This recommended practice (RP) of AACE International defines general practices and considerations for the various aspects of conducting a project schedule risk analysis using a critical path method (CPM) network of activities and Monte Carlo methods to estimate contingency and/or to understand the project’s behavior in consideration of risk. This RP does not present a standalone methodology, but is an extension of other RPs that present CPM-based approaches to schedule risk analysis and contingency estimating. This RP discusses key procedural, analytical and interpretive considerations in preparation and application of a CPM model; considerations that were not covered in the broader methodological RPs.

A quantitative schedule risk analysis is an important aspect of risk management on a project. It can help project teams understand how project risks and uncertainty may impact the project schedule and when key milestones will be achieved. The analysis should be conducted by a skilled risk analyst. This analysis is typically performed during project development prior to key approval points, but can also be used during project execution to assess the current status of the project schedule risks.

Most schedule risk analyses utilize a CPM network as the base tool for conducting a Monte Carlo type simulation of project schedule variability. The CPM model for risk analysis must be properly constructed and realistically reflect how the identified risks may impact the project activities and overall duration. The identified schedule risks may be linked to the activities in the model in a variety of ways, depending on the software used and user preference. Regardless of how the risks are linked to activities in the software, the analysis needs to be based on a comprehensive list of schedule risks and an understanding of how they may impact the project. Understanding the compromises, assumptions and basis of the analytical methods and what the resulting schedule risk analysis means are key to developing appropriate risk treatment plans, contingency estimates, and making well supported value adding project decisions.

This RP is applicable to any industry or project where the CPM approach is used. It addresses considerations for risk analysis as they relate to the CPM model and not to any integration with cost risk analysis.