LECTURE 10

CIVE 683 – Reliability-Based Design of Civil

Systems

Decision Making in the

Presence of Uncertainty

Fall 2020 Dr. Shadi Najjar AUB

Decision and Risk Analysis
People are not good at evaluating what they
know and what they do not know.

 Need to have a rational framework for

making decisions in the presence of
uncertainty.
 Case Study – Ok Tedi Mine
 OK TEDI MINE

Location: Papua New Guinea

Copper and Gold Mine
80,000 tons of waste generated
annually
Waste thrown in Ok-Tedi River
Environment and Safety problems
OK TEDI MINE (Papua New Guinea)
Cupper and Gold Mines
 OK TEDI Problem

Crusher Dumping
Mine Waste

If they lose slope,

they lose the crusher Water
400 m high level
Build Fill???

Eorsion River
OK TEDI MINE (Scarp)
OK TEDI River
OK TEDI Crusher
 OK TEDI Problem

Crusher Dumping
Mine Waste

If they lose slope,

they lose the crusher Water
400 m high level
Build Fill???

Eorsion River
 Decision Tree Analysis
Decision Failure Construction Total
Chance
Node Cost Cost Cost
Node

Stable (0.75)
$0 M $0 M $0 M
Status Quo P(q1la1)

(a1) Failure (0.25)

- $10 M $0 M -$10 M
P(q2la1)

Stable (0.9)
$0 M - $1.5 M - $1.5 M
Build Fill P(q1la2)

(a2) Failure (0.1)

- $5 M - $1.5 M - $6.5 M
P(q2la2)

Decision Alternatives Outcomes Consequences

(a ) (q ) u(ai,qi)
 Decision Criterea
Failure Construction Total
Cost Cost Cost

Stable (0.75) $0 M $0 M $0 M
Status Quo
Failure (0.25) - $10 M $0 M -$10 M

Stable (0.9) $0 M - $1.5 M - $1.5 M

Build Fill
Failure (0.1) - $5 M - $1.5 M - $6.5 M

(1) If the decision maker is “pessimistic”:

He/she will assume that failure is going to happen.
He/she will try to Minimize the Maximum Loss that can happen.
Choose alternative “Fill”: -$10 M versus -$6.5 M
 Decision Criterea
Failure Construction Total
Cost Cost Cost

Stable (0.75) $0 M $0 M $0 M
Status Quo
Failure (0.25) - $10 M $0 M -$10 M

Stable (0.9) $0 M - $1.5 M - $1.5 M

Build Fill
Failure (0.1) - $5 M - $1.5 M - $6.5 M

(2) If the decision maker is “optimistic”:

He/she will assume that things will be alright.
He/she will try to Maximize the Maximum Possible Gain.
Choose alternative “Status Quo”: -$0 M versus -$1.5 M
 Decision Criterea
Failure Construction Total
Cost Cost Cost

Stable (0.75) $0 M $0 M $0 M
Status Quo
Failure (0.25) - $10 M $0 M -$10 M

Stable (0.9) $0 M - $1.5 M - $1.5 M

Build Fill
Failure (0.1) - $5 M - $1.5 M - $6.5 M

Neither of these approaches/criterea are practicle in the

long run!
Should consider the “likelihood” associated with “gain”
and “loss”.
 Failure Construction Total
Cost Cost Cost

Stable (0.75) $0 M $0 M $0 M
Status Quo
Failure (0.25) - $10 M $0 M -$10 M

Stable (0.9) $0 M - $1.5 M - $1.5 M

Build Fill
Failure (0.1) - $5 M - $1.5 M - $6.5 M

(3) Rational solution – Maximize the Expected Gain

Prob. of Cost

0.75 0.9
E(Cstatus Quo)=(0)(0.75)+(-10)(0.25) = -2.5 M

0.25 0.1 E(Cbuild fill)=(-1.5)(0.9)+(-6.5)(0.1) = -2.0 M

0 -10 (C) -1.5 -6.5 (C)

(a1) Status Quo (a2) Build Fill Build Fill
 Decision Trees
A Decision tree can be more detailed: Failure
Cost
Crusher OK (1.0) $0 M

Stable (0.75)

Crusher Lost (0) -$-22 M

Status Quo
Crusher OK (0.7) -$ 5 M

Failure (0.25)

Build Fill -$22 M

Crusher Lost (0.3)

E(Cfailure l status Quo)=(0.3)(-22)+(0.7)(-5) = -$10 M

 Ex. Selection of Pile Type
Decision: Either use conventional Steel Pipe Piles to support a Bridge
Pier or a newer technology which involves the use of Plastic Piles.

