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41R-08: Understanding Estimate Ranging [February 18, 2022]

41R-08: Understanding Estimate Ranging
AACE International, February 18, 2022

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In 2021, the scope and title of RP 41R-08 was changed from “Risk Analysis and Contingency Determination Using Range Estimating” to the current recommended practice (RP) titled “Understanding Estimate Ranging”. The RP now describes and provides considerations for a general class of estimate ranging quantitative risk analysis (QNRA) methods. It also directs readers to other estimating ranging related references and QNRA methods. AACE® International (AACE) RPs are living documents that evolve. At times an RP no longer addresses industry expectations and needs and/or is superseded by industry or practice changes that are best addressed in new RPs rather than editing an existing one. Such is the case for the former RP 41R-08, Risk Analysis and Contingency Determination Using Range Estimating.

This RP documents the basis for the AACE decision to change this RP’s scope and to no longer recommend “range estimating” as covered in the original RP 41R-08 as a specific estimate ranging practice in support of risk analysis and contingency determination. However, this RP also recognizes the valued contribution of the original 41R-08 author and contributors, provides a brief history of the original range estimating method, and provides references to the original method for those still interested in it.

In addition, this RP defines estimate ranging as a general class of QNRA practices with multiple variants (including the “range estimating” methodology); i.e., estimate ranging is still in the AACE QNRA toolbox. Based on this, the decision was to rename this RP to refer to the concept of "estimate ranging" as it describes the general method approaches, typical variations and typical use cases. The RP also assesses the method variations in respect to industry research findings and established QNRA principles of good practice. Some content of the original 41R-08 is not applicable to or addressed in other QNRA RPs; in particular the concept of critical cost item grouping which does not apply to explicitly risk-driven methods. However, the concept and guidelines for critical risk events are now covered in RPs on the expected value method, and the original RP 41R-08’s discussion of probability distributions and their use in determining contingency is now addressed by RP 104R-19, Communicating Expected Estimate Accuracy. The purpose of this RP and its assessment of variations is to improve industry understanding of estimate ranging and to guide AACE RP development and improvement.

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