Threshold for Utilizing Risk-Based Prioritization.

DOE-DP-STD-3023-98

10.3 Threshold for Utilizing Risk-Based Prioritization.

Issue. Consideration should be given whether or not to have a threshold and a

determination of a threshold value for the prioritization effort.

Discussion. Generally, formal RBP requires considerable resources to implement.

Such methods are usually not warranted if the expected value of its result is less than

the cost of implementation. The standard calls for a graded approach in which the

depth and rigor with which the guidelines are applied is carefully tailored to the

problem being worked. However, there may be a need for threshold guidance as to

when RBP should be utilized.

When RBP has been applied to illuminate the choice among many competing major

capitol projects or project variants, it commonly can identify a preference that achieves

the objectives for 10 percent to 30 percent less cost than the plausible alternatives

that might have been selected with less rigorous decision aids. Economies in using

RBP can often be achieved when a tailored approach to RBP is routinely applied to

many specific applications, such as living schedules for nuclear power plants.

Recommendation. The prioritization decision maker(s), working in collaboration with

advisers expert in RBP, should make a determination of the threshold guidance as to

whether RBP and the standard should be implemented, and how the graded approach

should be employed for the kinds of decisions to be made, tailored to the decision

context. Customer needs should be analyzed throughout the initiative. A number of

issues should be considered in determining the need for, and degree of, prioritization

effort. The following are indicators that RBP may be warranted:

a. When the activity has extensive oversight and public interest to warrant a

substantial investment in exploring and documenting the pros, cons, and

bases for the decision.

b. When the identification of the optimum decision is particularly difficult because

the decision involves selecting among a large number of alternatives, the

decision involves weighing many disparate pros and cons for each alternative,

or the implications of the decision options are particularly complex.

c. When the RBP application can be performed for no more than 10 percent of

the budget for implementing the decision options.

d. When economies of scale can be realized by applying the RBP to many future

applications or by utilizing an off-the-shelf RBP methodology.

e. When the benefit received through proper planning on activities that have a

relatively long life cycle. Proper planning early in the life cycle can return

substantial cost savings over the life of the activity.

It is often the case that a large part of the cost of using RBP are fixed costs

associated with preparing the team and the application of RBP methods. In such

cases, the incremental costs of prioritizing all, rather than just some of the decision

options may be too small to warrant selective application. However, when this is not

the case, there may be merit in some additional approaches to cost and schedule

control: