Managing Risks for Winnipeg

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Managing Risks forWinnipegsWater Treatment
Program
Presented by Tom R. Pearson, P. Eng, Project
Director
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Agenda

• Background
• Project Profile
• Project Status
• Winnipegs Policy on Risk Management
• Key Issues
• Initial Risk Assessment
• Process
• Outcome
• Ongoing Risk Management
• Management of risks Examples
• Benefits of risk management
• Questions

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Background Councils Decision to Treat

• In 1993 Council
• - Accepted the recommendation to undertake water
  treatment within a ten year time frame
• - And established a Water Treatment Reserve
• Between 1995 and 1999 a comprehensive program of
  monitoring, pilot testing and engineering studies
  was undertaken
• In 2000, Council adopted a recommendation that
  Winnipeg proceed with a water treatment program
• This decision was supported by public
  consultation, public health officials and the
  opinion of an expert panel (low risk high
  consequence)

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Background - Specific Objectives

• Reduce the risk of a waterborne disease outbreak
  caused by chlorine-resistant microorganisms
• Reduce chlorine disinfection by-products
• Meet the Canadian Drinking Water Quality
  Guidelines

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Background - Plant Location
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Background - History
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Profile - Our New Treatment Plant

• Located at the Deacon Reservoir Site.
• Design Life projected to be 2040
• Maximum Finished Water Production 400 ML/d
• Average Finished Water Production 254 ML/d
• Minimum Finished Water Production 100 ML/d
• Total cost now projected at 300 Million

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PROFILE - AERIAL VIEW FROM SOUTH WEST
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Profile - The Water Treatment Process
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Project Status

• Detailed Design is underway, concurrent with
  construction
• Design will wrap up this year
• About 55.3 Million spent
• Overall, we have committed about 192.2 Million
  to date
• The 300 Million budget projection appears to be
  secure

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Risk Management in Winnipeg

• In June, 1999 the City Auditor recommended to
  Council pursuant to a review of the Main Norwood
  Bridge, that We must ensure a corporately
  focused and risk-based approach to managing major
  capital projects.
• Policies and governance concerning risk are the
  responsibility of the Chief Financial Officer
• Administered under the auspices of the Corporate
  Controller
• All large projects (10 Million or more) must
  report each quarter to the Committee on Fiscal
  Issues, outlining project status, emerging risks
  and steps to mitigate
• Reports are reviewed by a Major Capital Committee
  before submittal to the Committee on Fiscal
  Issues
• Risk management is identified as a deliverable in
  project Terms of Reference

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Key Issues

• Environmental Issues
• Organizational Issues
• Market Conditions
• Schedule
• Finances

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Environmental Effects Assessment

• An Environmental Effects Assessment study of the
  effects the water treatment plant identified no
  adverse effects.
• The study was voluntary not required by
  regulators.
• The results were shared with stakeholders and
  Manitoba Conservation.
• Two Public Open Houses were held in Springfield
• All substantive issues were addressed.
• The Environmental Effects Assessment study
  reduced project risk, and improved the quality of
  the project.

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Organizational Issues

• This is a large complex project with four major
  consulting firms working from geographically
  diverse locations
• Coordination/communication through ERoom
• Construction Management and Fast Tracking lead
  to risks and cultural issues for City and
  Consultants
• Hiring and training of certified operators in
  time for commissioning and start-up (2008 by
  Council mandate) will be challenging

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Market Conditions

• Many large new projects will be going to market
  over the scheduled construction period
• A period of high inflation within the
  construction industry is forecast (time money)
• A shortage of qualified contractors and personnel
  is anticipated
• We must make this an attractive project for
  contractors

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Aggressive Schedule

• April 2005 Finish preliminary design and
  environmental effects study
• Spring 2005 Started building the
  water treatment plant
• Fall 2008 Start testing the plant
• End of 2008 Begin operating the plant

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Finances

• The original water treatment program budget was
  214 million to build the WTP and 12.75
  million/yr to operate
• Council has approved an additional 13.3 million
  for risk mitigation initiatives and 2.8 million
  for shops/staff consolidation (Total budget now
  at 230.1 Million)
• The current rate model will provide about 117
  Million in cash financing
• Projected cost is now 300 Million and additional
  borrowing will be required
• Once the plant is up and operating, revenues from
  water sales are sufficient to cover operating and
  debt servicing without extraordinary increases to
  water rates

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Initial Risk Assessment

• Undertaken after preliminary design, before
  starting detailed design
• 2-day workshop format
• Pre-workshop preparation
• survey of participants concerns
• orientation concerning risk assessment
  methodology and terms
• Facilitated by S.M.A. Consulting Ltd.

