Implementation of the AASHTO Guide for Enterprise Risk Management (2022)

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2022 N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP RESEARCH REPORT 986 Implementation of the AASHTO Guide for Enterprise Risk Management Shobna Varma StarIsis Corporation Lewis Center, OH Gordon Proctor Gordon Proctor & Associates Dublin, OH Subscriber Categories Administration and Management Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration

NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed, and implementable research is the most effective way to solve many problems facing state departments of transportation (DOTs) administrators and engineers. Often, highway problems are of local or regional interest and can best be studied by state DOTs individually or in cooperation with their state universities and others. However, the accelerating growth of highway transporta- tion results in increasingly complex problems of wide interest to high- way authorities. These problems are best studied through a coordinated program of cooperative research. Recognizing this need, the leadership of the American Association of State Highway and Transportation Officials (AASHTO) in 1962 ini- tiated an objective national highway research program using modern scientific techniques—the National Cooperative Highway Research Program (NCHRP). NCHRP is supported on a continuing basis by funds from participating member states of AASHTO and receives the full cooperation and support of the Federal Highway Administration (FHWA), United States Department of Transportation, under Agree- ment No. 693JJ31950003. The Transportation Research Board (TRB) of the National Academies of Sciences, Engineering, and Medicine was requested by AASHTO to administer the research program because of TRB’s recognized objectivity and understanding of modern research practices. TRB is uniquely suited for this purpose for many reasons: TRB maintains an extensive com- mittee structure from which authorities on any highway transportation subject may be drawn; TRB possesses avenues of communications and cooperation with federal, state, and local governmental agencies, univer- sities, and industry; TRB’s relationship to the National Academies is an insurance of objectivity; and TRB maintains a full-time staff of special- ists in highway transportation matters to bring the findings of research directly to those in a position to use them. The program is developed on the basis of research needs iden- tified by chief administrators and other staff of the highway and transportation departments, by committees of AASHTO, and by the FHWA. Topics of the highest merit are selected by the AASHTO Special Committee on Research and Innovation (R&I), and each year R&I’s recommendations are proposed to the AASHTO Board of Direc- tors and the National Academies. Research projects to address these topics are defined by NCHRP, and qualified research agencies are selected from submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Academies and TRB. The needs for highway research are many, and NCHRP can make significant contributions to solving highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement, rather than to substitute for or duplicate, other highway research programs. Published research reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet by going to https://www.mytrb.org/MyTRB/Store/default.aspx Printed in the United States of America NCHRP RESEARCH REPORT 986 Project 20-44(02) ISSN 2572-3766 (Print) ISSN 2572-3774 (Online) ISBN 978-0-309-09462-7 Library of Congress Control Number 2022930692 © 2022 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FTA, GHSA, NHTSA, or TDC endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The research report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the National Academies of Sciences, Engineering, and Medicine. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; the FHWA; or the program sponsors. The Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; and the sponsors of the National Cooperative Highway Research Program do not endorse products or manufacturers. Trade or manufacturers’ names or logos appear herein solely because they are considered essential to the object of the report.

The National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, non- governmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Marcia McNutt is president. The National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. John L. Anderson is president. The National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president. The three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. The National Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine. Learn more about the National Academies of Sciences, Engineering, and Medicine at www.nationalacademies.org. The Transportation Research Board is one of seven major programs of the National Academies of Sciences, Engineering, and Medicine. The mission of the Transportation Research Board is to provide leadership in transportation improvements and innovation through trusted, timely, impartial, and evidence-based information exchange, research, and advice regarding all modes of transportation. The Board’s varied activities annually engage about 8,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. Learn more about the Transportation Research Board at www.TRB.org.

