MBA643 Risk analysis and mitigation project

Table of Contents
1. Part A: North East Link Melbourne Project Overview ........................................................... 3
1.1 Overall Projected Budget .......................................................................................................... 3
1.2 Economic and Social Rationale ................................................................................................ 3
1.3 Key Statistics .............................................................................................................................. 3
1.4 Funding Mechanism................................................................................................................... 5
1.5 Major Stakeholders .................................................................................................................... 6
2. Part B: Risk Analysis ............................................................................................................... 7
2.1 Qualitative and Quantitative Risk Analysis ............................................................................ 7
2.2 Development of Risk Matrix .................................................................................................... 8
3. Part C: Mitigation Plan .......................................................................................................... 10
3.1 Risk Assessment ....................................................................................................................... 10
3.2 Formulation of Risk Management Strategy and Critique Plan to Overcome Risks ........ 12
References ..................................................................................................................................... 14
 1. Part A: North East Link Melbourne Project Overview

1.1 Overall Projected Budget

The overall budget estimation considered a various important aspect of the construction of North

East Link Melbourne Project (NELM) and it is estimated at $16.5 billion.

1.2 Economic and Social Rationale

The project has associated with some benefits and drawbacks. The benefits include improved

access, speed, and reliability to private road users, reliable and fasters to public transport users,

less congestions for pedestrians and cyclists, improved access to jobs, increased opportunities to

businesses to access the supplier, customers, and their businesses, congestion relief to road freight

operators, improved economic activities to the Victorians, better, healthier, and safer environment

to the communities, and improved abilities of government in implementation of new policies

(North East Link Project, 2018). The drawbacks of the project include disruption to road, unwanted

dust emission from the construction processes, limited access to the facilities and properties,

increased vibration and noise levels, problems in acquiring land, and disturbance to water access.

These are managed easily developing suitable strategies.

1.3 Key Statistics

Size and scope of the project

NELM is the largest road infrastructure development project in Australia. The size and scope of

the project includes the upgrading of M80 ring road, construction of busways between the central

city and Doncaster city, construction of the road between the Eastern Freeway and Greensborough

in the distance of 11 km, enhancement of transitions into the North of Koonung Creek structure,

upgrading the interchanges between the Grimshaw Street, M80 ring road, Manningham road,
Bulleen road, and lower plenty road. Upgrade and expansion of the road Eastern railway in Bulleen

and Donvale and traffic free road for buses are included in the project scope.

Estimated cost and budget

Cost of the project is estimated at capital cost Real P50 $11.9 billion, Real P90 $12.7 billion, and

nominal P90 $15.8 billion.

S. No Activities Projected Budget

1 Preliminary investigation on site 15 million

2 Engineering works 20 million

3 Environmental and geotechnical 15 million

studies

4 Developing a business case 10 million

5 Primary designs 12 million

7 Construction of road 28 million

Table 1: Budget Projected

Timeline for completing the project: The time duration estimated for the project is 10 years.

This project started in 2017 and complete in 2027 completing the major stages such as planning,

procurement, and construction and delivery. Planning, initiation, investigation, and business case

are already completed in the 2018 year. In early 2019, the procurement phase will be started. Later,

remaining phases are completed.

Phases of the construction of road: The phases involved in the road construction include

initiation, conducting an investigation, business case, assessment of environmental impact and

approvals, procurement, and construction. The key construction activities include bridge segments,
upgrading the eastern freeway, Doncaster Busway, construction of M80 ring road to connect the

southern and northern suburban regions, and road for cycling and walking to be completed to

ensure entire completion of the project (North East Link Project, 2019).

Benefits of the project: The NELM project offers social, economic, business, and environmental

benefits. Those include

 Improved productivity of businesses through adding economic value through $250 million,

access to 62000 workers, attracting 5500 jobs, and worth of business clustering $590 million.

 Improved growth of the economy through a rise in Gross State product, 10000 jobs in

construction work, regional development, and creation of extra jobs in Victoria state

 Increased competitiveness of the supply chain by enhancing the connectivity with freight,

improved relationships between the suppliers and product manufacturers, increased freight

between south and northeast, and reduction in the operating and maintenance expenses of

vehicles

 Enhanced connectivity to the households, increased living and job opportunities to Melbourne

citizens, and access to education.

 Reduced environmental pollution, cycling, and walking chances, and increased convenience

and safety.

1.4 Funding Mechanism

Different type of funding opportunities is available to provide liquidity support to the NELM

project. Those include property leases and sales, property development rights, levies on

infrastructure development, the contribution from business owners, road tolls, and leasing for

telecommunication and advertising services.

 Property lease or sales in an effective mechanism to sell or lease land to commercial or

residential purposes generate funds to the project charging amount for land purchase.

 Utilizing the property development rights effectively to give rights to third parties on extra

available land to develop the project (NorthEast Link Project , 2018).

 Developing the infrastructure contribution plan as a part of the corridor strategy is required to

generate the funds from levies on the communities.

 Charging the road users imposing the toll tax benefit the project for easing of traffic on the

road and reducing the traveling time.

