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Running head: ANALYSIS OF THE PANAMA CANAL EXPANSION PROGRAM 1

Analysis of the Panama Canal Extension Program


William Taylor Pittman
PJM380-1 Project Management Tools
Colorado State University Global Campus
Professor Michael Laverty
May 16, 2014







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Analysis of the Panama Canal Expansion Program
Introduction
In Risk Planning and Management for the Panama Canal Expansion Program, a case
study is offered of the cost and duration contingency model developed for the Canal Expansion
Program (reference). Within this study, we will examine the approach to comprehensive risk
management taken by The Panama Canal Authority, the contingency model itself, and its
relevancy to my own experience.
Approach to comprehensive risk management
The Canal Authority took an early approach to producing accurate estimations and
produced schedule and cost estimates not typical of the level of engineering design completed.
Personally, I have used early estimation techniques to help bid on large or complex projects. In
addition to reducing risk in planned projects, risk in bidding inefficiently can also be reduced.
The early approach and resulting detailed estimations resulted in a perception that the risk and
related contingencies may be artificially low due in part to the high level of detail. Although high
level of detail is provided at this point, the level of complexity and size of the projects results in
the addition of more risk. In my own experience, there is a point where, as you increase in
complexity and size, level of detail has a diminishing return on risk analysis and other factors,
such as external variables, begin to have an equal or greater impact on risk assessment.
Rather than taking the traditional approach to establishing contingencies, based on a
percentage of cost or schedule estimates, an integrated methodology of schedule and cost
estimates are combined with risk factors to create the risk model. The integrated risk model, up
to this point, I have been unfamiliar with, however seems to be a valuable to large projects. As
ANALSIS OF THE PANAMA CANAL EXTENSION PROGRAM 3

my responsibilities grow along with the company I work for, larger projects than the typical ten
to fifty million dollars are on the horizon and the integration of cost and schedule estimates may
be an option for better contingency allocation.
Contingency Model
The structure of the contingency model was created by the combination of the cost
estimate and a simplified schedule model to create an integrated model. Linkages between
associated cost and activity duration were built and tested. In my work experience, I have never
been involved with a complete integration of schedule and cost to produce contingencies.
However, I have assessed individual task duration and their associated costs for relationships
between them. I can see that in the future, as a PM, an integrated approach such as the one
implemented be the Canal Authority could be applicable to many projects, regardless of size.
Within this model, fourteen variables assessed to be most important are included as
stochastic variables. Several of the risk factors affect multiple different cost elements, thus, they
were included for each element with its own individual assessment. Using excel to generate the
model provided staff with valuable tools available in @Risk to help create, operate and report the
model. Several risk factors effecting multiple cost elements is not uncommon even in smaller
projects. I see this effect most commonly with design or schedule change. The level of analysis
and repeated testing of relationships is an important in assessing the feasibility of the model.
Conclusion
Although comprehensive and intended to produce more accurate contingencies, the
highly detailed, integrated approach the Canal Authority took came with its own challenges.
However, through implementation and testing within the development of the model, an accurate,
ANALSIS OF THE PANAMA CANAL EXTENSION PROGRAM 4

numerically based description of project risks and their related contingencies was formed
effectively. The steps taken and the resulting model will be assessed for their effectiveness and
implemented into future projects. This method of learning from historical events is an effective
tool in the project managers tool bag. It is represented by the canal authorities elaboration on
existing methods and also by the future elaboration and modification by others.




















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References
Alarcon L. F., Ashley D. B., Hanily A. S., Molenaar K. R., Ungo, R. (2011). Risk Planning and
Management for the Panama Canal Expansion Program: American Society of Civil Engineers
Retrieved from
https://csuglobal.blackboard.com/bbcswebdav/pid-827856-dt-content-rid-
4765073_5/library/Article%20Reserve/PJM380/Risk%20planning%20and%20manange
ment%20for%20the%20Panama%20Canal%20expansion%20program.pdf

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