Risk Analysis for Major Rehabilitation. Major Rehabilitation Background Prior to FY 1992 Funded under Operation and Maintenance, General, Appropriation

Risk Analysis for Major Risk Analysis for Major RehabilitationRehabilitation

Major Rehabilitation Major Rehabilitation BackgroundBackground

Prior to FY 1992 Funded under Operation and Maintenance,

General, Appropriation FY 1992 and subsequent

Study funded in O&M Construction funded under Construction

General Appropriation Compete with New Starts


Objectives of program Reliability

improve reliability of a feature thereby extending its physical life and deferring capital expenditures to replace the structure

Efficiency Improvement enhance operational efficiency increasing outputs

beyond the original project design


Cost Threshold for Inclusion in Program: Reliability

Inland Navigation--$10.4 mil. All Other--$6.5 mil.

Efficiency Improvement All--$1.28 mil.

Provided each year in Budget EC


Analytical Requirements

Equivalent framework to planning studies

Major Rehabilitation GuidanceMajor Rehabilitation Guidance

Major Points Objective of the Analysis Base Condition Analysis of Alternatives

Objective of the AnalysisObjective of the Analysis

Determine the Economically Efficient Rehabilitation Strategy

Commensurate values that differ in terms of risk, monetary values, and timing

Analysis Must AnswerAnalysis Must Answer

1. Why are we doing this now?

2. What are the consequences of not doing this now?

3. Which project or component is in the most critical condition?

4. Which alternative rehabilitation strategy is the best?

Steps in the AnalysisSteps in the Analysis1. Establish the overall engineering

condition and reliability identifying problems associated with critical project features.

2. Identify and define existing and potential reliability problems and opportunities for efficiency improvements.

3. Identify alternative methods to resolve or manage the problem

Steps in the Analysis (cont.)Steps in the Analysis (cont.)4. Develop cost estimates for proposed

solutions

5. Determine if proposed project is eligible for funding under major rehabilitation

6. Estimate economic benefits and costs of the base condition and alternatives.

7. Identify cost sharing requirements

8. Identify all environmental concerns

Steps in the Analysis (cont.)Steps in the Analysis (cont.) 9. Identify the recommended plan

10. Develop M-CACES cost estimate for the recommended plan

11. Prepare draft Project Cooperation Agreement (PCA) if required

12. Prepare Project Management Plan (PMP) for recommended alternative

Engineering and Economic Engineering and Economic Evaluation ConsiderationsEvaluation Considerations

Required information Project outputs and costs

Normal conditions Unplanned outage conditions

Current and future reliabilities of project operation

Base Condition Any Rehabilitation Strategy

The Base ConditionThe Base Condition

The condition used as the baseline against which all rehabilitation alternatives are measured conceptually equivalent to the "without"

condition in new project evaluation assumes that the existing O&M practices will

continue in the absence of rehabilitation emergency repairs of feature components as

they occur

The Base ConditionThe Base Condition

Describe using event tree Probabilistic Scenario Analysis

To

T1

Tn-1Tn

Unit 1Subfeature Level

Performance

GeneratorCondition

Beginning of Year

Turbine Condition

Beginning of Year

GeneratorPerformance

TurbinePerformance

GeneratorCondition

Beginning of Year

Turbine Condition

Beginning of Year


TurbinePerformance

GeneratorCondition

Beginning of Year

Turbine Condition

Beginning of Year


TurbinePerformance

Feature Level PerformanceNumber Units Out


Performance


Performance

Opportunity Costs

PUP FunctionsPUP Functions

Probability of Unsatisfactory Performance Instantaneous probability of component not

performing as designed Typically related to age or number of

operations Unsatisfactory performance must have

measurable consequences

Example PUP FunctionExample PUP Function

0 10 20 30 40 50 60 70

Age

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

PU

P

Rehabilitation AlternativesRehabilitation Alternatives

Advanced Maintenance Strategy schedule repair or replace of component to

avoid emergency repair Planned Repair Strategy

stockpile replacement parts and develop emergency repair procedures to reduce service disruption

