transportation asset management webinar series webinar 4: asset management and risk management...
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Transportation Asset Management Webinar SeriesWebinar 4: Asset Management and Risk ManagementSponsored by FHWA and AASHTO
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Webinar 4 — May 8, 2013
FHWA-AASHTO Asset Management Webinar Series
• Sharing of knowledge is a critical component of advancing asset management practice
• This is the fourth of a 12-part webinar series that will be held over the next two years
• Webinars will be held every two months with topics such as AM and safety, AM business models, GIS application in AM, etc.
• Welcome ideas for future webinar topics and presentations• Submit questions using the webinar’s Q&A feature• Next webinar: Asset Management and Performance-based
Planning – July 10, 2013 2:00 EST
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AM and Risk Management Overview
• What is risk management in the context of AM?– Broad definition of risk management: encompassing an agency-wide
framework that complements AM and addresses both opportunities and threats
• What progress has been made in recent years in the AM and risk management relationship?– Recent five-part series addressing risk-based TAM, produced by FHWA– Risk management is a key component of the AASHTO TAM Guide– Since the guide, an increasing focus on program and enterprise risk
management (but don’t lose sight of project risk management)
• How is this topic important in the context of MAP-21?– Required risk-based TAMPs have brought new attention to this area
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Webinar Overview
• We’ll hear three distinct takes on asset management and risk management
• Presenters will focus on applying risk-based asset management as part of a DOT’s overall approach to transportation asset management
• Presentations will cover basic principles of risk-based asset management and illustrate different models
• Cases will highlight successful approaches for developing and applying a risk-based asset management strategy
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Webinar Overview
• We’ll hear three distinct takes on asset management and risk management
• Presenters will focus on applying risk-based asset management as part of a DOT’s overall approach to transportation asset management
• Presentations will cover basic principles of risk-based asset management and illustrate different models
• Cases will highlight successful approaches for developing and applying a risk-based asset management strategy
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Learning Objectives
• Building working knowledge of key concepts and definitions in the area of risk-based AM
• Developing an understanding specific models for risk-based AM• Gaining familiarity with successful approaches to linking
components of risk management and asset management• Applying this knowledge to begin to answer the following
questions:– What are the benefits that your DOT can expect from integrating risk
management and asset management?– How does MAP-21 impact your agency’s approach to risk-based AM?
• SHARE LESSONS LEARNED, IDEAS, KNOWLEDGE!!!
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Shobna Varma, Gordon ProctorShobna Varma, Gordon ProctorApplying Risk to the Management of Transportation Assets, A Series of FHWA Reports
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Risk Management Reports
• Reports examine how risk management complements Transportation Asset Management
• They define and illustrate how risk can be applied
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Risk Defined
• Risk is the positive or negative effects of uncertainty or variability upon agency objectives.
• Risk management is the cultures, processes and structures that are directed towards the effective management of potential opportunities and threats.
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Not All Risks Are Negative
• Risk are more than just threats. They include:– Threats– Variability– Change– Uncertainty– Opportunity
• This includes risks to achieving objectives, to customer satisfaction to sustaining infrastructure condition and performance
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Risk Affects Many Areas
• Risk can be anything that may impede an objective or create a new opportunity– Economic risks caused by
prices– Decision risks caused by bad
data, information– External risks such as
climate– New opportunities such as
new technology, materials or processes
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MAP 21: A New Era
• MAP-21 initiates a new era for U.S. transportation agencies focusing on:– Performance Management– Asset Management– Risk Management
• States must develop risk-based, performance-based asset management plans for at least the NHS
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A Complementary Process
• Performance and Asset Management seek to ensure reliable, dependable processes and outcomes
• The opposite of reliability is variability
• Risk management seeks to reduce the variability of desired outcomes
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Reports Illustrate Existing U.S. Examples
• Risk can be managed at:– Information systems– Classes of critical assets– Climatic or seismic threats– Investment decisions– Changing legal or political requirements
• Scalability– U.S. agencies commonly use risk at the
project level– Risk can be scaled to program and
agency level
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3 Levels of Risks
• Agency risks– Risks to agency objectives,
goals,– Organizational wide– Generally external
