Prognostic risk modelling of complex engineering projects using a system architecture approach with the application of 3PE methodology
Creators: name: COOK, Matthew
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 401407
subject: Manufacturing management

description: Many large and highly complex engineering projects are undertaken by organisations without a clear understanding of the technical and commercial risks. Injudicious decisions are subsequently made that fail to adequately manage or mitigate potential and residual risks. In cases where these risks are realised, the projects can suffer from budget overruns, schedule impacts/delays, technical faults/failures, reputation loss and ultimately a disappointed customer. One of the critical challenges of this research is the ability of the risk model to account for the perceived qualitative or subjective nature of risk assessments.

The objective of this research is to investigate and develop a risk analysis methodology that will allow organisations, particularly in the defence environment, to quantify their risks and to control risk profile throughout a project life cycle. The research was conducted primarily in the defence environment and applied a generic system engineering model, building on a well-defined system modelling methodology known as "Product Process People Environment" (3PE).

This research focuses on developing a unique quantitative risk model by applying the 3PE methodology to risk analysis. The 3PE method combines the elements of Product, People, Process within an environment and presents a topology where all risks can be assigned by their nature. This novel approach to risk modelling ameliorates all aspect of the risk process, with the three constituents (or elements) and their interactions forming a structured topology that is the basis for the determination of complex risks prevalent within projects. An exemplar or baseline risk profile can be calculated for current projects, which can be developed from previous projects that have understood outcomes.

The methodology developed in this research introduces a unique analysis model and risk identification structure to generate a visual risk profile for the life cycle of the project. To ensure a holistic and consistent approach to deciding mitigation strategies, the model incorporates the Analytic Hierarchy Process (AHP) to the 3PE topology to prioritise risks. This enables cross sections of the project enterprise to be given appropriate attention in terms of urgency and resources towards risk resolution and mitigation.

From this risk modelling, it is possible to identify and importantly visualise specifically what and where the key risk drivers reside and the impact of mitigations, along with the ability to control, manage and monitor risks throughout the life cycle. This analysis results in the development of a risk profile that can be presented in a visual format and manage/track both residual and emergent risks throughout the project life cycle. The potential development of a relationship between the model and a risk burndown chart, has been further developed as a means of associating the identified risks with both their predicted financial and schedule impacts and what effect proposed mitigations will achieve. The methodology includes a graphical burndown plot representing the entire life cycle risk management for engineering projects, to ensure an organisation can successfully deliver on technical and contractual obligations for large complex engineering projects. It allows for the continued management and visualisation of risks and enables a process of continued analysis to both reduce and/or mitigate residual risks and emergent risks progressively to acceptable levels.
 
Another area that forms part of this research, is the formation of an Alliance to execute a large and complex project. An alliance is generally thought of as a risk reduction strategy for sharing the technical challenges, tapping into appropriate resources, ensuring competitive edge, sharing the financial burden and schedule pressure of large challenging projects. This strategy has the benefit of distributing both the financial burden and technical effort across several organisations, ensuring specific attributes and skill sets are exploited in the right areas. However, there is growing evidence that the formation of an alliance actually brings added complexity to the structure of the project and leads to a significant increase in the overall risk level of the project. Some sources suggest that the failure rate of alliance projects could be as high as 50%. 

This research analyses ways that risk pathways increase as more partners join the alliance and actually increase the risk profile of the project. Furthermore, research goes on to propose a model that has the ability to allow managers and engineers alike to identify and assess how risks can multiply as internal organisation and external project risks are generated and combined. These risks include technical, process, behavioural and cultural issues that can exist and/or develop between organisations, thus increasing the challenge of achieving success. A number of case studies have been undertaken throughout this research to both demonstrate and refine the model. This includes the complete life cycle analysis of a large historical defence project that was used to holistically demonstrate the model.   It should also be noted that some of the methods of calculation chosen are not mandatory and the proposed model has considered the need for flexibility to allow for alternative interpretations and weightings. A risk model is regarded as useful if it can identify key risks from quantitative data and suggests possible mitigation strategies. While many organisations already attend to highlighting risks with an array of tools, software and/or process methods, their calibre is often diminished by over-complexity and convoluted processes that are too involved. Hence, probably the most important characteristics of a risk model should be simplicity and ease of use.

This research has contributed a new methodology that quantifies and models the relative risk profile of a project throughout the project life cycle. It is important to state that this research has focused primarily on major projects conducted within both the UK and Australian defence environment. This is mainly due to available sources of information. However, it is necessary to highlight that this research and the risk model it has developed is equally transferrable to other disciplines, industries and countries.