Program (interaction) risk
Programs, megaprojects (which are always a program in composition) and the work breakdown of most large projects in general, are made up of sub-projects. For example, a processing facility may be one element, while the supporting utilities and infrastructure are managed as separate elements. Each element may have a project manager, reporting to a program director. Each PM needs their own contingency in order to manage their part. Therefore, ValidRisk is often going to be applied separately for each of these projects; that serves the purpose of the PMs. However, the program is likely to be decided upon and funded as a whole, not by element. The question then is “what is the cost distribution for the program?”
To answer that question, ValidRisk includes a program “Consolidator” tool. After running ValidRisk on the sub-projects, and saving those outputs, one selects projects for which the cost distributions will be input into the Consolidator. The user enters correlation coefficients (the degree that each project is related to the other from a risk perspective) and runs Monte Carlo to obtain a single program cost distribution. If one funds contingency at the mean, the sum of the project mean values will equal the consolidated program mean value.
A type of risk that affects programs, but may not appear in each project’s risk register, is interaction risks. These are risks that result from the projects interacting with each other. A common example is internal competition for resources resulting in diminished productivity and/or higher prices for each of the projects. Using ValidRisk one can do a QRA for the program.
One way to do a program level QRA starts with entering in the ValidRisk parametric tool the worst of the various project’s systemic risk ratings. This assumes a program is only as strong as its weakest link; if one project gets in trouble, it is likely to cross-infect. Next, the project critical risks are copied into the expected value tool, and additional critical interaction risks are added. The output of this program level QRA is used to support a decision as to funding a program level management reserve under the authority of the program director. The ValidRisk tools are flexible enough to support various ways to do program level analyses.
