44R-08: Risk Analysis and Contingency Determination Using Expected Value

44R-08: Risk Analysis and Contingency Determination Using Expected Value
AACE International, December 4, 2012

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This recommended practice (RP) of AACE International (AACE) defines general practices and considerations for risk analysis and estimating cost contingency using expected value methods. This RP applies specifically to using the expected value method for contingency estimating in the risk management “control” step (i.e., after the risk mitigation step), not in the earlier risk assessment step where it is used in a somewhat different manner for risk screening. This RP is limited to estimating cost contingency; RP 65R-11, Integrated Cost and Schedule Risk Analysis and Contingency Determination Using Expected Value is an extension of this RP covering integrated cost and schedule risk analysis and contingency determination using expected value.

This RP is intended to provide guidelines, not standards, for contingency estimating that most practitioners would consider to be good practices that can be relied on and that they would recommend be considered for use where applicable. There is a range of useful contingency estimating methodologies; this RP will help guide practitioners in developing or selecting appropriate methods for their situation. While integrated cost and schedule methods are generally recommended (e.g., 65R-11, Integrated Cost and Schedule Risk Analysis and Contingency Determination Using Expected Value or 57R-09, Integrated Cost and Schedule Risk Analysis Using Monte-Carlo Simulation of a CPM Model), this RP is limited to estimating cost contingency for those situations where a different method will be applied for schedule contingency determination (for example, the schedule aspects of CPM-based methods as in 57R-09).

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