In the late 1990s significant underestimation of cost and schedule for major infrastructure projects became a signature issue. Numerous projects including London’s Jubilee Line, the Channel Tunnel and Boston’s Central Artery/Tunnel Project experienced very large cost and schedule overruns that were highly visible and broadly criticized. Studies of individual projects and histories showed that overly optimistic estimating was not a new problem and identified several fundamental issues that needed to be corrected. A central theme of the more successful of these new methods was the explicit consideration of uncertainty (risk and opportunity) in the estimating process. An early leader in developing risk-based approaches to cost and schedule estimating in the US was the Washington State Department of Transportation (WSDOT) which, in 2002, developed its Cost Estimate Validation Process (CEVP?). CEVP was registered by WSDOT to recognize the Agency as the developer of this specific process and to require that use of CEVP would adhere to WSDOT Guidelines (www.wsdot .wa.gov/Projects/ProjectMgmt/RiskAssessment). Key principles of CEVP have now been broadly incorporated in policies, procedures and requirements of other Agencies. WSDOT uses the CEVP approach not only to provide a best estimate of cost and schedule but also as the basis for an improved project management process. The CEVP project management process integrates risk management, value engineering and other techniques with policy directives such as managing to budget. The integrated process uses the quantitative, probabilistic understanding of a potential project outcome that CEVP provides to guide subsequent project management decisions. Appropriate changes in the project plan can then be implemented to assure that final project delivery is consistent with expectations. This paper presents a comprehensive analysis of case studies from WSDOT transportation projects during the past 8 years where a risk-based evaluation of the original cost and schedule estimates was used as the basis for developing and managing the project. The case studies document a significant improvement in the ability to estimate and manage projects when risk-based methods are used effectively. Cost overruns on major transportation infrastructure projects are not inevitable. The CEVP project management process has been successful because WSDOT, and the State of Washington, have set a clear priority on delivering transportation projects within the authorized budget. In many projects this priority has required that the targeted schedule or scope of the project must change and, for most projects, the scope and/or schedule has changed during preliminary and final design. A key tool in this process has been CEVP with its focus on a highly structured process that identifies and manages the uncertainties-risks and opportunities-that can, and will, impact eventual project completion.
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