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