5th ANNUAL CONFERENCE ON

DREDGING IN INDIA

MANAGING RISKS

03 – 09 - 2014

PRESENTATION BY
Devdatta Bose – Group Sector Head
Mihir Parekh – Manager
TATA Consulting Engineers
4th Floor, Tower A, 247 Park, LBS Marg, Vikhroli (West), Mumbai 400 083

CONSULTING ENGINEERS LIMITED

CONTENTS
1 RIRISK MANAGEMENT PROCESS

2 RIRISK IDENTIFICATION

3 ESTIMATING CONSEQUENCES

4 II IMPACT ANALYSIS

5 RISK IDENTIFICATION – EXECUTION STAGE

6 RISK DESCRIPTION

7 • DREDGING RISK MATRIX

8 • RISK MITIGATION

9 • CONCLUSION

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REPRESENTATIVE RISK MANAGEMENT PROCESS
RISK MANAGEMENT PROCESS

 Communicate and consult – with stakeholders

at each stage
 Establish the context – provides background to
the analysis and structure of risk assessment.
 Identify risks – Identify when, where, why and
how risk events could occur. Consult subject
matter specialists and site personnel.
 Analyse risks – Identify existing controls,
evaluate likelihoods (PROBABILITY) and
consequences (SEVERITY) to determine levels of
risk.
 Evaluate risks – Compare estimated levels of risk
with evaluation criteria, consider benefits versus
adverse outcomes.
 Treat risks – As required, to develop and RISK QUOTIENT = PROBABILITY x SEVERITY
implement specific strategies for increasing 0 – Impossible 0.1 – Minimal
benefits and reducing potential costs and to
ensure that all material risk events are
addressed.
1 - Certain 1000 - Extreme
 Monitor and review – The effectiveness of all
steps of the risk management process.
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RISK IDENTIFICATION

PROBABILITY (EVENT) X PROBABILITY (CONSEQUENCE)

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ESTIMATING CONSEQUENCES (SEVERITY)
NEGLIGIBLE MINOR MODERATE MAJOR EXTREME
Minimal, if any Low level impact High level of High level of High level of
impact for some for some impact for some impact for impact State -
communities. communities, or communities, or communities area wide.
Potentially some high impact for a moderate impact wide.
impact for a small small number for communities
number (<10) of (<10) of area wide
individuals. individuals.
0.1 1 10 100 1000

The key categories of impact in the consequence table include:

 Property and Infrastructure
 Environment
 Social
 Economic
 Public Health and Safety

If the event would have multiple consequences (for example, excessive noise would have
consequences for the local community as well as the environment), the consequence values were
recorded for each of the categories. These were then summed for each risk issue. For example, a
value of 1 for Environment consequences and a value of 10 for Social consequences give a total value
of 11 for the total consequence of the risk issue.
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IMPACT ANALYSIS
IMPACT ANALYSIS

 Risk for each event is stated as a “risk quotient”

 Risk Quotient = Likelihood of the event occurring

(total frequency over the specific period) x
Consequence level if the event were to occur.

 The contribution by Asset refers to the

proportion of the risk that is posed to the
defined community assets: Public health and
safety, Economics, Social, Environmental and
Property / Infrastructure.

 Establishment of a risk target helps stakeholders

to understand what level of risk might be
RISK QUOTIENT = PROBABILITY x SEVERITY
considered acceptable in the context of the scale
of the Project. For example - a risk target of 1 is 0 – Impossible 0.1 – Minimal
equivalent to a 10% chance of a Moderate level
impact occurring (i.e. consequence value of 10)
or a 1% chance of a Major event occurring (i.e. A 1 - Certain 1000 - Extreme
consequence value of 100).
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IMPACT ANALYSIS

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DREDGING RISKS – CAPITAL DREDGING PROJECT

IDENTIFIED RISKS

1 Disturbance of the Works – Port operations / Naval exercises / Wave, wind and tidal forces
2 Unforeseeable Conditions – Uncertainty about quantity and character of physical obstructions
3 Site and Security – Not possible to secure site,
4 Certifying Progress and Completion
5 Time
6 Insurance
7 Instructions of the Engineer
8 Defects
9 Design
10 Permits, Licenses and Approvals – Coordination with multiple statutory / port authorities

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RISK DESCRIPTION
Identified Risks Risks Description
 Disturbance of the Works • Offshore works notoriously vulnerable to
 Unanticipated Conditions wave, wind and tidal forces
Disturbance of
 Site and Security the Works
 Certifying Progress and Completion • Disturbance due to Port Operations, Naval
Exercises etc
 Time
 Insurance • Unforeseeable Physical Obstructions –
Hazardous / Non Hazardous
 Instructions from the Engineer
 Defects • Unforeseeable Physical conditions –
 Design siltation, scouring
 Permits, Licenses and Approvals Unanticipated
Conditions • Non availability of adequate site
investigations

