assigned (Liu et al., 2009; Ebrahimnejad et al., 2010; Giezen, 2012).

Step 2: Decision Making I; Select risk data for further analysis


After quantifying the risk data in the previous step, this step is carried out to refine the
prioritization of risk data for treatment or quantitative analysis by evaluating them through
the Multi-Attribute Decision-Making (MADM) process against pre-established criteria
such as those used by Liu et al., (2009); Ebrahimnejad et al., (2010); Giezen, (2012) and
other authors. Ranking the risks will be made to facilitate the risk analysis in the risk

treatment process, which is important for understanding the level of risk exposure
relative to the MBRP risk appetite and tolerance. Decisions about risk treatment can be
made so to optimize risk taking and maximize the likelihood of achieving the Program
primary objective of meeting the schedule. Because it is too expensive or ineffective to
respond to all risks, decision-makers need to know which of their risks are most critical
and prioritize accordingly. Usually, it is found that the treatment of a few critical risks
results in dramatic reductions in residual risk, whereas the treatment of each following
risk results in nominal incremental reductions in residual risk. Before deciding which risks
to accept, the risks will need to be prioritized. To ensure objectivity and transparency, the
risks will be prioritized against agreed criteria because the results may give a different
outcome from the initial thinking.

66

Step 3 Quantitative deterministic analyses of risk data


Further analysis of risks data will be carried out through the so-called scenario
theory based on a quantitative distribution of each risks time impact (e.g. single point,
uniform or triangle distribution) can be chosen (Risk Analysis and Monte Carlo
Simulation within Transport Appraisal, Centre for Traffic and Transport). Selection of the
distribution will be based on the risk data available. The single point, uniform or triangle
distributions (Hesse, 2000) do not depend on large numbers or mature risk data unlike
the probabilistic distribution (Bernoulli, 2013).
Once the impact range has been obtained, the distribution of the time impact within a
range can be selected based on the following three options:

If a single (one only) impact within the range is provided, it will be recorded as most

likely and the default distribution will be discrete (e.g. The time delay will be X
weeks as considered relevant to MBRPs).

If minimum and maximum impacts are provided to cover the entire range, then the
default distribution should be uniform (e.g. The time delay could be anywhere
between Xminimum weeks and Xmaximum weeks).

If all, minimum, maximum and most likely impact values are obtained then the so
called triangle distribution will be considered (e.g. The time delay is likely to be
X weeks but could be anywhere between Xminimum weeks and Xmaximum weeks).
The distribution represents the alternative time a project or program element can

take. The uncertainty in time that an element might take reflects all of the risks that could
impinge on that program/project element.

Step 4 Quantitative probabilistic analyses of risk data


67

Next collection of risks data will be through probabilistic theory, which is a


quantitative approach to risks data by using normal distribution of all risks time impact
through Monte Carlo Simulation (Whitlock and Kalos, 2008). In case the data collected is
not normal or near normal, then other methods (eg. Poisson distribution) are proposed to
be used depending on their suitability. Quantitative risk analysis attempts to assign
adequate numerical values (weighting factors) to risks attributed either by using collected
empirical data, or by quantifying qualitative assessments. The number of risks on which
quantitative risk analysis is performed varies depending if it concerns the entire MBRP or
one project within it only.
Quantitative risk analysis will be carried out for all identified risks from the qualitative
risk assessment. Inputs into the quantitative risk assessment process will be provided
from the following sources:

Organization-wide factors including published information such as commercial


databases, academic studies, benchmarking, or other industry studies;

Program/projects scope statement, which defines the boundaries and limitations


of the scope of the program/projects;

Risk management plan where the procedure to be used for quantitative risk
analysis on the program/projects will be described and the roles and
responsibilities for conducting risk management, budgets, and to schedule
activities for risk management, risk categories, the risk categories and revised
stakeholders risk tolerances will be detailed;

Risk register showing the risk categories that require quantitative risk analysis and
their relative priority ranking to identify high priority risks;

68

Program/project implementation plan that provides details on the program/project


schedule management plan and the program/project cost management;

Data gathered from interviews with members of the program/project teams and
other parties with specialist knowledge on the different areas of the
program/project; and

Correlation, dependency or combined dependency between the projects. For


example, if one project goes over schedule, others might be more likely to go over
schedule (Liu et al., 2009).
The program/projects quantitative risk analysis will be implemented stepwise

depending on the urgency of risk treatment, as well as on the required level of details
and reliability including confidence intervals of the data. As more data are becoming

available, a detailed quantitative schedule risk analysis will be carried out to assess the
probability of achieving the pre-determined program/project completion date. Such a
more complex form of quantitative risk analysis will be carried out by using schedule risk
analysis software which are popularly used in Project Management (like, Oracles
Primavera)and by consulting relevant experts on the particular subject matters to
validate the risk data and techniques used. The risk data from the risk database and the
schedule data from the MBRP schedule will be imported into the schedule risk analysis
software for further probabilistic analysis through Monte Carlo analysis. The quantitative
schedule risk analysis (QSRA) will then be carried out for different scenarios such as
significant schedule change, emergence of significant schedule risk and other major
changes. The Qatar rail project data will be used for the case study to validate the
model.

69

The Monte Carlo simulation (Whitlock et al., 1978) involves random sampling of
each probability distribution by running a number of iterations using the frequency
ranges, probabilities and impact ranges. Each iteration will pick a value from the impact
range based on the values and distribution provided.
The risk register, updated with the results of the quantitative risk analysis, will be the
main output, along with a prioritized list of those risks that pose the greatest threats or
opportunities to a single project or the program through influence on the critical path of
the schedule. Other outputs from more comprehensive quantitative analysis include the
following:

More detailed quantification of the time and cost contingency reserves if required
within a given level of confidence, e.g. 70 th and 95th percentile level of confidence,
which means 70% or 95% probability that the schedule or budget will be met.