including• Declining revenues• Lack of political support• Change in leadership• Aging infrastructure
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Program Risks
• Program risks– Bridge, pavement,
maintenance risk
• Data quality, availability
• Poor project selection, preservation strategies
• Inadequate forecasting
• Loss of institutional knowledge through key personnel retirements
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Project Risks • Project risks
– Typically known types of risks including
– Scope, schedule, costs
• Cost overruns
• Schedule delays
• Unknown geotech, environmental or utility issues
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Risks to Networks, Corridors
• Inherently in MAP-21 is a risk-based focus first on the NHS and voluntarily on other networks
• Overriding importance of NHS led to national emphasis upon it if trade offs have to be made
• A corridor or network approach complements MAP-21 freight plan requirements
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Higher Networks, Higher Risk
• NCDOT example of setting higher asset targets for higher-priority networks
• MAP-21 gives us an opportunity to demonstrate the difficult trade offs that DOTs are forced to make
• A risk-based approach to decision making provides opportunity to explain, and educate, decision makers about trade offs being made
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Managing Risks to Policies
• Executives or boards can manage risks to their policies;
• Policy risks are “owned” by executives
• Tend not to lend themselves to formulaic solutions
• “Managing risk” as a verb, an activity owned by the executive
• Not all are threats; Some are opportunities
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Building Resiliency into Assets
• Risk-based asset management assists with key disaster-preparedness strategies– Redundancy as a strategy to
assist with evacuations, recovery
– Robustness as a means to ‘harden’ assets to cope with events
– Resiliency as the ability to plan for, absorb and recover from events
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Planning for the Unpredictable
• Asset management policy ‘owners’ can expect increasing variability from climate– Risk management includes
tools for planning for the unpredictable
– TAM tools increase resiliency • Good asset inventories help
with risk identification and repair after events
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Analogs for Risk-Based TAM
• Caltrans and Washington DOT’s prioritization of bridge assets for seismic retrofit
• Use of asset inventories to predict flood-prone assets
• Ability to model climate variability and its effects on assets
• Rock fall programs as example for risk-based planning
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Conclusion
• As states develop risk-based asset management plans, the state examples could be useful
• Although risk-based asset management sounds new, its principles are common to many agency practices
• Also, risk is the complement to performance management
• It helps manage the unpredictable18
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Integrating Risk into Decision Making at MnDOT
Tim Henkel, Division DirectorModal Planning and Program Delivery
Minnesota Department of Transportation
FHWA Risk Asset Management WebinarMay 8, 2013
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Today’s DiscussionToday’s Discussion
• The Emergence of Enterprise Risk Management at The Emergence of Enterprise Risk Management at MnDOTMnDOT
• Applying Risk Management Analysis in Highway Applying Risk Management Analysis in Highway Investment Planning Investment Planning
• Applying Risk Management Analysis in MnDOT’s first Applying Risk Management Analysis in MnDOT’s first Transportation Asset Management PlanTransportation Asset Management Plan
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• Risk management is Risk management is a systematic approach to setting a systematic approach to setting the best course of action under uncertainty.the best course of action under uncertainty.
• Increasingly, performance-based needs far exceed Increasingly, performance-based needs far exceed projected resources. projected resources.
• Risk assessment is used as a tool to consider tradeoffs Risk assessment is used as a tool to consider tradeoffs among competing objectives.among competing objectives.
Enterprise Risk Management Enterprise Risk Management (2008-present)(2008-present)
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• Early risk management efforts identified pavement as a Early risk management efforts identified pavement as a “high risk”“high risk”
• Used a risk-based process to communicate how a Used a risk-based process to communicate how a programmatic investment can create worthwhile results by programmatic investment can create worthwhile results by managing risksmanaging risks
• Directed $398 million in released project contingency and Directed $398 million in released project contingency and recent bid savings to over 500 miles of roads in poor recent bid savings to over 500 miles of roads in poor conditioncondition
Better Roads for Minnesota Better Roads for Minnesota (2011)(2011)
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• PurposePurpose– Identify and assess unique risk conditions at district level– Evaluate the applicability of the statewide investment direction at
the district level– Identify investment
strategies to manage those risks to a tolerable level
• OutputOutput– District risk profile– Common risks that
inform MnSHIP
District Risk Profiles District Risk Profiles (2010)(2010)
Accept more?
Managemore?