• Inadequate time and resources available

with the contractor to assess site
conditions prior to bidding

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RISK ARISING FROM INADEQUATE INVESTIGATIONS

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RISK DESCRIPTION
Identified Risks Risks Description
• Operational and legal risks
 Disturbance of the Works
 Unanticipated Conditions • Not possible to secure site - Can only be
 Site and Security Site and demarcated by marker buoys and warning signs
 Certifying Progress and Completion Security
 Time • Damage caused by incursion into the marine
site, persons / vessels can directly affect
 Insurance
permanent works
 Instructions from the Engineer
• Measurement of completed works - Not an
 Defects
easy task in dredging works
 Design
 Permits, Licenses and Approvals Certifying • Measurement frequency, equipment
Progress specifications, certification of fuel escalation
and
Completion • Pre dredging and post dredging surveys are
normally used but they do not reflect the effort
required in cases of tight tolerances and side
slopes

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RISK FROM MEASUREMENT AND CERTIFICATION
PROJECT PROGRESS 100%
90%
Project
• Physical Project Progress >> Certifiable Progress 80%
Progress
70%
• Difference mainly due to choice of certification and
60% Cash Flow -
payment milestone arising out of choice of contract
type 50% Item Rate

40%
Cash Flow -
Lumpsum Assured Depth type contract is 30% Lumpsum
not advisable in capital dredging projects 20%
where heterogeneous material is expected
10%
to be encountered
0%
Time

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RISK DESCRIPTION
Identified Risks Risks Description

 Disturbance of the Works • Time is the essence of any contract, more so in

 Unanticipated Conditions
 Site and Security
 Certifying Progress and Completion
 Time
 Insurance
 Instructions from the Engineer
 Defects
 Design
 Permits, Licenses and Approvals
dredging contracts
• Two important dates – Commencement Date and
Time for Completion (calculated from the
Time Commencement date)
• Contractor’s liability in the event of delay
• Risks, the occurrence of which, would entitle the
contractor to an extension
• Requirement of insurers in the area of dredging
are not straightforward

Insurance • Exemption of Insurer’s liability from damage

caused solely by erosion or scour, and for the
cost of redredging owing to siltation by normal
wave and tidal action.

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DELAY DUE TO LOSS IN PRODUCTIVITY
Fine mesh size bomb grid results in smaller suction area
draghead, causing lower production rates

Much faster accumulation of waste caught up in bomb

grid as production significantly reduces, requiring frequent
flushing and disposal (B)

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RISK DESCRIPTION
Identified Risks Risks Description
• Powers of the Engineer viz-a-viz accountability
 Disturbance of the Works for mis-exercise of these powers
 Unanticipated Conditions
 Site and Security • Risk arising out of delay in obtaining
Instructions
 Certifying Progress and Completion Employer’s approval by the Engineer
from the
 Time Engineer
• Risk arising out of not fulfilling trifling
 Insurance instructions by the Engineer and the Employer
 Instructions from the Engineer holding it as a default by the Contractor
 Defects (theoretically)
 Design • High cost of remobilization of dredging
 Permits, Licenses and Approvals equipment to remedy defects

• Effect of natural forces leading to

Defects unforeseeable defects in completed works

• Dredging works are exempted from the

defects regime after issuance of Taking Over
Certificate

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RISK DESCRIPTION
Identified Risks Risks Description
• Design Risk, for the works designed by the
 Disturbance of the Works Contractor, (to be borne by the Contractor)
 Unanticipated Conditions
 Site and Security • Design risk, in terms of time or cost overruns,
Design
 Certifying Progress and Completion from specifications and drawings, designed by
the Employer / Engineer, and issued with the
 Time
tender document, (should lie with the
 Insurance Employer).
 Instructions from the Engineer
• Contractor, in general, is responsible for
 Defects obtaining and paying for all necessary permits,
 Design licenses and approvals with reasonable
Permits,
 Permits, Licenses and Approvals Licenses
assistance from the Employer.
and
• However, sometimes the Employer is better
Approvals
placed to obtain certain permits/ licenses etc.
These should be brought out in the Contract
document

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DESIGN RISKS – BERTH POCKET DREDGING

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DREDGING RISK MATRIX
1 VH 0.1 1 10 100 1000
DEFINITION OF RISK TERMINOLOGY
0.5 H 0.05 0.5 5 50 500