C O O P E R A T I V E R E S E A R C H P R O G R A M S AUTHOR ACKNOWLEDGMENTS The research reported herein was performed under NCHRP Project 20-44(02) by StarIsis Corporation. StarIsis Corporation was the prime contractor for this work. Ms. Shobna Varma, President, StarIsis Corpo- ration, was the Project Director and Principal Investigator. The other author of this report is Mr. Gordon Proctor, President, Gordon Proctor & Associates. The work was done under the general supervision of Shobna Varma at StarIsis Corporation. Implementing the pilot activities during the time of the COVID-19 pandemic was extremely challeng- ing and would not have been possible without the valuable engagement and support of the leadership and staff of the Tennessee Department of Transportation (TDOT), Utah Department of Transportation (UDOT), and Washington State Department of Transportation (WSDOT), whose contributions, focus, and efforts made the pilot activities successful. Sincere acknowledgment goes to Paul Degges, Chief Engineer of TDOT, who served as the executive champion; Angie Duncan, Assistant Director Bid Analysis & Estimating Office; Jennifer Lloyd, Director Headquarters Roadway Design and Aerial Surveys; Benjamin Price, PE, Director of Engineering Operations; and Brian Hurst, Transportation Manager II, Program Development and Scheduling Office, all from TDOT. CRP STAFF FOR NCHRP RESEARCH REPORT 986 Christopher J. Hedges, Director, Cooperative Research Programs Lori L. Sundstrom, Deputy Director, Cooperative Research Programs Waseem Dekelbab, Associate Program Manager, National Cooperative Highway Research Program Ann M. Hartell, Senior Program Officer Jarrel McAfee, Senior Program Assistant Natalie Barnes, Director of Publications Heather DiAngelis, Associate Director of Publications Doug English, Senior Editor NCHRP PROJECT 20-44(02) PANEL Field of Special Projects Timothy A. Henkel, Minnesota Department of Transportation, St. Paul, MN (Chair) Chad A. Allen, Seattle Department of Transportation, Seattle, WA Kimberly Joy Doran, New York State Department of Transportation, Albany, NY John C. Milton, Washington State Department of Transportation, Olympia, WA Annie Searle, ASA Risk Consulting, Seattle, WA Michelle A. Tucker, CalPERS, Sacramento, CA Stephen J. Gaj, FHWA Liaison Matthew H. Hardy, AASHTO Liaison

AUTHOR ACKNOWLEDGMENTS (Continued) From WSDOT, the project team acknowledges John Milton, Director, Transportation Safety and System Analysis division, who served as the executive champion; Guy Alston, Enterprise Risk Management Manager; and Yvette Wixson, Dustin Motte, Larry Watkinson, Monica Harwood, Matthew Neeley, Ron Morton, John Nisbet, Chris Johnson, Elizabeth Robbins, Kerri Woehler, James McBride, and Dave McCormick, who were engaged in different aspects of the WSDOT pilot implementations. From UDOT, the project team acknowledges Executive Director Carlos Braceras, who supported the pilot implementation; Monte Aldridge and Patrick Cowley, who served as the project champions; and Shane Young, Winston Inoway, Chris Dilley, Lorri Economy, Reuel Alder, and Rachel Morris, who supported the pilot initiative from its inception. The project team also acknowledges the contributions and feedback received from Annie Searle, ASA Risk Consultants, during the early phase of this project. In addition to the three pilot state DOTs, representatives from seven other state DOTs were actively engaged in the community of practice. The project team acknowledges Nathaniel Lyday, Michelle Tucker (currently at CalPers), and Silvia Russell from the California Department of Transportation; Toby Manthey and William Johnson from the Colorado Department of Transportation; Kimberley Doran from the New York State Department of Transportation; Deanna Belden and Christopher Berrens from the Minnesota Department of Transportation (MnDOT); Amy Schroeder from the Idaho Transportation Department; and Stephen Gaj and Nastaran Saadatmand from the FHWA. The team acknowledges the engagement and valuable contributions of Chad Allen (currently at the Seattle DOT) and Kevin Marshia from the Vermont Agency of Transportation, who participated in peer exchanges and presented at project webinars. Special thanks to Tim Henkel, Assistant Director, and Kathy Caleb from the Minnesota Department of Transpor- tation for hosting a peer exchange at the DOT. Also, thanks to Jean Wallace from MnDOT, who chairs the Subcommittee on Risk Management of AASHTO.

