Flexibility in Infrastructure Design · 2014. 10. 7. · Flexibility in Infrastructure Design A...
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Flexibility in Infrastructure Design A “Future Proof” Approach MIT Professor Richard de Neufville Engineering Systems + Civil and Environmental Engineering Author: Flexibility in Engineering Design MIT Press, 2011 with Prof. Stefan Scholtes, University of Cambridge UK
Transcript of Flexibility in Infrastructure Design · 2014. 10. 7. · Flexibility in Infrastructure Design A...
Flexibility in Infrastructure Design
A “Future Proof” Approach
MIT Professor Richard de Neufville
Engineering Systems + Civil and Environmental Engineering
Author: Flexibility in Engineering Design MIT Press, 2011
with Prof. Stefan Scholtes, University of Cambridge UK
NGInfra Presentation © 2014 Richard de Neufville
Goedemorgen iedereen!
Het is een genoegen
en een grote eer
om met U!
This is the book
MIT Press, 2011, 2013
Available online from
Amazon Germany
pocketbook and ebook
(about € 19)
NGInfra Presentation © 2014 Richard de Neufville
Theme for Today
Flexibility in Design is new approach that is
• Desirable – it recognizes uncertainty
• Practical – not difficult to implement
• Valuable – can increase expected value significantly -- at lower cost!
• Economical way to “future proof” system
I am happy to have the opportunity to collaborate on this with Rijkswaterstaat
NGInfra Presentation © 2014 Richard de Neufville
Outline
1. Flexibility in Design – a definition – what it is, and why it is new approach
2. Its overall characteristics • Desirable – it is realistic about issues • Practical – examples demonstrate • Valuable – 20 to 30% increases in
expected value – at lower cost!
3. Economical way to “future proof” system
NGInfra Presentation © 2014 Richard de Neufville
What is Flexibility in Engineering Design?
Flexibility is the capability easily to change the capacity or function of a system.
Flexibility exists in a system because of prior planning and design decisions.
Flexibility can be either “in” or “on” system • “in” as part of technical design (usb ports
on lap top to permit other devices) • “on” from management arrangements
(mothballing rather than closing a factory) • Also known as “real options”
NGInfra Presentation © 2014 Richard de Neufville
Example of Flexibility in Design
Vertical Expansion of Health Care Service Corporation Building, Chicago.
Phase 1 (left) and Phase 2 (right, opened 15 years later) in center of image.
Source: Goettsch Partners, 2008 and Pearson and Wittels, 2008.
NGInfra Presentation © 2014 Richard de Neufville
Why Flexibility in Design Desirable?
The simple answer is because of uncertainty about what we need.
• The fact is that we cannot predict future exactly over 50-year life of infrastructure.
• Too many trend-breakers and surprises
We need capability to provide for real needs – not what we mistakenly imagined years earlier, based on incomplete information
This is contrary to established practice!
NGInfra Presentation © 2014 Richard de Neufville
Traditional Design Avoids Uncertainty
Adapted from
O. de Weck
User Needs
Product System
Subsystem
Components
Marketing or Political Process
Systems Engineering
Subsystem
Development
Component
Design
Requirements
Definition Fielding/
Launch
Conceptual Design
Preliminary Design
Detailed Design System
Operation
Component Testing
Subsystem Integration
Final Assembly
System
Testing
Components
Subsystem
System
System
Validation
NGInfra Presentation © 2014 Richard de Neufville
Flexibility in Design is Practical
Suspension bridges, strength for 2nd deck
• George Washington Bridge, New York
• 25 de Avril bridge across Tagus, Lisboa
Skyscrapers for vertical extension
• HCSC Building, Chicago (image shown)
• Tufts Dental School, Boston
Flood Control Works
• See image, following
Floodwall in Sacramento, California
A base strong enough for higher wall, enables building
lower wall (less cost) with option to add height if needed
Source: Building of Morrison Creek floodwall, Sacramento, CA, flickr.com via Kim Smet
NGInfra Presentation © 2014 Richard de Neufville
NGInfra Presentation © 2014 Richard de Neufville
Value of Flexibility in Design
Flexibility in design can deliver measurably great value. Case after case show 20 to 30% increased expected value.
