Planning for project control through risk analysis: a petroleum pipeline-laying project

Abstract

Projects that are exposed to uncertain environments can be effectively controlled with the application of risk analysis during the planning stage. The Analytic Hierarchy Process, a multiattribute decision-making technique, can be used to analyse and assess project risks which are objective or subjective in nature. Among other advantages, the process logically integrates the various elements in the planning process. The results from risk analysis and activity analysis are then used to develop a logical contingency allowance for the project through the application of probability theory. The contingency allowance is created in two parts: (a) a technical contingency, and (b) a management contingency. This provides a basis for decision making in a changing project environment. Effective control of the project is made possible by the limitation of the changes within the monetary contingency allowance for the work package concerned, and the utilization of the contingency through proper appropriation. The whole methodology is applied to a pipeline-laying project in India, and its effectiveness in project control is demonstrated.