NCHRP Research Report 986 documents the activities of a cohort of state departments of transportation (DOTs) that implemented the risk management methods developed as part of NCHRP Project 08-93, “Managing Risk Across the Enterprise: A Guidebook for State Departments of Transportation.” The results of that research were published in the AASHTO Guide for Enterprise Risk Management. This report will be of interest to those in leadership and management positions at DOTs who are seeking to integrate risk manage- ment principles and practices across their agencies. Risk management specialists will also find experiences and insights relevant for their work with state DOTs. The AASHTO Guide for Enterprise Risk Management (the Guide) was published in 2016 (available online from the AASHTO Store: https://store.transportation.org). The Guide defines enterprise risk management (ERM) as “the formal and systematic effort to control uncertainty and variability on an organization’s strategic objectives by managing risks at all levels of the organization.” The Guide explains how the managing of risk at the enter- prise level provides agencies with new insights as well as management and analysis tools that can increase the likelihood of achieving strategic objectives, thus complementing related management tools such as strategic planning, asset management, and performance management. The objectives of NCHRP Project 20-44(02), “Implementation of the AASHTO Guide for Enterprise Risk Management,” were to increase awareness of the Guide and to support imple- mentation of the risk management methods from the Guide at three state DOTs. Funded under NCHRP 20-44, “NCHRP Implementation Support Program,” NCHRP Project 20-44(02) sought to foster pilot activities and to convene a community of practice focused on enterprise risk management. These activities were envisioned to create and convene a core community that, over time, would fulfill the longer-term objective of promoting and supporting further implementation among additional DOTs. StarIsis Corporation was tasked with working closely with three pilot agencies: Tennessee DOT, Utah DOT, and Washington State DOT. The specific risk management initiatives at each pilot agency are detailed in the report. These three pilot states joined seven other states in a community of practice, which met regularly to exchange ideas, challenges, solutions, and experiences. The project team also organized regional meetings to increase awareness of the AASHTO Guide and the value of risk management beyond the com- munity of practice. In October of 2020, the project team conducted a virtual roundtable event that focused on using risk management to navigate the economic and workforce impacts to state DOTs from the COVID-19 pandemic. A summary of the event is provided in Appendix D. F O R E W O R D By Ann M. Hartell Staff Officer Transportation Research Board

NCHRP Project 20-44(02) was initiated in 2018, and pilot activities began in May 2019. In 2020, as the nation experienced the onset of a pandemic, a series of destructive natural disasters, and widespread social and civic upheaval, state DOTs sought to manage the sudden and significant impacts of these events to their workforces, agency revenues, and the trans- portation system. The Guide provided a ready framework for identifying, managing, and tracking the risks from these impacts; a number of state DOT examples of using ERM to navigate the events of 2020 are documented in this report. While it is hoped that 2020 will be an anomaly, the future remains uncertain. Risks—both new and familiar—will most certainly arise. The Guide provides state DOTs with a structured method to manage those risks, whether they are navigating extraordinary times or the more routine challenges to planning, building, maintaining, and operating our transportation system. The experiences documented in this report demonstrate the value of ERM and offer real-world examples of how to apply risk management principles across a wide range of state DOT functional areas, from highway design to workforce diversity. The experiences of the early implementers can provide insights, examples, and even inspiration to encourage and inform wider and more effective implementation of risk management among state DOTs.

1 Summary 4 Chapter 1 Introduction 4 1.1 Project Background 5 1.2 Project Objectives 5 1.3 Project Process and Methodology 7 1.4 The Products of This Project 12 Chapter 2 Report Organization 13 Chapter 3 The Pilot Risk Implementation Process 13 3.1 Risk Management Supports Performance 14 3.2 Project Kickoff Workshop 16 3.3 Key Pilot Implementation Objectives 16 3.4 Setting the Context 16 3.5 Identifying Risks – Casting a Wide Net 16 3.6 Risk Analysis 17 3.7 Risk Evaluation and Prioritization 17 3.8 Risk Response 18 3.9 Mitigation Implementation and Monitoring 19 Chapter 4 Pilot Case Studies 19 4.1 Tennessee Department of Transportation 40 4.2 Utah Department of Transportation 66 4.3 Washington State Department of Transportation 82 Chapter 5 Other Case Studies 82 5.1 California Department of Transportation 85 5.2 Vermont Agency of Transportation 88 5.3 Risk Management to Support Financial Decision Making 98 Chapter 6 Tactics for Successful Risk Management 98 6.1 Lessons Learned from Risk Management Practitioners 102 6.2 Managing Risks from COVID-19 107 6.3 Longer-Term Risks Attributable to the Pandemic 108 6.4 COP Recommendations on Key Areas of Focus for Risk Management 111 References C O N T E N T S

112 Appendix A TDOT Documents and Tools 169 Appendix B UDOT Documents and Tools 369 Appendix C WSDOT Documents and Tools 378 Appendix D Managing Risks in Uncertain Times – Proceedings of the Webinar Note: Photographs, figures, and tables in this report may have been converted from color to grayscale for printing. The electronic version of the report (posted on the web at www.trb.org) retains the color versions.