Calculations of the probability distribution and ascending cumulative distribution of


achieving time and cost objectives at a given level of confidence; and

Any trends in quantitative risk analysis results that could lead to conclusions
affecting risk treatments.

After completing this step, the risks which are likely to jeopardize the program will
become known. This information is needed for the next step in order to define those risks
which are necessary to be treated.

Step 5. Decision Making II - Select risk treatment options


Risk treatment not only seeks to minimize potential downside, but also maximize the
potential upside of opportunities. Too much treatment is as undesirable as too little, and

70

therefore the objective is to find the right balance to optimize returns to the business by
maximizing gains from opportunities while minimizing losses from threats. Evaluation of
downside risk involves the consideration of non-financial as well as financial impacts
(COSO, 2004; ISO 31000, 2009; PMBOK 2013). This step delivers qualitative and
quantitative information about residual risk to the risk management processes so that
management can make informed strategic decisions about how to allocate resources to
program/projects. Once risks have been evaluated using the probability impact diagram,
I shall determine treatment options for each risk level (low, medium or high) based on the
definitions provided in Table 4.

Table 4 Risk Treatment Description per Level


Risk Level Description

Timeframe

The risk shall be mitigated to As Low As Reasonably

Practicable (ALARP), unless the risk reduction cost Arbitrary


High

significantly outweighs the risk reduction benefit.


Otherwise, the risk is eliminated.
The risk is accepted if adequate controls and other
internal measures are in place. Risk control measures Arbitrary
Medium
may be implemented to further mitigate the risk if a
strong effectiveness case exists.
The risk is accepted but if possible removes risk cause Arbitrary
Low

or reduces likelihood and/or impacts.

On a very rare basis, exceptions may be noted. Depending on the risk appetite of
the authorities risks that qualify under Green category (Low risk) do not require any
treatment, while risks under Blue category (Medium risk) require suitable treatment (like
71

terminate, tolerate or transfer such risks as deemed relevant), and risks under Red
category (High risk) require risk control on a priority basis. Exceptions rated as High,
which cannot be eliminated will be handled on a case-by-case basis by management as
an outlier from the normal. The maximum timeframe to address a risk treatment and to
implement its mitigation measures depends on the risk. It will be assumed that all risk
treatment owners (responsible decision-makers at all levels of MBRP management) shall
adhere to the timeframe defined in the Table 4 unless it can be justified why the risk
treatment and mitigation should have a timeframe beyond the limitations.
Treatment of individual risks rarely occurs in isolation, and thus it is important to
have a clear understanding of a complete treatment strategy to ensure that critical
dependencies and linkages are not compromised. For this reason, the development of
an overall treatment strategy is a top-down decision-making process within the

organizational management structure. This process is driven by the need to achieve the
program objective while controlling each uncertainty and bringing it within tolerable limits
for each such uncertainty.

Table 5 presents the four risk treatment options (Avoid,

Accept, Transfer or Mitigate) that decision-makers should choose in order to continue


treating a risk.
Table 5 Risk Treatment Options
Risk Treatment Options
Avoiding the risk by deciding not to start or continue with the activity that
Avoid
gives rise to the risk
Taking or increasing risk in order to pursue an opportunity. Retaining the risk
Accept
Transfer

by informed decision
Sharing the risk with another party or parties including contracts and risk

72

financing.
Mitigate Removing the risk source or changing the likelihood or impact
When a decision has been made which risks to avoid, accept, transfer or mitigate,
an evaluation of the treatment options by the use of decision tree needs to be made,
which is the last step in the RBDM process.

Step 6. Decision Making III. Evaluate treatment options through Decision


Tree Theories
As described above, based on ISO 31000 (2009) and Risktec (2005), the options
available for the decision tree will be based on: Avoid, Mitigate, Accept, or Transfer. The
designed risk response portfolio will not only focus on reducing the likelihood of a risk
occurring, but will also include plans for balance and recovery to ensure crisis

management, business continuity and reputation management. All four risk treatment
options (Avoid, Mitigate, Accept and Transfer) for MBRP will be evaluated, taking into
account their costs, benefits and views of relevant stakeholders such as the strategic
objectives and other criteria. Whilst risk treatment options, which are not cost-effective
(i.e. the value of any reduction in risk is out-weighted by the cost of the control) would
normally be discarded, there will be mandatory requirements or preferred criteria
imposed by internal standards or external stakeholders.
The evaluation of each risk treatment option will be based on the decision tree, such
as one used in a RBDM research done by Risktec (2005). The evaluation will be carried
out for each of four risk treatment options against Compliance, Objectives, Risk appetite
and Schedule benefit, as shown in Figure 8.

73

Figure 8. Decision tree for the evaluation of risk treatment options


Eventually, a decision can be made. In order to decide which alternative to select for
a schedule driven MBRP, a decision criterion will be applied that takes into account both

the possible outcomes for each decision alternative and the probability that each
outcome will occur. Sometimes the outcome is clearly worthwhile or not, which makes
the decision easy. Sometimes, however, there is no clear answer, which needs further
analysis or a simple consensual decision. An assessment is also needed to identify
whether the residual risk is acceptable, given the risk appetite or not.
IV.5 Output
The ultimate output of my research will be a multi-criteria RBDM model adapted for
a schedule driven mega-project such as MBRP. As a result of the case study will be an
informed RBDM report with a recommendation on how to select the most suitable risk
treatment option to meet the project schedule without jeopardizing other criteria.

