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(RISK-2054) Risk-Based Estimate and Risk Treatment Planning

Primary Author: Dr. Ovidiu Cretu PE
Co-Author(s): Mr. Vlad Cretu

Audience Focus: Intermediate
Application Type: Application
Venue: 2015 AACE International Annual Meeting, Las Vegas, NV, USA

Abstract: The authors advocate for Risk Based Estimate (RBE) that goes beyond simple assessing a project's risks by adding to the estimating process the "Risk Treatment Planning" that traditionally is a phase of the project risk management cycle. An analogy is made to the recent findings on how human’s mind works: System 1 (effortless, automatic) and System 2 (strenuous, second view). It presents the main activities of the “risk treatment planning” when it acts as an extension of the RBE. Next it presents the case study of the largest single bore tunnel in the world that demonstrates the benefit of adopting of an enhanced RBE in the project management process. For the case study the paper presents how a contractor may approach the risks: (1) risk averse or (2) risk taker. The authors conclude that adopting risk treatment planning into the RBE may improve the project’s performance by reducing the project uncertainties.