Tradeoffs
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– Charged with developing, promoting, and managing a formal and continuous process to identify, assess, prioritize and manage risk exposures and opportunities across the department
– Chief Risk Officer: Eric Davis
Enterprise Risk Management Office Enterprise Risk Management Office (2012) (2012)
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Strategic-level risks: Impede the achievement of MnDOT’s vision, mission, and key results
Business-Line-level risks: Impede the agency’s ability to deliver products and services, meet established performance targets, and accomplish our business objectives
Project-level risks: Threaten the scope, schedule, cost, or quality of agency projects
Enterprise Risk Management Framework Enterprise Risk Management Framework and Guidance and Guidance (2013)(2013)
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Investment PlansInvestment PlansMultimodal PlanMultimodal Plan
MnDOT’s Family of PlansMnDOT’s Family of Plans
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Using Risk in Scenario PlanningUsing Risk in Scenario Planning
• Asset Management
• Traveler Safety
• Critical Connections
• Regional + Community Improvement Priorities
• Project Support
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FHWA Asset Management Plan FHWA Asset Management Plan Pilot ProjectPilot Project
• Three State DOTs developing their first TAMP as part of the initial pilot – Minnesota, Louisiana, New York
• FHWA Consultant will work with the state DOTs to develop and execute a TAMP Work Plan
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Elements of FHWA Work PlanElements of FHWA Work Plan
1) Asset Inventory and Conditions1) Asset Inventory and Conditions2) Asset Management Objectives and Measures2) Asset Management Objectives and Measures3) Performance Gap Assessment3) Performance Gap Assessment4) Lifecycle Cost Considerations4) Lifecycle Cost Considerations5) 5) Risk Management AnalysisRisk Management Analysis
6) Financial Plan6) Financial Plan7) Investment Strategies7) Investment Strategies8) Asset Management Process Enhancements8) Asset Management Process Enhancements
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For Each of the Asset Type Selected, For Each of the Asset Type Selected, MnDOT Will …MnDOT Will …
1) Establish a Baseline – Document Current 1) Establish a Baseline – Document Current PracticesPractices
2) Establish Levels of Service, Performance 2) Establish Levels of Service, Performance Measures, and TargetsMeasures, and Targets
3) 3) Conduct System Risk Assessments Conduct System Risk Assessments withinwithin the Asset Groupthe Asset Group
4) 4) Conduct Programmatic and System Risk Conduct Programmatic and System Risk Assessments Assessments between between Asset GroupsAsset Groups
5) Develop an Operations and Maintenance Plan 5) Develop an Operations and Maintenance Plan to Minimize Lifecycle Costs to Minimize Lifecycle Costs
FDOT Emergency Management:
Preparedness ResponseRecoveryMitigationAsset Maintenance
Contracting
Review and Update all Emergency Documents Emergency Plans Evacuation Routes Damage Assessment (Assignments and
Routes) Others’ Involvement (RECON, EOC Liaisons,
etc.) Provide Update Training Pre-Event Contracts (Advertise and Award) Coordinate with Locals (Federal Guidelines)
Just Prior to the Event Execute Pre-Event Contracts Prepare Equipment and Personnel Assign/Deploy Volunteers Pre-stage Critical Teams (Damage Assessment, Pre-
Event Contractors, etc.) Safe Up Construction and Other Work Sites Close Bridges (Moveable Bridges for Winds > 39
mph) Accounting Process in Work Program Emergency Declaration Process
During and After the Event Perform Initial Damage Assessment Assign Detailed Damage Assessment Teams Emergency Repair not covered by Pre-Event
Contracting Work with Local Governments for Eligible
Reimbursements Provide Oversight of Damage Repair Sites Complete the Repair Work Prepare and Submit Proper Documentation
ER/PA Process Flowchart
Long-term, performance-based contracting encompassing all (or most) maintenance functions required to serve the public and maintain the roadways within specific roadway corridors or geographical areas
Formerly called Asset Management
Asset Maintenance ContractingRe-Tooling Disaster Response
Asset Maintenance (AM) Contracts formerly included complete responsibility for hurricane response & recovery
Now, all AM Contracts only include limited responsibility
Why?
Overall, AM Contractors perform well in disaster response and cleanup Already mobilized with an abundant amount of
resources Extensive knowledge and experience of the
affected areas Great majority of work was FHWA and/or
FEMA reimbursable Tremendous amount of paperwork,
documentation, and “red tape” involved in getting the Federal money to the Contractor
In some cases, AM Contractor’s did not see Federal money (millions) for over 2 years
8 hurricane landfalls in two years – no one was completely ready for that
No single entity’s fault – everyone was partly to blame - FDOT, Contractor, Feds
Insufficient/Frustrating CommunicationNo consistency in documentation
requirements – no one really knew what any other party wanted or needed
In some cases, AM Contractor’s did not see Federal money (millions) for over 2 years
Major overhaul of AM Scope to exclude Post-Event activities
FDOT has to utilize “Pre-Event” Contracts within AM Contract Areas
Old Language
1. Title - Incident Response2. Response & Deploy time
defined in Scope3. Contractor responsible
for all incidents/events4. Contractor not
responsible for “act of terrorism”
5. Must sumbit reports of incident response
New Language
1. Title - Emergency Management
2. Open Roads Policy Used3. Categorizes into two
classifications4. Clearly defined
responsibilities5. Contraflow Added6. Contractor responsible &
compensated for “act of terrorism”
7. Removed 50% risk cap8. No Federal
Reimbursement
FDOT is currently coordinating with the Feds to allow for either of the following: 1. Modify existing AM Scope to become
Federally approved and eligible for reimbursements or;
2. Utilize AM Contractors to manage and administer FDOT’s Pre-Event Contracts for repair work within the AM Project Limits and Scope of Work.
Presenter’s Contact Information:
Byron UnderwoodEmergency Operations Chief [email protected]
Daniel Strickland, P.E.Maintenance Contracts [email protected]
Questions?
• Submit your questions using the webinar’s Q&A feature
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Next webinar: Asset Management and Performance-based Planning 07/10/13, 2:00 PM EST