74

IV.6 Validation of the RBDM Model


The enhanced RBDM model of a MBRP as described in Figure 7will be tested and
validated in a case study carried out for the Qatar Rail MBRP. There, a Program risk
management team is formed to manage risks in the construction of the five metro lines,
four long distance high-speed lines and a light rail transit line. According to the program
schedule, changes to the design of the infrastructure are identified as a critical event to
meet the target date of completion. The time overrun of one work package or a project is
identified as the major risk needed to be assessed for securing the success of the entire
Program. At the moment preliminary risk assessment through projects, program and
strategic risk workshops has identified a number of risks, which can lead to the delay of
the program, such as scope change, ineffective interface and integration, delay of tender
process, availability of required plant and equipment, lack of required number and level

of skilled resources, alignment and Rights of Way not legally protected. These risks
prove to be difficult to measure due to the lack of risk data and uncertainties involved. As
there are no adequate practical data yet to support a traditional risk analysis needed to
test the proposed model, it will be tested in phases following the steps as mentioned in
the quantitative deterministic analysis of risk data.
IV.7 Data Collection
A carefully drafted and pre-tested Questionnaire encompassing all the risk factors as
identified in the risk tree has been administered for data collection. For design of the
Final Questionnaire a Pilot study was done by discussing with 10 superior officers of the
project during August 2014. Afterwards, the refined (final) Questionnaire was prepared
and sent to 350 principal project staff (officers and above) so as to collect the data in the

75

form of their responses / feedbacks during September 2014. Only 117 Questionnaires
were replied as of December 2014, even after two reminder letters. Of these 117
Questionnaires only 100 alone were complete in all respects. These 100 (fully complete)
Questionnaires were used for further analysis during January-March 2015. For selecting
the 350 respondents as above random sampling (lottery method) was adopted using the
list of regular Officers as per the official records of Qatar Railway Project. Besides, expert
opinions were collected regarding the general trend in technology, structure and nature
of the market, relative significance as well as risk associated with various aspects of the
project etc. during November-December 2014. For this an Interview schedule was
prepared and opinions of 8 highly reputed experts (selected using purposive or
deliberate sampling) in this field were collected using face to face (structured) interviews.
Each interview took 25 to 30 minutes time, on an average. Accordingly, the risk weights

were assigned meaningfully and risk assessments done for the individual project
activities and for the project as a whole.
IV.8 Conclusion
A comprehensive literature review has been conducted in order to identify whether
the existing risk based decision-making models can be used to address the RBDM of a
MBRP. The reviewed models have the advantage of addressing mainly one single item
applicable to the RBDM model of a MBRP, but not all constituents of the model. Such
items that can be used to design only particular parts of a RBDM model specific for a
MBRP, are, for example the errors in criterias weights (Ebrahimnejad et al., 2010) or
correlation between projects in a program (Liu et al., 2009),. There is not, however, any
RBDM model suitable to address the MBRP as a whole.

76

Development, testing and validation of a new RBDM model applicable to the entire
MBRP is presented in this Dissertation is based mainly on elements selected from the
existing models. The new model will be tested by the use of data collected during current
construction of the Qatar Rail projects. The model will then be used to evaluate, compare
and select the most appropriate risk treatment option against multiple criteria of the
program by considering particularly those risks that may influence the program schedule,
but without disregarding any other risks and criteria. To complete and address the three
elements of the iron triangle in the project management, further research into the cost
and quality aspects of a MBRP program will be required.

77

v.

ANALYSIS OF RISK DATA A MULTIPLE CRITERIA MODEL

V.1 STEP 1 QUALITATIVE DETERMINISTIC ANALYSIS


This is the first step in the analysis of risk data. A qualitative and deterministic approach
is adopted in this step which involves a preliminary analysis of the risk. The standardized
risk data that will be collected require a selection through preliminary risk analysis
against the multiple criteria decision-making model. As already noted, preliminary risk
analysis is a qualitative technique that involves a disciplined analysis of the event
sequences which could materialize a risk. In this technique, the possible undesirable
events are identified first and then analyzed separately. For each undesirable event,
possible treatment actions are then formulated. This methodology provides a basis for

determining which risks should be looked into more closely and which analytical methods
are most suitable. With the aid of a probability / consequence diagram (risk matrix) the
identified risks are qualitatively scored and ranked against the MBRP multi-criteria,
allowing measures to be prioritized to prevent the risk to materialize. Qualitative Risk
Assessment of risk data is carried out in order to prioritize the identified risks for further
action in the next step. All risks are assessed by defining their probability of occurrence
and the corresponding impact to the multiple criteria.
A pre-defined rating system is used in the probability and impact assessment
process to perform the qualitative analysis to prioritize the risks. The level of probability
for each risk and its impact on each criteria is evaluated based on documents, event
records, or verbal information obtained during the interviews or meetings with

78

responsible teams/persons and on the assumptions recorded which justify the levels
assigned.

Table 6: Summary of Qualitative Deterministic Analysis of Risk


Type of

1st Tier

2nd Tier

Risk

Risk Involved with


MBRP
Conventional

Social

Regulatory Compliances

Environmental Impact

High

rail
Low

and

Licenses, Permits,

Statement
Transportation Impact

High

Low

High
High
High
High
High

Medium
Medium
High
Low
High

High
High
Higher
High
High
High
High
High
High
High
Medium
Medium
Medium
High
High
High
High
Medium
High

Medium
Medium
High
High
Low
Medium
Low
Low
High
Medium
Medium
Low
Medium
Low
Low
Low
Low
Medium
High

Political

Clearances etc.

Statement
Energy Use Statement
Technology Transfer
Project Feasibility
Planning

Long-term Viability
Political Situation
Reasonableness of Projects


Scope, Schedule, Cost
Technical Constraints
Complexity of Project

Enginee
r-ing /
Constru
ction

Financia
l

Public Perception on Safety


Decision Making Process
Design
Standards / Code
Complexity
Completeness of Design
System Integration
Construction
Safety Standard
Quality Control
Infrastructure
Type of Contract
Contracting Arrangement
Procurement
Labor
System Procurement
Specification
Scope of Procurement
Procedure of Procurement
Funding
Funding Source
Inflation
Accuracy of Cost Estimate

79

Exchange Rate
Cost Overrun
Delay Cost (Time Overrun / Schedule Slippages)

High
High
High

Low
High
High

Based on Qualitative analysis it is noted that high risks are involved in Schedule
Slippages, Cost overrun, maintaining safety standards, ensuring the viability of the
project in the long run as well as putting in place a sound decision making
system(Table6)

V.2 STEP 2 DECISION-MAKING: PHASE I


The step two (Decision-making I) is the selection of risk data for further analysis. In this
step, the risks are prioritized for treatment based on pre-established criteria.
After identifying the risk data in the previous step, this step is carried out to refine

the prioritization of risk data for treatment or quantitative analysis by evaluating them
through the Multi-Attribute Decision-Making (MADM) process against pre-established
criteria. Ranking the risks will be made to facilitate the risk analysis in the risk treatment
process, which is important for understanding the level of risk exposure relative to the
MBRP risk appetite and tolerance. Decisions about risk treatment can be made so to
optimize risk taking and maximize the likelihood of achieving the Program primary
objective of meeting the schedule. To ensure objectivity and transparency, the risks will
be prioritized against agreed criteria because the results may give a different outcome
from the initial thinking.
Accordingly, the various factors identified as shown in Table 7 are assigned
relative scores (in the range 1 to 10) depending on the perceived severity or criticality of
the risks and these risks are arranged for prioritization. Table 9 shows the risks arranged
80

in the order of priority, based on the above methodology. Depending on the scores
allotted (1 to 10) it is noted that the priorities of the various risks vary from 1 to 10 in the
reverse order, as shown in Table 7.
Table 7: Summary of Qualitative Deterministic Analysis of Risk
Type of

1st Tier

2nd Tier

Risk
Social
and
Political

Regulatory
Compliances

Planning

r-ing/
Construction

Financia
l

Environmental Impact Statement


Transportation Impact Statement
Energy Use Statement

Risks
Low
Low
Medium

1
3
5

10
8
6

Long-term Viability
Political Situation
Reasonableness of Projects

Medium
High
Low
High

6
7
2
8

5
4
9
3

Medium
Medium
High
High
Low
Medium
Low
Low
High
Medium
Medium
Low
Medium
Low
Low
Low
Low
Medium
Low

5
6
7
7
3
5
3
3
7
6
5
3
5
3
3
3
4
6
8

6
5
4
4
8
6
8
8
4
5
6
8
6
8
8
8
7
5
3

Licenses, Permits,
Clearances etc.
Technology Transfer
Project Feasibility

Enginee

Risks of MBRP Priority


Quantum of
Priority

Scope, Schedule, Cost


Technical Constraints
Complexity of Project
Public Perception on Safety
Decision Making Process
Design
Standards / Code
Complexity
Completeness of Design
System Integration
Construction
Safety Standard
Quality Control
Infrastructure
Type of Contract
Contracting Arrangement
Procurement
Labor
System Procurement
Specification
Scope of Procurement
Procedure of Procurement
Funding
Funding Source
Inflation
Accuracy of Cost Estimate

81

Exchange Rate

High
High
High

Cost Overrun
Delay Cost (Time Overrun / Schedule Slippages)

7
9
10

4
2
1

V.3 STEP 3 QUANTITATIVE DETERMINISTIC RISK ANALYSIS


During the step three a quantitative deterministic analysis of risk data is done using
probabilistic grades to each of the risk factors identified. The prioritized risks as shown in
Table 7 are quantified using probability grades as shown in Table 8.
Table 8: Criteria for Prioritizing the Risk Factors
Criticality of Risk

Largest

Larger

Medium

Smaller

Small

Range of the Score (1-10)

9-10

7-8

5-6

3-4

1-2

Risk Weight assigned

1.0

0.8

0.6

0.4

0.2

Factors

Further analysis of risks data will be carried out through the so-called scenario
theory based on a quantitative distribution of each risks time impact can be chosen.
Selection of the distribution is done based on the risk data available. The single point,
uniform or triangle distributions do not depend on large numbers or mature risk data
unlike the probabilistic distribution. Once the impact range has been obtained, the
distribution of the time impact within a range can be selected based on the following 3
options: (i) If a single impact within the range is provided, it will be recorded as most
likely and the default distribution will be discrete; (ii) If minimum and maximum impacts
are provided to cover the entire range, then the default distribution should be uniform; (iii)
If all, minimum, maximum and most likely impact values are obtained then the so called
triangle distribution will be considered.

82

The distribution represents the alternative time a project or program element can
take. The uncertainty in time that an element might take reflects all of the risks that could
impinge on that program/project element.
Table 9: Quantitative Deterministic Analysis of Risk Prioritizing the Risk Factors
Risk Type
Social and
Political

Engineering /
Construction

Financial

Risk Factors
Environmental Impact Statement C11
Transportation Impact Statement C11
Energy Use Statement C11
Technology Transfer C11
Long-term Viability C11
Political Situation C11
Reasonableness of Projects Scope, Schedule, Cost C11
Technical Constraints C11
Complexity of Project C11
Public Perception on Safety C11
Decision Making Process C11
Standards / Code C21
Complexity C22
Completeness of Design C22
System Integration C22
Safety Standard C22
Quality Control C22
Type of Contract C22
Contracting Arrangement C22
Labor C22
Specification C22
Scope of Procurement C22
Procedure of Procurement C22
Funding Source C32
Inflation C32
Accuracy of Cost Estimate C32
Exchange Rate C32
Cost Overrun C32
Delay Cost (Time Overrun / Schedule Slippages) C32

Weight
0.2
0.4
0.6
0.6
0.8
0.2
0.8
0.6
0.6
0.8
0.8
0.4
0.6
0.4
0.4
0.8
0.6
0.6
0.4
0.6
0.4
0.4
0.4
0.4
0.6
0.8
0.8
1
1

V.4 STEP 4 QUANTITATIVE PROBABILISTIC RISK ANALYSIS


In the step four the quantitative probabilistic analysis of risk data is done. In this stage a
quantitative approach to the risks data is undertaken by using a distribution of all risks
83

time impact through Monte Carlo Simulation, the data being normally distributed. Use of
other distributions (that are not normal, eg. Poisson), though not required here, is noted
to provide quite identical results. Quantitative risk analysis attempts to assign adequate
numerical values (weighting factors) to risks attributed using quantifying qualitative
assessments as noted earlier. Quantitative risk analysis is carried out for all identified
risks from the qualitative risk assessment.
The program/projects quantitative risk analysis is to be implemented stepwise
depending on the urgency of risk treatment, as well as on the required level of details
and reliability including confidence intervals of the data. As more data are becoming
available, a detailed quantitative schedule risk analysis is to be carried out to assess the
probability of achieving the pre-determined program/project completion date. Such a
more complex form of quantitative risk analysis is carried out by using schedule risk

analysis software which is popularly used in Project Management viz. Oracles


Primavera. Besides, consultation with relevant experts in the subject field is also made in
order to validate the risk data and techniques used. The risk data from the risk database
and the schedule data from the MBRP schedule is imported into the schedule risk
analysis software for further probabilistic analysis through Monte Carlo analysis. The
quantitative schedule risk analysis (QSRA) is then carried out for different scenarios
such as significant schedule change, emergence of significant schedule risk and other
major changes. The Qatar rail project data is used for the case study to validate the
model.
Table 10: Quantification of Risks and Finding the Risk Degrees
Risk Factors

Probability

Influence on the

Risk

84

Environmental Impact Statement C11


Transportation Impact Statement C11
Energy Use Statement C11
Technology Transfer C11
Long-term Viability C11
Political Situation C11
Reasonableness of Projects Scope, Schedule,

Pij
0.3
0.5
0.5
0.5
0.5
0.3
0.4

Cost C11
Technical Constraints C11
Complexity of Project C11
Public Perception on Safety C11
Decision Making Process C11
Standards / Code C21
Complexity C22
Completeness of Design C22
System Integration C22
Safety Standard C22
Quality Control C22
Type of Contract C22
Contracting Arrangement C22
Labor C22
Specification C22
Scope of Procurement C22
Procedure of Procurement C22
Funding Source C32
Inflation C32
Accuracy of Cost Estimate C32
Exchange Rate C32
Cost Overrun C32
Delay Cost (Time Overrun / Schedule Slippages)

0.45
0.45
0.4
0.45
0.35
0.3
0.3
0.35
0.25
0.45
0.2
0.35
0.4
0.35
0.45
0.35
0.25
0.3
0.4
0.25
0.5
0.5

overall project Wij degree


0.2
0.06
0.4
0.2
0.6
0.3
0.6
0.3
0.8
0.4
0.2
0.06
0.8
0.32

0.6
0.6
0.8
0.8
0.4
0.6
0.4
0.4
0.8
0.6
0.6
0.4
0.6
0.4
0.4
0.4
0.4
0.6
0.8
0.8
1
1

0.27
0.27
0.32
0.36
0.14
0.18
0.12
0.14
0.2
0.27
0.12
0.14
0.24
0.14
0.18
0.14
0.1
0.18
0.32
0.2
0.5
0.5

C32

Overall Project Risk Degrees =


Probability of occurrence of various risk factors is assessed through a systematic
process of collecting feedback from the respective stakeholders using carefully designed

85

and pre-tested Questionnaires / Interview schedules. Based on such feedbacks from


multiple respondents, a reasonable (most likely) probability is arrived at. (Table 10).
Now, the overall project risk is computed using the following formula:

Overall Project Risk Degrees =

From Table 10, it is noted that the overall project risk as above works out to 6.67
in the present case. It may be noted that the above risk is in the High Risk category as
per the Risk Assessment Standards Matrix shown in Table 11.
Table 11: Risk Assessment Standards Matrix
Risk degree range

00 - 4.0
4.0 6.0
6.0 8.0
8.0 10.0

Risk level
Low risk
Medium risk
High risk
Higher risk

Source: As per the Research Design for the study


It may be stated that an overall risk of 6.67 as above though in the High Category
is in the lower half (6 to 7) within that range (Table 11). This is turn suggests a focused
approach towards the most risky activities of the project rather than all projects elements;
because, some elements are much more risky than the just high overall project risk.

