School of Engineering and Applied Sciences

Civil & Infrastructure Engineering & Management (CIEM)

Fall 2020 Assignment - 5

CIEM 438: Value and Risk Management
1/2
Dr. Sahar Shahat
Eng. Mohamed Adel

Question 1:
Assuming these are the identified risks from the previous example, the highlighted risks are to be analyzed
qualitatively.
Technical Risks:
• The right-of-way analysis is in error at Ward Avenue south of Kapi‘olani Boulevard.
• Inaccurate assumptions about technical issues were made in the planning stage.
External Risks:
• Property owners are unwilling to sell land at the intersection.
• Local communities are concerned about traffic flow during construction.
Environmental Risks:
• The area contains a historic site, possibly including native graves.
• The ground is polluted.
Project Management Risks:
• The project scope, schedule, and costs are not clearly described.
• There is pressure to deliver the project on an accelerated schedule.

− For the risk of the right-of-way, This risk was assessed to have a near certain
likelihood and a moderate impact on project completion.

− The risk of historic site, possibly native graves in area was assessed as having a near
certain likelihood and unacceptable consequences for the project.

− The risk of pressure to deliver the project on an accelerated schedule was assessed to
have a likely probability and unacceptable consequences for the project.

Assuming the likelihood of risks are:

Remote, Unlikely, Likely, Very Likely, Near Certain. Which are analogues to 1, 2, 3, 4 and
respectively.
And the consequences of risks are:
Minimal, Minor, Moderate, Major, Unacceptable. Which are analogues to 1, 2, 3, 4 and respectively.

A. Based on the qualitative analysis for mentioned risks , Calculate the score of
each risks and,
B. Construct the risk matrix and allocate the risks therein based on their scores.
C. Rank the risks into three categories (High, Moderate , Low) ; based on your
defined ranges for each one.
 School of Engineering and Applied Sciences
Civil & Infrastructure Engineering & Management (CIEM)
Fall 2020 Assignment – 5
CIEM 438: Value and Risk Management
2/2

Question 2:
Grand Construction Co. is debating placing a bid on a construction project for a new city library in
downtown Honolulu. However, the two partners of the firm have conflicting views on the level of
confidence they should have before placing a bid. The first partner likes to be safe and take a low
level of risk in order to avoid losing money on the final project; the other partner prefers to take
greater risks so that the firm has a better chance of being awarded the contract. The estimated cost of
bidding on the project, regardless of risk, is $9,000. If the risk-averse partner has his way, the firm
has a 20% chance of winning the contract and an 80% chance of losing it; if the risk-tolerant partner
has his way, the firm has a 65% chance of winning the contract and a 35% chance of losing it. If the
contract is awarded under low-risk conditions, the firm will have an 80% probability of earning a
$150,000 profit, a 10% probability of breaking even at $0, and a 10% probability of losing $50,000;
under high-risk conditions, the firm faces a 50% probability of earning a $150,000 profit, a 25%
probability of breaking even at $0, and a 25% probability of losing $50,000.
A. Using the technique of Decision Tree , Explain and Decide what is the financially
smarter for Grand Construction to bid on the contract under low-risk or high-risk
conditions?