Project Due Diligence Gaye Francis and Richard Robinson Directors R2A Due Diligence Engineers 1
Plan 1. Due Diligence vs Risk Management - exclusive reliance on RM Standard fatal 2. The Project Due Diligence Process 3. Case study: Class E Tram Procurement 4. Thanks to the PTV, John Barry, Nelson Jaiquiry and Alan Braithwaite. 2
Risk Paradigms Safety Business Project 3
Project Risk With project risk, upside risk is assumed in the proposal. The risk analysis generally focuses on those issues which will prevent the assumed upside benefits from being achieved. That is, it is a downside risk assessment process from an assumed upside risk position. 4
Risk Management vs Due Diligence Likelihood Project Risk Management Project Due Diligence Long tail event (low likelihood, high severity) XXX XX X - Value addeds Potential Likely Promised 'show downside project stoppers' 'risks' upside risk 5 Consequence position
Silos 6
Project Due Diligence Project critical success factors (Stakeholder requirements and expectations) Contract Commissioning award Concept / Design and Tendering / Construction / Demolition & Operations & Maintenance scoping engineering procurement delivery disposal Vulnerabilities Credible threats Project Due Diligence Functional (time sequence) and zonal vulnerability assessments Military intelligence approach - threats to agreed critical success factors give rise to vulnerabilities 7
1.0 Project critical success 2.0 Credible threats factors 3.0 Credible vulnerabilities 4.0 Criticality review 5.1 Risk assessment 5.0 Precautions / protection / controls 5.2 Risk profile 5.1 Residual risk profile 6.0 Action list 5.2 Contingency sums 8
Example - gas plant Preliminary dependence diagram 9
Vulnerability table 10
Scoring xxx Potential project show stopper. Project not viable until addressed. xx Moderate potential vulnerability that needs to be specifically addressed by tenderers. x Minor potential vulnerability. To be addressed by successful contactor project manager. - No detectable change. v/a Possible value adding. 11
Show stoppers 12
Representative Projects Eastlink Marina Coastal Expressway (Singapore) Tugan Bypass (Queensland) Interim Rolling Stock Procurement (X’Traps) Class ‘E’ Trams Procurement South Morang Rail Extension 13
Functional Vulnerability Assessment 14
Register Critical success factor(s) Vulnerability Item Threat Criticality Proposed Controls / Treatment Plans impacted / mechanism 1 Vehicle Enhanced service capability / xxx 1. Tram wheelchair lift trials conducted specification flexibility, 2. Review of tram axle load and vehicle issues Maintainable asset over design kinematic envelop life at target cost, 3. Franchisee submitted functional / Operationally safe, operational requirements Compliant with Government 4. RTBU consultation re: new vehicles Policies, 5. Franchisee consultation, review, feedback Project reputation, and acceptance First tram operational on time, 6. Facilitated discussions with industrial First 5 trams operational on parties time, 7. Social Transit Unit and PTAC consultation First 5 trams proven to be and acceptance maintainable and reliable on 8. Consultation with PTSV time, 9. Consultation with Myki and AVL project Sixth tram operational on time, teams Reliable fleet maintained during 10. Functional specification developed rollout and internally Project delivered within budget 11. Internal critique / peer review 12. Review of potential supplier proposals 13. Technical consultation with short listed suppliers 15
Criticality, not risk All senior decision makers assess decisions about future uncertainty initially at least, using criticality, not risk. NB: The minimisation of personal and electoral liability is logically prior to shareholder profits and taxpayer funds. 16
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