What’s the intuition?
• Mitigates, lessens risk (downside) – a win
• Opens opportunities (upside) – more win
• Lowers first capital expenditures (capex)
• More value, lower cost, great benefit/cost!
• A win-win approach
NGInfra Presentation © 2014 Richard de Neufville
Example: Deep Water Oil Platform
NGInfra Presentation © 2014 Richard de Neufville
Details of Case
• Reservoirs in deep water, off Country ***
• Design team took traditional approach – optimize for “best estimates”
• Preliminary design: Single large facility
• Note Uncertainties:
– Price of Crude Oil highly volatile
– Estimates of economically recoverable quantity of oil+gas differ by factor of 2
NGInfra Presentation © 2014 Richard de Neufville
Flex Design: small modules + subsea
Value-at-Risk-Gain (VARG) Curve
(with reservoir uncertainty)
0
0.2
0.4
0.6
0.8
1
-100 -50 0 50 100 150 200 250 300 350
Net Present Value [ % of ENPV of strategy 1]
Cu
mm
ula
tive P
ro
bab
ilit
y
Strategies 1&2
Strategies 3&4
Strategy 5
Strategy 6
Strategy 7
Strategy 8
Source: Lin et al, 2009
Results compared
to base case:
Loss: risk eliminated
Gain: maximum value
much higher
Overall: Expected
value plus 78%
X-axis: Value
Y-axis: Probability
NGInfra Presentation © 2014 Richard de Neufville
Looking Back:
Flexibility in infrastructure is
Desirable – Realistic view of uncertainty
Possible – Plenty of examples
Valuable – many demonstrations
Now: Economical Way to
“Future Proof” our systems
An Essential Issue: Uncertainty
Our infrastructure lasts a long time
• One generation for sure
• Maybe two or three
We do not, indeed cannot, know what
our needs will be so far in advance
Experience of surprises, trend-breakers
(climate change, fracking, nuclear…)
NGInfra Presentation © 2014 Richard de Neufville
Forecast is ‘always’ wrong
What actually occurs is generally differs
greatly from what was forecast long ago
Even when overall numbers are within
10%, big differences in needs, services
(think of aviation traffic through Schiphol)
The point is, we really do not know what
future our infrastructure will serve
NGInfra Presentation © 2014 Richard de Neufville
How do we “future proof” infrastructure?
What is your reflex?
How do we guarantee future performance?
Make infrastructure strong enough (raise
dikes by x meters, for example) to meet all
conceivable needs.
By definition this would guarantee future
– provided we could really conceive of all
possible futures…
NGInfra Presentation © 2014 Richard de Neufville
Over-building is expensive and wasteful
Overbuilding is clearly expensive (not only in
money, also in space, time, and effort)
Overbuilding is wasteful because
• focus on extreme means strong possibility
that much of system will be unnecessary
• Building later is cheaper (deferring interest
payments)
• Better to build later, with less ignorance,
more knowledge of future.
NGInfra Presentation © 2014 Richard de Neufville
Flexible Design Recommended
It is the more efficient, economical way to
prepare for unknown future.
Properly done, flexible design:
• Enables appropriate response to several
possible futures
• Defers some investment (saves interest)
• Avoids some investment (more savings)
• Lower cost per project permit more
projects, more service to more people.
NGInfra Presentation © 2014 Richard de Neufville
Overall Suggestion
• Less effort on trying to predict long-term
future – in any case unknowable
• Less effort on building infrastructure now
that will satisfy guessed at future
• Emphasis on implementation of facilities
that could – by extension or adaptation –
meet several futures
• Thus reducing immediate project costs,
and facilitating more projects and service
NGInfra Presentation © 2014 Richard de Neufville
This is the book
MIT Press, 2011, 2013
Available online from
Amazon Germany
pocketbook and ebook
(about € 19)
