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Risk Budget management in progressing underground works
Tunnelling and Underground Space Technology 19 (2004) 29–33
Risk Budget management in progressing underground works International Society for Trenchless Technology (ISTT) and International Tunnelling Association (ITA) Joint Working Group Report夞 Gerard Arendsb,c,e, Rolf Bieleckic,d,1, John Castlec, Stanislav Drabekc, Alfred Haackc,d,e,f, Frantisek Nedbalc, Annica Nordmarka,e, Ray Sterlingc,e,g a
BK Swedish Rock Construction Committee, Box 1721, S-111 87, Stockholm, Sweden b Delft University of Technology, P.O. Box 5, 2600 AA Delft, The Netherlands c International Society for Trenchless Technology, 15, Belgrave Square, London, SW1X 8PS, UK d Germany Society for Trenchless Technology, St. Petersburger Str. 1, D-20355, Hamburg, Germany e International Tunnelling Association, ITA-AITES - cyo EPFL - Bat GC, CH 1015, Lausanne, Switzerland f ¨ ¨ Germany STUVA e.V., Mathias-Bruggen-Str. 41, D50827, Koln, g Trenchless Technology Center, Louisiana Tech University, P.O. Box 10348, Ruston, LA, USA Received 1 April 2003; received in revised form 16 August 2003; accepted 16 August 2003
Abstract There is a mass of detailed data concerning technical risk assessment methods and practices for underground work. But there is very little advice or guidance on the broad apportionment of the total risk between the various phases of an underground project or general advice on how risk might be managed. The Working Group has produced a generic Risk Budget covering five typical phases of an underground works project, which illustrates the heavy bias of risk towards the early phases. Using a practical example the report illustrates how project risk can be managed in a structured manner. 䊚 2003 Elsevier Ltd. All rights reserved. Keywords: Underground; Risk Budget; Planning
夞 Disclaimer: The International Society for Trenchless Technology (ISTT) and the International Tunnelling Association (ITA) publish this report to, in accordance with their statutes, facilitate the exchange of information, in order: (1) to encourage planning of the subsurface for the benefit of the public, environment and sustainable development; (2) to promote advances in planning, design, construction, maintenance and safety of tunnels and underground space, by bringing together information thereon and by studying questions related thereto. However, the ISTT and the ITA accept no responsibility or liability whatsoever with regard to the material published in this report. This material is: (1) information of a general nature only which is not intended to address the specific circumstances of any particular individual or entity; (2) not necessarily comprehensive, complete, accurate or up to date; (3) sometimes collected from external sources over which ISTTyITA services have no control and for which ISTTyITA assume no responsibility; (4) may not be ISTTyITA position; (5) not professional or legal advice (if you need specific advice, you should always consult a suitably qualified professional). 1 Chairman.
0886-7798/04/$ - see front matter 䊚 2003 Elsevier Ltd. All rights reserved. doi: 10.1016/j.tust.2003.08.002
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
30
1. Introduction Construction activities, in particular civil engineering works, require a lengthy planning phase linked with extensive public co-ordination. In order to minimise the time required and the risk of failure, it is essential to have specifically identified points during the planning process at which decisions have to be checked by independent experts. This means exposing the risks involved in planning and executing construction activities, and having a concept to minimise them—only then can works reasonably be expected to be completed both on schedule and at an economical, acceptable, price. 2. Minimising risk 2.
Measures needed to define the project goal. 2.1. Formulation of technical and operational requirements for the structure to be builtyrehabilitated, taking into account any environmental compensation and substitution measures. 2.2. Definition of the environment-specific parameters. For example: ● Areayspace specifications ● Location in inneryouter urban area ● Protection classification (e.g. environmentalyarchitectural constraints). ● Use of space ● State of site (existing use of the location) ● Neighbouring buildings and properties ● Flora and fauna on-site or in the vicinity ● Type and use of transport routes ● Specification of topographical, geological, hydrological and climatic conditions at the location 2.3. Recording of on-site conditions ● Inventory of the state of existing above and under ground structures: Geotechnical investigation is carried out by probe drilling, investigation pits, etc. These may also be combined with State-of-the-art methods of engineering geophysics (e.g. electromagnetic, radar and seismic surveys) although they very often are not reliable because of the tremendous problems of interpretation. 2.4. Analysis of potential damage causes and rehabilitation options (e.g. for tunnelling: overburden, operating techniques, displacementy distortion, temperature differences, corrosiony recording of point damage, multiple point damage, line damage) 2.5. Recording of local regulations. This includes compliance with police requirements
2.6. Licensing procedures, fire protection requirements (e.g. fire brigade access, fume extraction). The construction specification is to be established taking into account all the above conditions, with selection of the specific building methods in accordance with process engineering, environmental, legal and economic criteria. 2.2. The project then needs to be assessed, typically: 2.2.1. Fundamental project assessment ● Economic potential ● Environmental quality ● Regional impact ● Social well-being ● Sustainability 2.2.2. Ecological project assessment ● Environmental Impact Assessment 2.2.3. Regional and social aspect assessment 2.2.4. Economic potential assessment ● Absoluteyrelative cost-effectiveness ● Cost comparison calculations ● Cost-benefit analysis 2.2.5. Residual risks and consequences assessment The requirements for such assessments have to be: ● Objective, demonstrable, transparent (open) and traceable. 3. Risk Budget This diagram shows the allocation of risk to five typical phases of a project. Almost every underground project has these project phases and the diagram shows how risk can be controlled and reduced, by having reviews by independent project auditors working equally for the client and contractor (Fig. 1). 4. Cost comparison of open cut vs. trenchless technology or tunnelling 4.1. Direct costs Direct costs are defined as costs incurred directly for execution of the construction work, giving rise to the payment requirement from the client for the execution of the project. Such costs are largely determined by the construction costs and therefore dependent mainly on the tasks specified, the construction technique used and the relevant local conditions. The following are examples of direct costs: ● Costs of engineering work for planning, tender procedure, award of contract, construction supervision and project management ● Costs of any approvals required
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
31
32
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
Fig. 1. Risk Budget management.
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
● Costs of surveying work and documentation ● Costs of recording the status of structures and trees, plants, etc ● Costs of development testing of individual components of the construction techniques to be used ● Costs of the construction work itself, including setting up, securing and clearing the site ● Costs of compensation payments to third parties ● Costs of environmental compensation and substitution measures ● Costs of any special measures such as toxic waste disposal, processing of groundwater for groundwater level lowering, etc ● Financing and insurance costs 4.2. Indirect costs Indirect costs are not always definable nor expressible in financial terms. They are incurred by those affected by the project and not usually the client. The following are examples of indirect costs: ● Costs due to changes in above ground conditions (often not foreseeable) ● Costs due to impairment of traffic flow ● Costs due to damage to plants ● Costs due to impairment of retail trade Other types of indirect costs have also been identified, such as costs resulting from noise, exhaust gas or dust emissions, productivity losses or vibrations. However, they are generally hard to quantify. Examination of such factors in pipeline construction suggests that these cost elements will only be minor in specific cases, and are thus not always relevant to the making of decisions. 4.3. Comparative calculations of life cycle costs Comparisons should be made with discounted values, on the basis of costs of capital expenditure and incomey operating costs over the service life of the project. 5. Selection of contract type The description of the requirement can either be a ‘method specification with bill of quantities’ or a ‘performance (functional) specification.’ In the latter, the supplier accepts a higher risk. 6. Special criteria for a tender procedure 1. Details need to be agreed, inter alia, on: ● Quality ● Quantity guarantee
33
● Force majeure, where more precise definitions are required than those given in the regulations ● Construction ground risk 7. Risk analysis with evaluation and assignment To ensure a clear distinction between Contractor risk and Client risk, it is recommended that every bidder in major construction projects should be required to submit a risk analysis, evaluation and allocation together with his bid. This requires the bidder to explain all foreseeable cases of risk which can occur with the type of construction execution chosen by him, and to explain in detail how he intends to deal with such a risk. Bidders are required to quote for the safety measures needed to prevent damage, and measures needed to correct risks with the necessary scope of service and a price linked to the quality guarantee. All risks not specified in the construction contract but quoted by the bidder are risks to be borne by the Client; i.e., if necessary the Client will have to place orders for additional work later at prices which are already fixed. Any risks which were not specified by the bidder but which are foreseeable are risks to be borne by the Contractor. This kind of transparent presentation of risks under competitive conditions should be chosen in order to avoid subsequent disputes and the possibility of overpriced subsequent quotations. 1. Typical risks which need to be considered are: ● Flood ● Security measures ● Trials of partial elements of the construction methods to be used ● Measurement programmes ● Structural load assumptions ● Suitability tests ● Specifications of large-scale equipment to be used ● Manual for construction execution ● Quality assurance ● Measures for environmental protection ● Proof of measures to protect adjacent structures ● Construction schedule and financing plans (cash flow) 8. Award of contract 1. The award of contract should involve: ● Objective, demonstrable, transparent, traceable actions ● Repetition of risk consequence assessment ● Alternative operating cost assessment ● Construction contract formulation and specification of responsibilities
Risk Budget management in progressing underground works International Society for Trenchless Technology (ISTT) and International Tunnelling Association (ITA) Joint Working Group Report夞 Gerard Arendsb,c,e, Rolf Bieleckic,d,1, John Castlec, Stanislav Drabekc, Alfred Haackc,d,e,f, Frantisek Nedbalc, Annica Nordmarka,e, Ray Sterlingc,e,g a
BK Swedish Rock Construction Committee, Box 1721, S-111 87, Stockholm, Sweden b Delft University of Technology, P.O. Box 5, 2600 AA Delft, The Netherlands c International Society for Trenchless Technology, 15, Belgrave Square, London, SW1X 8PS, UK d Germany Society for Trenchless Technology, St. Petersburger Str. 1, D-20355, Hamburg, Germany e International Tunnelling Association, ITA-AITES - cyo EPFL - Bat GC, CH 1015, Lausanne, Switzerland f ¨ ¨ Germany STUVA e.V., Mathias-Bruggen-Str. 41, D50827, Koln, g Trenchless Technology Center, Louisiana Tech University, P.O. Box 10348, Ruston, LA, USA Received 1 April 2003; received in revised form 16 August 2003; accepted 16 August 2003
Abstract There is a mass of detailed data concerning technical risk assessment methods and practices for underground work. But there is very little advice or guidance on the broad apportionment of the total risk between the various phases of an underground project or general advice on how risk might be managed. The Working Group has produced a generic Risk Budget covering five typical phases of an underground works project, which illustrates the heavy bias of risk towards the early phases. Using a practical example the report illustrates how project risk can be managed in a structured manner. 䊚 2003 Elsevier Ltd. All rights reserved. Keywords: Underground; Risk Budget; Planning
夞 Disclaimer: The International Society for Trenchless Technology (ISTT) and the International Tunnelling Association (ITA) publish this report to, in accordance with their statutes, facilitate the exchange of information, in order: (1) to encourage planning of the subsurface for the benefit of the public, environment and sustainable development; (2) to promote advances in planning, design, construction, maintenance and safety of tunnels and underground space, by bringing together information thereon and by studying questions related thereto. However, the ISTT and the ITA accept no responsibility or liability whatsoever with regard to the material published in this report. This material is: (1) information of a general nature only which is not intended to address the specific circumstances of any particular individual or entity; (2) not necessarily comprehensive, complete, accurate or up to date; (3) sometimes collected from external sources over which ISTTyITA services have no control and for which ISTTyITA assume no responsibility; (4) may not be ISTTyITA position; (5) not professional or legal advice (if you need specific advice, you should always consult a suitably qualified professional). 1 Chairman.
0886-7798/04/$ - see front matter 䊚 2003 Elsevier Ltd. All rights reserved. doi: 10.1016/j.tust.2003.08.002
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
30
1. Introduction Construction activities, in particular civil engineering works, require a lengthy planning phase linked with extensive public co-ordination. In order to minimise the time required and the risk of failure, it is essential to have specifically identified points during the planning process at which decisions have to be checked by independent experts. This means exposing the risks involved in planning and executing construction activities, and having a concept to minimise them—only then can works reasonably be expected to be completed both on schedule and at an economical, acceptable, price. 2. Minimising risk 2.
