Managing Risks in the Project Pipeline Minimizing the Impacts of Highway Funding Uncertainties

1. Managing Risks in the Project PipelineMinimizing the Impacts of Highway Funding Uncertainties Larry Redd, P.E. Tim McDowell, WYDOT, P.E. Larry Redd LLC

2. Uncertainties Can Ruin Your Asset Management Plans • Unplanned Outcomes • Actual Revenue? • Missed deliveries • Holding Costs • Obsolete projects • “Hurry-up” projects • Low performance • Best Laid Plans • Optimized project selection • Intended performance benefits • Assumed revenue by year STIP— ”Project Pipeline” Project Deliveries Project Programming 2017+ 2017 2016 2015 2014 2013 2012 • Pipeline Uncertainties • Scope growth and project cost • Labor and Materials price volatility • Environmental or ROW issues • Unplanned political priorities • Construction cost inflation • Uncertain or variable revenue Larry Redd, P.E. 970-219-4732 larryredd@earthlink.net Larry Redd LLC

3. Non-Optimum Project Pipeline Costs Costs of “Being Too Lean”-- -Loss of Stimulus Funds, Block Grants, Special Legislative Funds -”Hurry-up” design and devel. costs -Non-optimum advanced const. Holding Costs – -“PE 10 yr Limit List” $Millions at risk, and $Billions in projects may not get done -Lost permit costs -ROW and EA costs -Development costs -Obsolete projects -Redesign costs Costs “Optimum” Range Amount of Projects “On-the-Shelf” Ready to Go

4. Objectives • Identify cost elements (holding and hurry-up costs) and uncertainty factors to reduce or trade off or mitigate. • Identify controllable factors to optimize (examples) – • How to operate the pipeline (loading, project mix, draining, etc.) • Cost factors to reduce (holding, hurry up) • Reduce time delays in getting projects onto the shelf • Bottom line – Determine how to deliver intended projects, with expected performance, on time; in the midst of uncertain and/or variable funding • Not “Business as usual…” – Instead, using low impact solutions/methods to manage risks and uncertainties

5. Uncertainty Factors • Scope growth • Political priorities • Material price volatility • Labor costs • Other construction cost escalation • Legal issues • Environmental or regulatory issues • Right-of-way issues • Funding issues

6. Simulation Cartoon

7. Available Funding – WYDOT Scenario

8. Sensitivity of Losses to Key Parameters

9. Observations and Conclusions • Latest results verify that total Project Pipeline losses can be about 3% per year or more (off-nominal cost assumptions). • A 3 percent savings is representative based on the findings of the analysis. This would amount to a total savings of $90 million,for example, for a budget of 3 billion dollars over a 10-year period. • Multiple methods have been shown to be effective in cutting these losses: • Using (accurate) forward projections of available revenue, or reducing design times in the pipeline (especially for 3R4R projects) • Reducing the values of the factors of Hurry Up and Holding Costs • The “Critical Project Method” of stabilizing the flow of major projects has proven effective. Don’t delay the largest and more complex projects.

10. Questions?????