V.5 STEP 5 SELECTION OF RISK TREATMENT OPTIONS


(DECISION MAKING II)
Step five is the selection of risk treatment options (Decision-making II) during this stage
decision is made on how to minimize potential downside but also maximize the potential
upside of opportunities by using pre-established criteria. Risk treatment not only seeks to

86

minimize potential downside, but also maximize the potential upside of opportunities. Too
much treatment is as undesirable as too little, and therefore the objective is to find the
right balance to optimize returns to the business by maximizing gains from opportunities
while minimizing losses from threats. This step delivers qualitative and quantitative
information about residual risk to the risk management processes so that management
can make informed strategic decisions about how to allocate resources to
program/projects.
Depending on the risk appetite of the authorities risks that qualify under Green
category (Low risk) do not require any treatment, while risks under Blue category
(Medium risk) require suitable treatment (like terminate, tolerate or transfer such risks as
deemed relevant). Risks under Yellow category (High risk) and Red category (Higher
risk) require close monitoring and control of risks on a priority and top priority bases

respectively. Exceptions rated as High, which cannot be eliminated will be handled on a


case-by-case basis by management as an outlier from the normal. The maximum
timeframe to address a risk treatment and to implement its mitigation measures depends
on the risk.
The risk treatment options for each risk level (low, medium, high, and higher) are
suggested based on the definitions provided in Table 12.
Table 12: Risk Treatment Description per Level
Risk Level

Description of the Risk Treatment Required

Periodicity

The risk shall be mitigated to As Low As Reasonably


Very frequent

Higher

Practicable (ALARP), unless the risk reduction cost

(Red)

significantly outweighs the risk reduction benefit. Otherwise,

and close
monitoring
the risk is eliminated.

87

High
(Yellow)

Close monitoring of risks is required for these risks at

Frequent

frequent intervals. Each kind of risk needs to be monitored

monitoring and

and minimized / mitigated appropriately.

control

The risk is accepted if adequate controls and other internal


Regular and

Medium

measures are in place. Risk control measures may be

(Blue)

implemented to further mitigate the risk if a strong

Periodical
monitoring
effectiveness case exists.
Low

The risk is accepted but if possible removes risk cause or

Periodical

(Green)

reduces likelihood and/or impacts.

reviews

Treatment of individual risks rarely occurs in isolation, thus, it is important to have a


clear understanding of a complete treatment strategy to ensure that critical
dependencies and linkages are not compromised. For this reason, the development of

an overall treatment strategy is a top-down decision-making process within the


organizational management structure. This process is driven by the need to achieve the
program objective while controlling each uncertainty and bringing it within tolerable limits
for each such uncertainty.
Table 13.Presents the four risk treatment options (Avoid, Accept, Transfer or
Mitigate) that decision-makers should choose in order to continue treating a risk during
the entire life cycle of the project concerned viz. MBRP of Qatar Railways.
Table 13: Risk Treatment Options
Options
Avoid

Procedure involved in exercising the option


Avoiding the risk by deciding not to start or continue with the activity that gives rise
to the risk

88

Accept

Taking or increasing risk in order to pursue an opportunity. Retaining the risk by


informed decision

Transfer

Sharing the risk with another party or parties including contracts and risk financing.

Mitigate

Removing the risk source or changing the likelihood or impact

When a decision has been made which risks to avoid, accept, transfer or mitigate,
an evaluation of the treatment options by the use of decision tree needs to be made,
which is the last step in the RBDM process.

V.6 STEP 6 RISK TREATMENT OPTIONS (DECISION MAKING III)


Step six evaluates the treatment options through Decision Tree Theories (Decisionmaking III). Here, the models of ISO 31000 combined with Risktec (2005)are applied to
evaluate the available treatment options through a decision tree analysis. Based on ISO
31000 (2009) and Risktec (2005), the options available for the decision tree will be

based on: Avoid, Mitigate, Accept, or Transfer. The designed risk response portfolio not
only focuses on reducing the likelihood of a risk occurring, but also includes plans for
balance and recovery to ensure crisis management, business continuity and reputation
management. All four risk treatment options (Avoid, Mitigate, Accept and Transfer) for
MBRP will be evaluated, taking into account their costs, benefits and views of relevant
stakeholders such as the strategic objectives and other criteria. Whilst risk treatment
options, which are not cost-effective would be discarded, mandatory requirements or
preferred criteria imposed by internal standards or external stakeholders.
Eventually, a decision can be made. In order to decide which alternative to select for
a schedule driven MBRP, a decision criterion will be applied that takes into account both
the possible outcomes for each decision alternative and the probability that each

89

outcome will occur. Sometimes the outcome is clearly worthwhile or not, which makes
the decision easy. Sometimes, however, there is no clear answer, which needs further
analysis or a simple consensual decision. An assessment is also needed to identify
whether the residual risk is acceptable, given the risk appetite or not.
The various risk factors as in Table 10 could now be arranged in the descending
order of their significance (criticality). Thus, it is noted that factors like Cost overrun,
Delay cost have the have the highest significance (0.5 each) followed by long term
viability (0.4) decision making process (0.36) and so on. The least significant items were
observed to be environmental impact statement and political situation (0.06 each). (Table
13). Based on the prioritized risk factors as above, a diagram showing the risks and their
relative significance is drawn up as shown in Figure 9. These risks are categorized into 4

groups (red, yellow, blue and green) depending on their significance (Table 14, Figure 9).