PROBABILITY
PROBABILITY (P) SEVERITY (S)
0.3 M 0.03 0.3 3 30 300
Very High
0.1 L 0.01 0.1 1 10 100
Very High Death / severe
VH VH
Likely to occur often environmental or 0.01 VL 0.001 0.01 0.1 1 10
financial damage > 50 M$
VL L M H VH
High High
Will occur several Severe Injury / major 0.1 1 10 100 1000
H H
times during the environmental or SEVERITY
project financial loss > 25 M$
Medium (moderate) Medium (moderate)
M Occur once during the M Light injury or system
project damage > 1 M$
Low Low
L Unlikely, but might L Light injury or system
occur once damage > 0.5 M$
Very Low
Very Low No injuries / irrelevant
VL VL
Not expected at all environmental or
financial loss < 0.1 M $

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RISK MITIGATION
Risk
No Identified Risk
Probability Severity
Disturbance of the Works - wind,
1 wave, tide, port operations, naval VH
exercises
Unanticipated physical Conditions
(siltation / scouring) and
2 M
obstructions (hazardous / non
hazardous)
Site and Security - demarcation,
3 L
incursion of vessels
Certifying Progress and Completion
4 - Measurement and certification M M
methods not explicitly stated
Time for completion and
contractor's liability in case of
5 H
delay, conditions where contrator
not liable for delay
Insurance - Insurers requirements
6 L
in dredging projects
7 Instructions from the Engineer - M H
Engineer's misuse of his powers
Defects - Rectification,
8 L
remobilization of equipment
Design Risks - Contractor's scope of
9 M
design, Employer's scope of design
10 Permits, Licenses and Approvals VH
Risk Mitigation Table
Residual Risk
Mitigation Measures Probability Severity
►Adequate wind, wave, tide, cyclone data collection
M VH L
►Adequate port traffic / naval exercises data collection and analysis
►Adequate site investigations - bathy, seismic, boreholes,
magnetometer survey
VH L H
►Adequate studies - hydrodynamic modelling, sediment transport,
tranquility
M ►Adequate demarcation using navigational buoys L M
►Explicit statement of progress measurement methodology and
certification
L M
►To include frequency of measurement, equipment specifications,
third party measurements, fuel price adjustment mechanism etc
►Planning at L4 - L5 level from L1 level project plan provided in
tender documents, if any. Budgeting for time overruns
VH M M
►Explicitly stating contractor's and employer's liabilities owing to
delays in various conditions in the contract
L L L
►Explicitly clarifying Engineer's role in the Contract Document
►Proactively identifying issues and obstacles with the Engineer and VL H
Employer and collaborating to resolve them
►Explicitly clarifying defects liability, if any, in the contract
VH VL H
►Thorough post dredging survey (third party recommended)
►Explicitly clarifying contractor's and employer's design scope
H M M
►Engineer / Third Party Approval procedures and timelines
►Effective Liasioning with govt / statutory agencies / port authorities
M M M
►Budgeting time overruns on account of delay in permits
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RISK MITIGATION
Sample MPs for Risk Event Various Management Practices (MPs), and combination
of MPs indicating relative effort required to implement
them and their relative effectiveness at mitigating the risk
event. The relative effort and effectiveness are given
values between 1 and 10, with 1 being least and 10 being
the highest. Such a list should be compiled using the
combined effort of dredging and environmental experts.

The result of the evaluation process

undertaken is then plotted onto the
selection matrix together with the given
threshold value.

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RISK MITIGATION
500
300

100
100
MAJOR IMPACT Risk
30 30

10 10 10
10
Impact Level

Residual Risk
MODERATE IMPACT
3 3 3 3

1 1 1 1 1 1
1
MINOR IMPACT

0.1 0.1
0.1
NEGLIGIBLE IMPACT

0.01

COLUMN HEIGHT SHOWS

IMPACT COLOURS WITHIN
COLUMNS SHOW PROPORTION
CONTRIBUTION TO THE IMPACT

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CONCLUSION
 Since dredging takes place in a natural environment, uncertainty and therefore risk has to
be accepted. This uncertainty can be reduced by undertaking modelling or additional
studies but in such a complex system it can not be eliminated.

 Discussion may arise between those involved in a dredging project (client, permitting
agency, conservation organisations or environmental NGO’s etc) on how to assess and
manage risks. Risk perception varies between groups and individuals and is value driven.
There is no quick solution to this potential conflict; early and open communication is
considered essential.

 Thorough site investigations are a must before embarking on a dredging project – bathy,
side scan, seismic profiler, magnetometer, marine boreholes, modelling studies etc.

 Choice of appropriate type of contract with optimum risk sharing between the contractor
and client

 Using international best practices in estimation and design as highlighted in CIRIA and
PIANC publications

 Using standard FIDIC documents (2010 RECOMMENDED) for preparing tenders. Minimal
changes to standard FIDIC general conditions.
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 mparekh@tce.co.in
devdattab@tce.co.in
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