 Large entities and businesses will fund the project to utilize the accessibility improvements

facilitated through the NELM project. Shopping centers, flower market businesses, and

vegetable and fruit market will provide funds to access the customers.

 VicRoads throughout the Melbourne generates funds from the project by giving leasing rights

to telecommunication and advertising for government and transport sector. It requires

permission on the state level.

1.5 Major Stakeholders

The major stakeholders groups of the NELM project are the Victorian government, local

government, and Federal government, landowners, private road operators, road users, transport

regulatory body, market, freight industry, facilities owners in community, media, regional and

local business owners, and environment protecting groups (Victoria State Government , 2018).

Along with these, other stakeholders have an interest in the NELM project are the regional

Victorians have an interest in the enhancement of the transport facilities, city planners focus

towards the development of Melbourne city, people live surroundings of the area project

constructing, travel, and own lands, and people focus on regular freight and transport services.
 2. Part B: Risk Analysis

2.1 Qualitative and Quantitative Risk Analysis

Qualitative and quantitative risk analysis is important to know the potential risks of the project to

determine their impact on the success of the project. Quantitative measures including the schedule,

quality, and cost are helpful in performing the qualitative risk analysis. Cost risks and schedule

risks and their potential impact on the project related to the confidence interval. Qualitative

measures including the probability and occurrence of the risks are utilized in quantitative risks

analysis (Tucker, 2014). The risks are explained in term of the impact low, high, medium, very

low, and very high. The impact of these risks will be on the community and environmental areas

and the size of the cost.

The potential risks for the project NELM are identified based on the risk profile

 The project requires important tunneling equipment in the construction processes. This will

have a serious impact on the project in terms of construction and geotechnical issues.

 Complexity and size of the project will create additional risks to the project in terms of the

changes in the project scope and project cost with changes in project design. This leads to the

risk of scope creep (Rossi, 2007)

 This project requires high capital cost with the use of tunneling equipment in road construction.

The size and magnitude of the risks related to construction are increased. It further introduces

the risks in the aspects of financing and market capacity.

 There will be an unexpected change in the operating and maintenance costs with the changes

in the traffic levels on the road estimated in the investigation process. When traffic levels are

increased to a higher level than expected, costs are also changed. After completion of the

project, if traffic levels are lowered, decreased revenues will be generated from the toll taxes.
 Greenfield development and brownfield elevate the additional risks such as the development

of risks and obtaining permission from the environmental board within the limitations of time.

This further impact on the project in terms of stakeholder resistance and viewpoints of the

community (Pepper Hamilton LLP, 2011). The results in the completion of the project with

the delayed schedule.

 The risk is also presented with interface and traffic presented between the roads and North East

Link in changing the Victoria state interest in the project

2.2 Development of Risk Matrix

The developed risk assessment matrix for the potential risks of NELM project is identified as

shown in the table.

S. No Potential risks Likelihood of Consequences Financial measures

occurrence
1 Geotechnical and High It results in the use of Increased
construction risks low cost and low- investments to the
quality equipment project and
during the anticipated 15%
construction. It increase in the
decreases the budget
efficiency of workers
and yields the low-
quality outcomes
2 Size and project Very High It needs to do a It increases up to
complexity redesign of the 40% of the
project to address the anticipated budget
complexities and due to the redesign of
requires the extra the project and
stakeholder
 budget, time, and satisfaction is
resources. reduced and the
present worth of the
project will be
decreased
3 Increase in the Moderate Financing 7% rise in the project
capital cost capabilities are cost to purchase the
lowered to invest in equipment, return on
other activities than investment and
procurement of the Internal rate of return
tunneling equipment will be decreased.
and time needs to be
spent on the finding
of other equipment.
4 Schedule risks Low These will lead to It delays the
incomplete benefits breakeven time of
to the community the project to start
and delayed project earning profits and
time incurs the extra contractors and
utilization of funders have to wait
resources, increasing a long time.
the budget, and
increased traffic
disruption and
pollution
5 The interest of Very high If the Victoria state It creates loss to the
Victoria state in the government interest government in terms
project is decreased in the of tax revenue up to
project, it is hard to 25% and the damage
get the required occurs to the
support to complete
 the project due to reputation of the
negative government.
environmental
impacts
6 Increase in This leads to an 10% rise in the
Maintenance and Moderate overall increase in operating and
operating expenses the project budget maintenance
due to not expenses
controlling traffic.
Approval is required
from the government
for increased costs
and acceptance is
required from the
funders to get
required support.
Table 2: Risk Matrix (Infrastructure Australia, 2018)

3. Part C: Mitigation Plan

3.1 Risk Assessment

Among the identified six project risks, some of the risks to be addressed definitely and addressing

some risks are not required.

Risks should be addressed

The interest of the Victoria state government: This risk should be addressed first to determine

whether the government is fully interested without any political forces since the government is key

to the project. It requires to address engaging with the state government to identify the key factors

which will influence their interest in the project and identification of political conditions is also
important. If the government took the decision to drop from the project in the middle of the

projects, it will have serious impacts in various aspects. Those include waste of funds, loss of

efforts of resources, damage to the government reputation, and negative opinion among the

citizens.