Table 14: Prioritized risk factors


Cost Overrun C32
Delay Cost (Time Overrun / Schedule Slippages) C 32
Long-term Viability C11
Decision Making Process C11

Accuracy of Cost Estimate C32


Public Perception on Safety C11
Reasonableness of Projects Scope, Schedule, Cost C11
Energy Use Statement C11
Technology Transfer C11
Complexity of Project C11
Quality Control C22

0.5
0.5
0.4

Red
Category

0.36
0.32
0.32
0.32
0.3
0.3
0.27
0.27

90

Technical Constraints C11


Labor C22

0.27

Yellow
Category

Transportation Impact Statement C11


Exchange Rate C32
Safety Standard C22
Scope of Procurement C22
Complexity C22
Inflation C32
Contracting Arrangement C22
Procedure of Procurement C22
Specification C22
Standards / Code C21
System Integration C22
Completeness of Design C22
Type of Contract C22
Funding Source C32
Political Situation C11
Environmental Impact Statement C11

0.24
0.2
0.2
0.2
0.18
0.18
0.18
0.14
0.14
0.14
0.14
0.14
0.12
0.12
0.1
0.06
0.06

Blue
Category

Green
Category

91

Figure 9. Risk Factors and their relative significance


(Source: based on Table 14)

92

V.7 SUGGESTED RISK MANAGEMENT APPROACH

93

In view of the foregoing, it is suggested that a highly focused and systematic effort
towards management of risks based on their severity (as shown in Table 12 and Figure
9) needs to be followed. Prioritization of risk management efforts is very much essential,
and hence resources are used in a specific and selective manner based on the above
rationale. This in turn results in optimization in resource utilization as well as outcome
from the project.

V.8 GENERAL CONCLUSION OF THE STUDY SUMMARY OF THE MAJOR


FINDINGS AND DATA COLLECTION METHODOLOGY
Based on the foregoing discussions, based on an objective and systematic procedure
involving six major steps, it is revealed that of the 29 different variables under study four
are in the most important category (Red category) deserve maximum attention. These

factors include Cost overrun and Delay cost, both with 0.5 weights each, followed by
Long term viability (weight 0.4) and then by Decision making process (weight 0.36).
These four factors in the red category are followed by nine factors in the Yellow category
which need close monitoring but with significance lesser than the four in the Red
category. These have weights ranging from 0.32 to 0.24 and these include Accuracy of
Cost Estimate; Public perception on safety; Reasonableness of Projects Scope,
Schedule and Cost; Energy Use Statement; Technology Transfer; Complexity of Project;
Quality Control; Technical Constraints; and Labour in that order. Next in significance is
eleven factors in the Blue category with weight score ranging from 0.2 to 0.14 and these
factors deserve only lesser monitoring and control. These Blue category factors are
Transportation Impact
procurement,

Statement,

Complexity,

Inflation,

Exchange rate, Safety standard,


Contracting

arrangement,

Scope

Procedure

of
for

94

procurement, Specification, Standards/Code, and System integration in that order. These


eleven factors in the Blue category are followed by five factors in the Green category.
These five factors have risk weights in the range 0.12 to 0.06 and these include
Completeness, Type of contract, Funding source, Environmental impact statement, and
Political situation, in that order.
Given the overall project risk in the High risk (6.67) category, it may be noted that
the four Red category factors as noted above have to be very closely monitored so as to
optimize the overall project risk. Next in severity is the nine factors in the Yellow
category, and then by the eleven factors in the Blue category. Lastly comes the five in
the Green category which need the least attention among all. The above priority is
required in all risk management endeavours.

The data collection for the study was been done using random sampling from
among principal project officers using Questionnaire and also from experts in the field
using Interview schedule through face-to-face structured interviews. The methodology of
the study being conceptual supported by empirical study involving data collected from
practitioners and experts in the field, the findings of the study are suitable for informed
project management decisions in practical situations. This adds up to the relevance and
utility of the research.

V.9 SCOPE FOR FURTHER EXPLORATION


(i)

Computer-based Decision Making Model for Cost Control

(ii)

Computer-based Model for Control of Time Overruns

(iii)

Computer-based Simulation Models for Decision making on various aspects etc.

95

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116

VII . QUESTIONNAIRE
(As part of an Academic Research Study entitled, Multi-Criteria Risk-Based DecisionMaking (RBDM) Model for a Multi-Billion-Railway Program (MBRP). The data collected
will be strictly confidential and will be used for academic purpose alone)
---------------------------------------------------------------------------------------------------------------------

PROFILE OF THE RESPONDENT (REGULAR OFFICERS ONLY)


(Please fill in the details)
Name and Designation

Length of service in the organization (as on 31.08.2014)

___Years & ___ Months

Details of the responsibilities handled in managing projects

(i)
(ii)
(iii)

--------------------------------------------------------------------------------------------------------------------Particulars

Responses [Use the scaling : 5 Yes, Very


True; 4 Yes; 3 Neutral; 2 No; 1 No; Not
at all.]

Has the project leadership of MBRP of


Qatar Railways has planned for compliance
with all requisite regulatory / legal norms?

Have all the cost impacts to the MBRP


been duly documented? [eg. Cost
Overruns]

Have the impacts to the daily operations of


MBRP been documented?

Have the impacts to existing processes of


Qatar Railways been documented?

Have the schedule impacts to MBRP been


identified? [eg. Time Overruns /Slippages]

Have the benefits of the MBRP project been


fully identified?