Failure Construction Total

Cost Cost Cost

$0 M $-20 M $-20 M
A = Steel Piles (0.99)

(0.01) - $80 M $-20 M $-100 M

Fails (FA)

$0 M - $15 M $-15 M
B = Plastic Piles (0.90)

(0.10) - $80 M - $15 M $-95 M

Fails (FB)

E(A)=(-20)(0.99)+(-100)(0.01) = -20.8 M

E(B)=(-15)(0.9)+(-95)(0.1) = -23.0 M
Choose A
 Ex. Selection of Pile Type
Suppose we do a Load Test on the “Plastic Piles”

Test Tells us This

Successful (S)
Piles will not fail

Pile Load Test Questionable (Q)

Questionable

Unsuccessful (U) Piles will fail

P (SlFB) = 0.1 P (QlFB) = 0.2 P (UlFB) = 0.7

 Ex. Selection of Pile Type
Case 1 - Suppose we run a pile load test and get a successful
result:

Total
Cost
E(A) = -20.8 M (did not change)
$-20 M
A = Steel Piles (0.99)
E(B)=(-15)(0.98)+(-95)(0.02) = -16.6 M
(0.01)
$-100 M
Fails (FA)
Choose B
$-15 M
B = Plastic Piles (0.98)

(0.02)
$-95 M
Fails (FB)
 Ex. Selection of Pile Type
Case 2 - Suppose we run a pile load test and get an
unsuccessful result:

E(A) = -20.8 M (did not change)

Choose A
E(B)=(-15)(0.39)+(-95)(0.61) = -63.8 M

Case 3 - Suppose we run a pile load test and get an

questionable result:

E(A) = -20.8 M (did not change)

Choose A
E(B)=(-15)(0.87)+(-95)(0.13) = -25.4 M
 Ex. Selection of Pile Type

After Updating: Posterior Analysis

Before Updating: Prior Analysis

Is there a Pre-Posterior Analysis ???

Can we come up with a decision analysis that
could tell us whether to run the test or not??

How can we evaluate the Value of a Test before

deciding to adopt it?
Pre-Posterior Analysis Choose A (0.99)
-22 M

No additional Info -22.8 M (FA) (0.01) -102 M

Successful (S)
E(C) = -20.8 M (0.98) -17 M
(0.73) -18.6 M
(FB)(0.02)
Choose B * -97 M
(0.99)
-22 M
Choose A *
Test Costs $ 2 Million (FA) (0.01)
-22.8 M -102 M
E(C) = -19.73 M (0.155)
(0.87)
Questionable(Q) -17 M
Run Pile Load Test on B -27.4 M
Choose B (FB)(0.13) -97 M

(0.99)
Choose A * -22 M

-22.8 M (FA) (0.01) -102 M

(0.115)
(0.39)
Unsuccesful (U) -17 M
-65.8 M
E(Run Test)=(-18.6)(0.73)+(-22.8)(0.155) + (-22.8)(0.115) (FB)(0.61)
Choose B -97 M
= -19.73 M < -20.8 M (Choose to Run Test)
 Value of Information (VI)

Is the maximum cost of the test such that you

will still choose to run the test in a pre-
posterior decision analysis.

VI = E (Test Alternative excluding test cost) – E (No Test)

VI = -17.73- (-20.8) = 3.07 Million $
 Perfect Information
Choose A

-20.8 M
(1) -15 M
(0.9) -15 M
(FB) (0) -95 M
Choose B*
E(C) = -15.58 M
Run Perfect Test on B Choose A*
-20.8 M
(0.1)
Learn (FB) (0)
-15 M
-95 M
Choose B (FB) (1) -95 M

E (Perfect Test) = (-15)(0.9)+(-20.8)(0.1) = -15.58 M

Value of Perfect Information = -15.58 – (-20.8) = 5.22 Million $