Summary

This case study describes a simple, straightforward analysis of uncertainty in the proposed schedules for a port expansion submitted by bidders tendering for the work. It goes on to explain how the quantitative analysis contributed to the bid evaluation process.

Background

The port expansion program

This case study relates to work Broadleaf conducted for a port operator. The port primarily serves exporters of bulk commodities. The operator was engaged in a program of significant expansion projects. These involved dredging new shipping channels, with the dredged material to be used to reclaim land for other projects, which included the construction of wharves, loading facilities and other infrastructure.

The operator had undertaken a series of risk assessments, both qualitative and quantitative, since the inception of the program. It wished to ensure it had an up-to-date view of the main uncertainties associated with the program and the uncertainty in the overall schedule, as a core input to its decision-making and program management processes.

The reclamation preparation project

As part of a larger program of work, our client wished to create a bunded area into which dredged material could be deposited. It would later be consolidated and its surface would be prepared for development and construction. The construction of the bunded area was established as a project within the port development program. The bunded area had to be completed in time to avoid delaying the dredging, for which dates had been agreed with a contractor, subject to penalties for delays.

Prospective bidders had been reduced to a short-list of three. Each had submitted a conforming bid, and they all offered non-conforming options as well. One of the conforming bids had been discarded for technical reasons, leaving five bids for us to examine.

Our task was to examine the schedules proposed by the contractors in the five shortlisted bids. The client needed to understand the uncertainties associated with the bunded area project and how these differed from one bidder to another.

Schedule uncertainty

The proposed schedules

The schedules in this case were very simple. They were modelled using a small set of activities, primarily with finish-to-start links. This is easily represented in Excel so the specialist schedule risk modelling tools we use on larger projects were not required.

Figure 1 shows the subtle differences in the bidders’ approaches. When comparing bidders’ plans, note that activities with the same name are similar in scope, as they relate to work areas specified in the port owner’s site layouts, but the bidders proposed to adopt different ways of working so the contents of the activities are not identical from one bidder to another.

Sources of uncertainty

The bid evaluation team conducted a workshop in which a wide-ranging, structured discussion was used to identify uncertainties in the bids. Not all the uncertainties affected the schedule. The uncertainties that were relevant to the schedule were identified and quantified:

1. Variations in the durations of individual activities, defined in the form of distributions
2. A project-wide weather risk, calculated from data specific to the location and the construction season and identical for all bidders, defined as a distribution of weather-related delays to the construction activity and applied to the project completion date
3. Discrete risks, each defined by a probability of occurrence and a distribution of its effect on particular activities if the risk were to arise
4. Acceleration uncertainty, defined as a distribution of schedule reduction that might be realised if acceleration were to be implemented. The model allowed for the decision to accelerate the final activity to be contingent on progress against the proposed plan.

Figure 2 indicates how these uncertainties applied to the plan for Bidder 1.

The ranges associated with the distribution of factors 1-4 and the probabilities associated with factors 3 and 4 were assessed in a facilitated workshop with personnel from the port operator’s team. These personnel were familiar with risk analyses and modelling from their use elsewhere in the business.

Analysis

Analysis for each bidder

An Excel model was developed for each bid using the logical structures shown in Figure 2 and the values assessed for the ranges and event probabilities.

Figure 3 shows the analysis for Bidder 1’s conforming bid.

• The black line shows the distribution of completion dates, considering only the variations in the durations of individual activities (source 1 in Figure 2 above).
• The blue line incorporates weather-related delays (2 in Figure 2).
• The red line shows the distribution of completion dates with all sources of uncertainty, including discrete risks and acceleration (3 and 4 in Figure 2). This shows earlier completion dates than the blue line because the impact of schedule acceleration (4) is greater than the combined delays associated with the discrete risks (3).

Comparison of bidders’ plans

Figure 4 compares the ranges of completion dates for the bids:

• The triangles show the mean and the 80-percentile range of completion dates (between the P10 and the P90 dates)
• The red crosses show the deterministic completion dates from the plans submitted by the bidders.

The plans submitted by Bidders 1 and 3 aligned with the evaluation team’s expectations of how long the work would take using the plans these two bidders offered, but Bidder 2’s nonconforming plan was clearly an optimistic outlier. Considering the details of Bidder 2’s bid and its project history, the evaluation team assessed that:

• Bidder 2 had underestimated the durations for mobilisation and site establishment, and for haul road construction activities
• Bidder 2’s recent site experience suggested there could be low productivity and labour disputes, with the likelihood of such risks being far higher than for Bidders 1 and 3, and the impacts on the schedule far greater.

This analysis put the evaluation team in a good position to incorporate other, non-schedule related, aspects of the bids into a choice between Bidder 1 and Bidder 3. Working through the analysis helped the evaluation team develop their shared view of the bidders and the project.

Lessons

The analysis outlined in this case study provided useful information for the bid evaluation team.

• For Bidders 1 and 3, it provided confirmation that the submitted plans offered reasonable and realistic schedules.
• For Bidder 2, whose conforming bid had been rejected already, it reinforced the potential problems with the nonconforming bid too.

The analysis provided this information with little cost and effort.

• As is often the case with straightforward projects, a simple schedule risk analysis provided sufficient insight and clarity to make a reliable assessment of the uncertainty associated with each bid.
• Quantification of uncertainty in the workshop setting was relatively straightforward, building on the evaluation team’s familiarity with risk analysis processes that were used widely in the port operator’s business.

The schedule analysis was quick and easy to conduct. It was easy to interpret, so the team was able to use it early in the evaluation. It made a valuable contribution to an integrated bid evaluation process.