Will MBRP require funds above that


originally allocated to the project? [Cost
Overrun]

117

Has MBRP included the State procurement


Processes and time frames as well as the
Project certification/release of funds
process?

Has sufficient funding been approved for


the MBRP of Qatar Railways?

Have qualified project managers been


assigned to the MBRP?

Has MBRP identified all the relevant


stakeholders?

Is the scope of the MBRP within the agency


mission

Are there business owners assigned to the


MBRP who have the time and understand
responsibilities for the MBRP?

Has a MBRP steering committee been


established within a MBRP governance
plan?

Is there adequate agency staffing resources


made available for the MBRP?

Is there a change management process


established?

Has the MBRP team documented the initial


business requirements for the MBRP
beyond the business objectives listed in the
MBRP charter?

Have the stakeholders approved all


documented business requirements?

Are documented requirements defined in


measurable terms?

Are requirements prioritized i.e. essential,


conditional, or optional?

Has an initial impact analysis been


performed on the business requirements
i.e., cost, operations, support

Is there a well-defined and institutionalized


change control process for requirements?

Has the MBRP established the ability to


verify that business requirements can be
traced through technical design, system
building or software coding/ configuration

118

and test phases to verify that the system


performs as intended and contains no
unnecessary elements?
Is the MBRP planning to use an existing
technology?

Is the MBRP planning to implement a


COTS (Commercial Off the Shelf) solution?

If COTS solution is anticipated will it require


significant customization, other than built in
set-up/start up configurations

Does the agency or State (DoIT) have


experience with the underlying technology
or hardware/operating system
environment?

Is a test environment part of the MBRP or is


there an existing test environment that
mirrors the production environment?

Is there at least a tentative plan for


Business Continuity?

Does the plan include the appropriate time


and cost contingency?

Does the plan include the appropriate time


and cost estimates?

Has a product planning methodology been


chosen appropriate for the complexity of the
solution and the knowledge of the MBRP
team?

Has the MBRP adequately identified the


constraints and assumptions of the MBRP?

Has the MBRP adequately identified the


MBRP risks, with probability, impact,
mitigation and or contingencies?

Are there significant dependencies on other


MBRPs or staff resources?

119

Please assign risk weights to the following risk elements depending on their criticality to MBRB
Low Risk, Green Medium Risk, Blue
(0 to 2.5)

High Risk, Yellow

(2.6 to 5.0)

(5.1 to 7.5)

Very High Risk, Red


(7.6 to 10)

Accuracy of Cost Estimate

..(Risk Weight)

Complexity of Project

.(Risk Weight.)

Cost Overrun

..(Risk Weight..)

Delay Cost (Time Overrun / Schedule Slippages)

..(Risk Weight..)

Decision Making Process

..(Risk Weight.)

Energy Use Statement

..(Risk Weight.)

Exchange Rate

..(Risk Weight.)

Labor
Long-term Viability

..(Risk Weight..)
..(Risk Weight..)

Public Perception on Safety

..(Risk Weight..)

Quality Control

..(Risk Weight..)

Reasonableness of Projects Scope, Schedule, Cost

..(Risk Weight..)

Safety Standard

..(Risk Weight..)

Scope of Procurement

..(Risk Weight..)

Technology Transfer

..(Risk Weight..)

Technical Constraints

..(Risk Weight..)

Transportation Impact Statement

..(Risk Weight..)

120

VIII. INTERVIEW SCHEDULE


(FOR USE AT THE TIME OF DATA COLLECTION THROUGH FACE TO FACE
INTERVIEW)
SECTION I: GENERAL INFORMATION REGARDING THE EXPERT INTERVIEWED
NAME AND DESIGNATION:

EXPERIENCE IN THE FIELD:

DATE AND TIME OF THE INTERVIEW:


SECTION II: OVERALL OPINION OF THE INDUSTRY AND BUSINESS ENVIRONMENT
Narrate briefly your overall opinion regarding the current scenario of Railway projects and the
influence of the socio-economic, political, legal, governmental and such other environmental factors
on mega Railway Projects, please:
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------SECTION III: SPECIFIC OPINION REGARDING QATAR RAILWAYS MEGA PROJECT


Narrate briefly your specific opinions regarding the Multi-Billion Railway Program (MBRP) of the
Qatar Railways. Also, mention briefly the major Strengths, Weaknesses, Opportunities and Threats
(SWOT) in respect of the said project, please:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

121

SECTION IV: RELATIVE CRITICALITY OF VARIOUS RISK FACTORS


Low Risk, Green Medium Risk, Blue
(0 to 2.5)

High Risk, Yellow

(2.6 to 5.0)

(5.1 to 7.5)

Very High Risk, Red


(7.6 to 10)

Accuracy of Cost Estimate

..(Risk Weight..)

Complexity of Project

..(Risk Weight..)

Cost Overrun

..(Risk Weight..)

Delay Cost (Time Overrun / Schedule Slippages)

..(Risk Weight..)

Decision Making Process

..(Risk Weight..)

Energy Use Statement

..(Risk Weight..)

Exchange Rate

..(Risk Weight..)

Labor
Long-term Viability

..(Risk Weight..)
..(Risk Weight..)

Public Perception on Safety

..(Risk Weight..)

Quality Control

..(Risk Weight..)

Reasonableness of Projects Scope, Schedule, Cost

..(Risk Weight..)

Safety Standard

..(Risk Weight..)

Scope of Procurement

..(Risk Weight..)

Technology Transfer

..(Risk Weight..)

Technical Constraints

..(Risk Weight..)

Transportation Impact Statement

..(Risk Weight..)

122