Rehabilitation AlternativesRehabilitation Alternatives

Scheduled Rehabilitation Strategy determine "optimum" timing for rehabilitation

based on reliability, service degradation, and economic costs

Immediate Rehabilitation Strategy Rehabilitation with Efficiency

Improvement

Impact of AlternativesImpact of Alternatives

Changes the life-cycle cost time path of the project

NED Cost TimelineNED Cost Timeline

1 50

1 50

Base condition:

fix-as-fail

Alternative: Rehabilitate then fix-as-fail

Analysis of AlternativesAnalysis of Alternatives

Calculate the Expected Present Value of Benefits and Costs for Each Alternative Each alternative modifies some part of Base

Condition event tree Typically reduces PUP value resulting in reduced

repairs and downtime losses Makes the component “younger”

Base Condition PVBase Condition PV

E[C] = [(1-pf,0) Cnf + pf,0 Cf ]/ (1+r)0

+ [(1-pf,1) Cnf + pf,1 Cf] / (1+r)1

pf,0 = 0.1

pf,1 = 0.11

Cnf = $100

Cf = $10,000r = 5.625%

E[C] = $ 2,216

Rehab Condition PVRehab Condition PV

E[C] = [(1-pf,0) Cnf + pf,0 Cf ]/ (1+r)0

+ [(1-pf,1) Cnf + pf,1 Cf]/ (1+r)1

pf,0 = 0.01

pf,1 = 0.011

Cnf = $100

Cf = $10,000r = 5.625%

E[C] = $ 303


Benefits Avoided loss in project benefits compared to

Base Condition Avoided increase in project O&M and repair

costs compared to Base Condition Reduced project O&M costs


Costs Rehabilitation costs Foregone project outputs during rehabilitation

Display of ResultsDisplay of Results

Statistics of estimated benefits and costs (mean, variance, skew)

Tabular display of mean, standard error, and 90% confidence interval for net benefits of all alternatives

Graphic display of effect of alternatives on project benefits, costs, O&M costs, etc.

Example Results TableExample Results TableScenario Simulation Comparison

Scenario Life Cycle Cost Rehab Cost Benefits Net Benefits B/C Ratio

Base Condition Average $90,856,459 $0 0 0 - Minimum $21,389,787 Maximum $215,455,610 Standard Deviation 29,305,078 Downstream Gate Only

Average $67,977,715 $11,394,508 $22,878,744 $11,484,236 2.01 Minimum $23,850,371 $11,394,508 (2,053,164) (13,447,672) -0.18 Maximum $177,015,737 $11,394,508 49,663,144 38,268,636 4.36 Standard Deviation 20,918,678 $0 8,546,212 8,546,212 0.75 Rehabilitate All Average $28,236,914 $23,138,034 $62,619,545 $39,481,511 2.71 Minimum $3,666,129 $23,138,034 18,347,296 (4,790,738) 0.79 Maximum $143,227,713 $23,138,034 92,617,952 69,479,920 4.00 Standard Deviation 19,752,740 $0 12,142,037 12,142,037 0.52

Example Graphical ResultsExample Graphical Results

0.0

0.2

0.4

0.6

0.8

1.0

-20 0 20 40 60 80

PV Net Benefits ($millions)

Cu

mu

lativ

e F

req

ue

ncy

DownstreamGate OnlyRehabilitateAll

Example Graphical ResultsExample Graphical ResultsDistribution of B/C

0

0.05

0.1

0.15

0.2

0.25

-10.00 -5.00 0.00 5.00 10.00 15.00

B/C

Fre

quency

Rehab AlllComponents

RehabDownstreamGate

Decision CriteriaDecision Criteria

Rank alternatives based on expected present value of net benefits choose alternative with largest expected present

value Supplement with risk considerations

probability that net benefit is positive sensitivity analysis

DiscussionDiscussion

Documents

Risk Analysis for Major Rehabilitation. Major Rehabilitation Background Prior to FY 1992 Funded under Operation and Maintenance, General, Appropriation