Measures needed to define the project goal. 2.1. Formulation of technical and operational requirements for the structure to be builtyrehabilitated, taking into account any environmental compensation and substitution measures. 2.2. Definition of the environment-specific parameters. For example: ● Areayspace specifications ● Location in inneryouter urban area ● Protection classification (e.g. environmentalyarchitectural constraints). ● Use of space ● State of site (existing use of the location) ● Neighbouring buildings and properties ● Flora and fauna on-site or in the vicinity ● Type and use of transport routes ● Specification of topographical, geological, hydrological and climatic conditions at the location 2.3. Recording of on-site conditions ● Inventory of the state of existing above and under ground structures: Geotechnical investigation is carried out by probe drilling, investigation pits, etc. These may also be combined with State-of-the-art methods of engineering geophysics (e.g. electromagnetic, radar and seismic surveys) although they very often are not reliable because of the tremendous problems of interpretation. 2.4. Analysis of potential damage causes and rehabilitation options (e.g. for tunnelling: overburden, operating techniques, displacementy distortion, temperature differences, corrosiony recording of point damage, multiple point damage, line damage) 2.5. Recording of local regulations. This includes compliance with police requirements
2.6. Licensing procedures, fire protection requirements (e.g. fire brigade access, fume extraction). The construction specification is to be established taking into account all the above conditions, with selection of the specific building methods in accordance with process engineering, environmental, legal and economic criteria. 2.2. The project then needs to be assessed, typically: 2.2.1. Fundamental project assessment ● Economic potential ● Environmental quality ● Regional impact ● Social well-being ● Sustainability 2.2.2. Ecological project assessment ● Environmental Impact Assessment 2.2.3. Regional and social aspect assessment 2.2.4. Economic potential assessment ● Absoluteyrelative cost-effectiveness ● Cost comparison calculations ● Cost-benefit analysis 2.2.5. Residual risks and consequences assessment The requirements for such assessments have to be: ● Objective, demonstrable, transparent (open) and traceable. 3. Risk Budget This diagram shows the allocation of risk to five typical phases of a project. Almost every underground project has these project phases and the diagram shows how risk can be controlled and reduced, by having reviews by independent project auditors working equally for the client and contractor (Fig. 1). 4. Cost comparison of open cut vs. trenchless technology or tunnelling 4.1. Direct costs Direct costs are defined as costs incurred directly for execution of the construction work, giving rise to the payment requirement from the client for the execution of the project. Such costs are largely determined by the construction costs and therefore dependent mainly on the tasks specified, the construction technique used and the relevant local conditions. The following are examples of direct costs: ● Costs of engineering work for planning, tender procedure, award of contract, construction supervision and project management ● Costs of any approvals required
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
31
32
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
Fig. 1. Risk Budget management.
G. Arends et al. / Tunnelling and Underground Space Technology 19 (2004) 29–33
● Costs of surveying work and documentation ● Costs of recording the status of structures and trees, plants, etc ● Costs of development testing of individual components of the construction techniques to be used ● Costs of the construction work itself, including setting up, securing and clearing the site ● Costs of compensation payments to third parties ● Costs of environmental compensation and substitution measures ● Costs of any special measures such as toxic waste disposal, processing of groundwater for groundwater level lowering, etc ● Financing and insurance costs 4.2. Indirect costs Indirect costs are not always definable nor expressible in financial terms. They are incurred by those affected by the project and not usually the client. The following are examples of indirect costs: ● Costs due to changes in above ground conditions (often not foreseeable) ● Costs due to impairment of traffic flow ● Costs due to damage to plants ● Costs due to impairment of retail trade Other types of indirect costs have also been identified, such as costs resulting from noise, exhaust gas or dust emissions, productivity losses or vibrations. However, they are generally hard to quantify. Examination of such factors in pipeline construction suggests that these cost elements will only be minor in specific cases, and are thus not always relevant to the making of decisions. 4.3. Comparative calculations of life cycle costs Comparisons should be made with discounted values, on the basis of costs of capital expenditure and incomey operating costs over the service life of the project. 5. Selection of contract type The description of the requirement can either be a ‘method specification with bill of quantities’ or a ‘performance (functional) specification.’ In the latter, the supplier accepts a higher risk. 6. Special criteria for a tender procedure 1. Details need to be agreed, inter alia, on: ● Quality ● Quantity guarantee
33
● Force majeure, where more precise definitions are required than those given in the regulations ● Construction ground risk 7. Risk analysis with evaluation and assignment To ensure a clear distinction between Contractor risk and Client risk, it is recommended that every bidder in major construction projects should be required to submit a risk analysis, evaluation and allocation together with his bid. This requires the bidder to explain all foreseeable cases of risk which can occur with the type of construction execution chosen by him, and to explain in detail how he intends to deal with such a risk. Bidders are required to quote for the safety measures needed to prevent damage, and measures needed to correct risks with the necessary scope of service and a price linked to the quality guarantee. All risks not specified in the construction contract but quoted by the bidder are risks to be borne by the Client; i.e., if necessary the Client will have to place orders for additional work later at prices which are already fixed. Any risks which were not specified by the bidder but which are foreseeable are risks to be borne by the Contractor. This kind of transparent presentation of risks under competitive conditions should be chosen in order to avoid subsequent disputes and the possibility of overpriced subsequent quotations. 1. Typical risks which need to be considered are: ● Flood ● Security measures ● Trials of partial elements of the construction methods to be used ● Measurement programmes ● Structural load assumptions ● Suitability tests ● Specifications of large-scale equipment to be used ● Manual for construction execution ● Quality assurance ● Measures for environmental protection ● Proof of measures to protect adjacent structures ● Construction schedule and financing plans (cash flow) 8. Award of contract 1. The award of contract should involve: ● Objective, demonstrable, transparent, traceable actions ● Repetition of risk consequence assessment ● Alternative operating cost assessment ● Construction contract formulation and specification of responsibilities