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Workshop Participants

• 23 in total, in addition to SMA staff
• City 9
• Earth Tech 5
• UMA 5
• EPCOR 3
• TetrEs 1
• Participants were divided into 5 groups that
  considered specific types of risks

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Group Assignments

• 1 Identify potential problems with the design.
• 2 Risk analysis focused on design of treatment
  processes, and mechanical equipment etc.
• 3 Risks analysis focused on operations including
  commissioning, resources, operations, responses
  to disastrous situations, contingency planning
  etc.
• 4 Risks associated with project coordination,
  project management, schedule, staging,
  estimating, cash flow, and external factors.
• 5 Risks associated with constructability,
  underground work, construction logistics,
  staging, tie-ins, and contracting strategies etc.

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Quantifying Risk Factors 4 Steps

• Determination of the likelihood of the factor
  being encountered (e.g. probability, or a
  subjective descriptor)
• Determination of the magnitude of the impact if
  the factor is encountered (e.g. dollar value or a
  subjective descriptor)
• Determination of the overall severity of the
  factor by multiplying the likelihood (1) by
  magnitude (2).
• The factors are then grouped based on the overall
  severity score and risk responses are developed

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Step 1 - Determination of Likelihood
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Step 2 Determination of Magnitude
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Step 3 - Determination of Severity
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Step 4 Develop a Risk Response

• Possible actions include
• Reduce uncertainty by obtaining more information.
  (This may lead to a re-evaluation of the
  likelihood and sometimes the magnitude.)
• Eliminate or avoid the risk factor by partial or
  complete modifications to proposed ideas, a
  different strategy, etc.
• Transfer the risk element to other parties.
• Insure against the occurrence of the factor if
  possible.
• Abort the project if the risk is intolerable and
  no other means can be undertaken to mitigate its
  damages.
• A planned response must be developed for all
  risks.

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Outcome

• 120 risk items were identified by workshop
  participants
• These were synthesized into 44 project issues and
  33 design issues by the Risk Consultant.
• Some of the risks were Serious to Critical

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Ongoing Risk Management

• The risk management plan defines specific tasks
  to be undertaken to mitigate the risk
• Responsibility and timelines for the tasks are
  assigned
• Follow up on the risk factors is undertaken on a
  regular basis until the project is complete.
• Risks are monitored on an ongoing basis by the
  project risk team and reviewed at monthly
  meetings

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Risk -Public Involvement

• The public open house (or action by a resident or
  RM) could result in additional requirements to
  mitigate perceived risks or nuisance or the need
  to file an Environmental Impact Statement. Then
  the project will be impacted.
• Assessment L 10 M 50 S 500
• Recommended Action
• 1- Open House
• 2- Environmental effects assessment
• 3- Continued communication

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Risk Impact of Floodway Operation

• Floodway operation may impact early stages of
  Construction particularly bulk excavation. Impact
  is increased potential of base heave from till
  layer increased pore pressure affecting slope
  stability.
• Assessment L 20 M 15 S 300
• Recommended Action
• 1- Stop excavation at 50 depth
• 2- Install pump wells
• 3- Pile first / excavate after - cost

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Risk Long Duration Power Outage

• If a power outage occurs then the DBPS pumps will
  stop and water supply to the city will be harmed
• Assessment L 10 M 50 S 500
• Recommended Action
• Could add backup power for partial UV and
  chlorination (chlorine - 2M at deacon, backup
  power 3). Come up with boil water strategy and
  potential for delay with regulators.

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Outcome Chlorine

• Risk analysis The probability of an accident
  resulting in a catastrophic release of chlorine
  gas from a rail tank car is very unlikely, but
  the consequences are disastrous and may include
  injury or death to City personnel and the general
  public.
• Recommended that this risk be eliminated or
  reduced. Additional capital funding of 7.3
  million required for on-site sodium hypochlorite
  generation, and operating costs will increase by
  74,000 per year.

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Outcome Power

• Risk analysis The probability of a long duration
  power failure which would cause depletion of
  potable water storage and result in the need to
  supply untreated water is very unlikely, but the
  consequences are severe and include the need to
  boil water to ensure health safety during the
  power outage.
• Recommended that the risk be eliminated.
  Additional capital funding of 6.0 million
  required for increased standby generation
  capacity, and operating costs will increase by
  90,000 per year.

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The Benefits of Risk Management

• Quality
• Credibility
• Cost
• Value

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Questions?