Project cost risk analysis using influence diagrams

Article Abstract:

Cost risks may be analyzed using Monte Carlo methods or Influence Diagrams. Studies comparing the two methods show the strengths and weaknesses of the formats using either of the two methods. Influence Diagram formats are most clear in presenting the project risks and their impact, but are limited in detailing cost nodes and the links between these nodes. Monte Carlo formats are more accurate in dealing with internal risks, but the assessment of external risks depends on the model used. A method combining the strengths of the two is being developed.

Research, Methods, Finance, Risk management, Value analysis (Cost control), Program budgeting

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Principle errors in capital cost estimating work: appreciate the relevance of the objective cost risk analysis method, part 2

Article Abstract:

One of the main reasons why modern cost risk analysis has become unpopular is that it has become unreliable and thus its credibility has been eroded. Its unreliability is due to cost risk analysts' reliance on gut feel or intuition rather than historical data. Intuition has often been used in determining the variations in risk frequency curves and in the evaluation of the correlation between variables. Although gut feel does play an important role in analysis, statistics should be applied in variations and in data correlation.

Usage, Correlation (Statistics), Instrumental variables (Statistics), Instrumental variables

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Principle errors in capital cost estimating work, part 1: appreciate the relevance of the quantity-dependent estimating norms

Article Abstract:

The principles of contract quantity in cost estimating work to reduce future problems with project budgets. This relationship between the quantity of work and work-hour unit rates should be considered in estimating future projects based on historic cost data. However, facts relating to budget and control are ignored by project managers because they require the use of computers. Despite acquisition costs, in-house databanks are beneficial in the long run.

Management, Evaluation, Capital budgets

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