Project size and complexities: These risks need to be addressed by analyzing their potential impact

on project success. Second preference is given to this project to know the expected complexities

and changes in the project size. These should be addressed conducting the initial investigation and

development of the business case development. It identifies the possible failures in terms of

commercial and technical success (Gido, et al., 2017). Consulting the experts handle the

government road construction projects will be helpful in estimating accurately the project size

utilizing the quantifying approaches and anticipating the future complexities and uncertainties with

the project.

Capital costs: This risk has moderate priority to address it. Preliminary market testing and analysis

should be conducted on the project to analyze the risks in a deep manner. Preliminary scope

analysis needs to be performed to determine the alternative actions to address the changes in the

capital costs and changes in the project scope. Market testing helps to know the tunneling

components available at low costs and to know the details of vendors. With this, the selection of

right vendors is possible to the contractors to avoid the increase of project cost. It supports the

procurement to purchase the items included in the project scope.

Geotechnical and construction risks: These are the last prioritized risks which have less impact on

the project success. These risks are due to the use of tunneling equipment in construction activities

and consuming the high electricity and release of greenhouse gas emissions into the natural

environment. The project team has to develop a clear plan to address the unexpected changes in
the geological conditions to avoid delay in construction activities and managing the construction

materials effectively.

Risks need to be addressed

Schedule risks: No need for addressing and worrying more about the schedule creep since it is a

common thing in construction-related projects. The schedule requires to plan effectively utilizing

the project management tools and collecting the expert suggestions.

Operating and maintenance risks: These have serious impact on the operations in terms of increase

in delay with increased traffic. Additional routes should be identified to shift the traffic to minimize

operational and maintenance expenses.

3.2 Formulation of Risk Management Strategy and Critique Plan to Overcome Risks

Development of risk management strategy and critique plan is required to mitigate the potential

risks identified. These strategies need to be focused on the improvement of cost-effectiveness and

commercial considerations. These include the various plans to mitigate the risks such as Building

Information Modeling (BIM), insurance programs, reviewing construction contracts, and

development of Public-Private Partnerships (PPP).

Business Information Modeling: BIM helps to the mitigation of the project risks. It has been

utilizing in many firms in construction projects to manage the risks. It motivates the team of the

project to focus on the extensive and detailed design process for roads and tunnels. It minimizes

the chance to the occurrence of conflicts, avoids expenses associated with delay, and provides the

solutions to resolve the job site problems (Pepper Hamilton LLP, 2011). BIM approach has

abilities to support the integrated teams to work efficiently.

Insurance programs: Insurance programs are helpful to the project in mitigating the risk impact

on the project. It is one of the primary strategy used in risk mitigation to transfer the risks. It gives

the responsibility to third persons to focus on the financial loss occurred to the project. Obtaining

insurance is required to minimize loss. It is required to focus on the finding of construction

requirements, risks presented with each aspect of the construction project, and concentrating on

the project disciplines to manage the projected loss.

Review of contracts: Project Attorney has to integrate special interest on the contracts before

signing on the contract to ensure that the project is continued properly on time. Proper payment

provisions should be followed to meet the project requirements. The attorney should be established

to manage the contracts properly (Rastogi & Trivedi, 2016). Accurate information and errors need

to be reviewed carefully to avoid the issues.

Public-private partnerships

PPPs are helpful in addressing the problems of funds shortage in facilitating the infrastructure. It

helps to the mitigation of project risks and responsible for providing the required support to

maintenance and operational costs. It supports the asset life cycle approach instead of the only

project oriented to avoid the performance problems to construction.

References
Gido, J., Clements, J. & Baker, R., 2017. Successful Project Management. 7th ed. USA: Cengage
Learning.
Infrastructure Australia, 2018. Project Evaluation Summary North East Link, Melbourne:
Infrastructure Australia.
North East Link Project, 2018. Business Case Executive Summary, Melbourne: Victoria
Government.
North East Link Project, 2019. About the Project. [Online]
Available at: https://northeastlink.vic.gov.au/about/project
[Accessed 21 April 2019].
NorthEast Link Project , 2018. Value Creation and Capture Plan , Melbourne: NorthEast Link
Project .
Pepper Hamilton LLP, 2011. Mitigation of Risks in Construction: Strategies for Reducing Risk
and Maximizing Profitability, New York: McGraw-Hill Construction.
Rastogi, N. & Trivedi, M. K., 2016. Risk Mitigation In Construction Contracts. International
Research Journal of Engineering and Technology, 03(02), pp. 929-935.
Rossi, P., 2007. How to link the qualitative and the quantitative risk assessment. [Online]
Available at: https://www.pmi.org/learning/library/link-qualitative-quantitative-risk-assessment-
7375
[Accessed 20 April 2019].
Tucker, E., 2014. Business Continuity from Preparedness to Recovery: A Standards-Based
Approach. USA: Butterworth-Heinemann.
Victoria State Government , 2018. Stakeholder and Communications Engagement Plan ,
Melbourne: Victoria State Government .