Description
A decision analysis
quantifies costs and uncertainties, identifies important decisions, and explores all
possible outcomes to derive strategies that optimize cost, limit financial risk, and
assure the best chances of project success.
The tools of decision analysis include influence diagrams, decision trees
(see the figure below), and sensitivity analyses. They are based on established
statistical techniques used successfully by many businesses to develop decisions. |
Quantitative Decisions helped this
client decide what approaches to take with investigation, remediation, public interaction,
and agency negotiation following the discovery of widespread PCB contamination in a
nearby wetland.
A formal decision analysis uncovered hidden major costs and revealed
where uncertainties could drive remedial costs up and success rates down.
The client observed that this approach helped their environmental
managers effectively communicate with corporate management the reasons why investment in
agency interaction and public involvement was worthwhile: The spread in possible remedial
costs of $2M to $20M represented important financial risk; investing in actions to
improve the chance of negotiating lower-cost outcomes was worthwhile.
The decision analysis identified the amounts that were worthwhile
investing in agency interaction as well as in additional investigation and scientific
studies. It did so by suggesting that the client quantify important costs and
uncertainties. Sensitivity analyses then identified the numbers that were driving the
project strategy, helping the team to focus on obtaining information that was important
for success.
Subsequent work on this project has proceeded favorably.
Hoped-for lenient PCB standards have been approved by the environmental agency; additional
sampling has been unnecessary; lower cleanup costs are anticipated.
Quantitative Decisions
Merion, Pennsylvania
|
