Page 272 - Sustainable On-Site CHP Systems Design, Construction, and Operations

CHAPTER 15

Managing Risks during CHP

Plant Construction

Milton Meckler

isk management is a systematic methodology that can be used to both
establish and quantify risks to which a proposed project may be exposed
Rprior to commencing construction so that conscious decisions are under-
taken on how best to manage foreseeable risks in order to ensure satisfactory
performance of the CHP plant on its completion.
The aim of this chapter is to describe a technique which identifies the practical use of
a probability distribution from which a line item cost prediction can initially be made on
limited information and used by the successful contractor in assessing a particular line
item prediction, and, eventually when all such items have been accessed, in deciding
upon the feasibility of the proposed CHP plant construction project under consideration.
The general risk management methodology options are applicable at any stage of invest-
ment appraisal, development appraisal, or design process of any CHP plant project.
If properly understood and executed, risk management allows one to go well beyond
known insurable construction risks, but may not guarantee identifying all possible risks.
However, rigorous risk management is far superior than to rely on one’s intuition or past
experience recalled from other completed central and related CHP plant construction
projects, particularly when different in scope, interconnectivity, and/or complexity.
A further purpose of this chapter is to outline and acquaint both the experienced
and beginning CHP plant contractors with some available and proven risk manage-
ment options that others have found to be practical and cost-effective provided there is
a willingness to use a disciplined approach to the most critical features of a CHP plant
using one of several available structured risk analysis methods. In the final analysis, the
depth to which you may wish to analyze CHP construction and plant performance risk
is often a matter of one’s common sense, judgment, and circumstance.
Although some risks are controllable, for example, lack of subcontractor coordina-
tion with each other or employees or with lack of timely processing of architect-
engineer (A/E), MEP (mechanical, electrical, plumbing), civil, structural requests for
information (RFI), or shop drawing review, other risks cannot be controlled. In addressing
the uncontrolled risks, one can initiate the risk management process by tabulating the
source of such initial risks, for example, adverse weather and inadequate on-site safety
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