Lumina, Chevron earn DA honors

INFORMS society names ‘Rigs to reefs’ top solution

Lumina Decision Systems, led by CEO Max Henrion, won the 2014 Decision Analysis Practice Award co-sponsored by the Decision Analysis Society of INFORMS and the Society of Decision Professionals for the project titled “A Multi-attribute Decision Analysis for Decommissioning California’s Offshore Oil Platforms.” Co-authored by Brock Bernstein and Syya Swamy, Henrion delivered the award-winning presentation at the 2014 INFORMS Annual Meeting in San Francisco in November.

The award recognizes outstanding applications of decision analysis to significant decisions. It considers the quality of the analysis, its impact on the decision, and the importance and benefit of that decision.

“This was a great demonstration of how decision analysis can bring together parties with significantly different points of view and objectives to find a ‘win-win’ solution,” says Frank Koch, chair of the award committee.

Like many environmental decisions, the question of how to decommission California’s offshore oil platforms started out as highly controversial. But, remarkably, almost all stakeholders, including oil companies and environmentalists, ended up supporting the same solution. The original leases required the oil companies to remove the entire rigs at the end of their productive life. Some are up to 1,200 feet deep, making removal very costly with substantial environmental impacts. These rigs have developed their own rich ecosystems, with commercially and ecologically important rockfish species, making them popular with sea lions, recreational divers and other marine life forms.

An interdisciplinary team created a decision tool in Lumina’s Analytica software to explore and evaluate decommissioning options to assist the California Ocean Science Trust. The two main options examined were complete removal, as required by the original leases, and conversion to an artificial reef, by cutting structures at 85 feet below the water line to prevent interference with shipping. Partial removal reduces costs by up to $500 million and helps to preserve marine ecosystems. Eventually the stakeholders reached near consensus on the “rigs to reefs” policy option. California lawmakers almost unanimously passed enabling legislation, signed into law by then-Gov. Arnold Schwarzenegger in 2010.

“By clearly identifying the issues, synthesizing the best multi-disciplinary science, daylighting the uncertainty and providing unbiased review, the tool was successful in distilling the rhetoric to meaningful discussion of trade offs and values,” says Skyli McAfee, director of California Ocean Science Trust. “Further, the tool was made available to the public; its assumptions and approach were transparent. Constituents had the opportunity to import various scenarios and learn the best approach. With this tool, sound legislation was passed that will serve California and our marine resources well.”

“This decision analysis was one of the most challenging and, in the end, satisfying projects I have worked on,” adds Henrion. “It is truly an honor to have our work recognized in this way.”

Chevron receives inaugural Raiffa-Howard Award

The Society of Decision Professionals (SDP) presented the inaugural Raiffa-Howard Award for Organizational Decision Quality to the Chevron Corporation during a gala celebration marking the 50th anniversary of decision analysis. The celebration, which included an afternoon program on the history and future of decision analysis followed by an evening dinner gala, was held Nov. 8 in San Francisco in conjunction with the 2014 INFORMS Annual Meeting.

The award recognizes “consistent and sustained excellence in decision-making throughout an organization.”

Chevron was cited for its “unique and long-term commitment to making decision quality an organizational competency contributing to the company’s outperforming its peer group in total shareholder return for both the last five- and 10-year periods. Chevron began its decision analysis initiative more than 15 years ago. Today, more than 25,000 employees have been trained in the discipline. Decision analysis is the discipline incorporating decision theory, methodology and professional practice guiding decision-making under uncertainty.”

The awards’ namesakes – Professor Howard Raiffa of Harvard University and Professor Ronald Howard of Stanford University – are widely considered co-founders of the discipline of decision analysis, which crystallized with key contributions from Raiffa and Howard in 1964. Both were on hand for the celebration, along with more than 300 other decision analysis luminaries and guests.

“While elements of decision analysis have existed for hundreds of years, it was the work of [Raiffa and Howard] beginning in 1964 that brought it into mainstream use by giving us a logical and systematic set of principles to enhance our clarity of thought and enable us to act with confidence in the face of uncertainty,” says Bill Klimack, president of the SDP, an association of professional practitioners. “Corporations and government entities now have the tools to make complex decisions.”

“Decision analysis has by now helped many thousands of decision-makers, and has created many billions of dollars of value for the economy through better business decisions and better government policies,” adds Jeff Keisler, president of the Decision Analysis Society (DAS), a subdivision of INFORMS.

“The Society of Decision Professionals is delighted to honor professors Howard and Raiffa for their work that has made an indelible impression on our field and our lives,” adds Jack Kloeber, vice president of SDP.

Klimack, Keisler and Kloeber are active members of INFORMS as well as SDP. INFORMS was a sponsor of the gala celebration along with DAS.

Decision analysis emerged as a distinct academic field in 1964, building on developments in statistical decision theory and game theory by Raiffa and dynamic probabilistic systems by Howard. In that year, Raiffa began teaching the first university course in decision analysis within the Economics Department at Harvard and began preparing material for his 1968 book, “Decision Analysis.”

Also in 1964, but independently, Howard conducted the first professional application of the field he called “decision analysis,” which he described in his 1966 paper, “Decision Analysis: Applied Decision Theory.” Since then, major corporations have adopted decision analysis to improve multibillion-dollar capital decisions.

Source: Raiffa-Howard Award Program