Primary Author: Mr Robert J White
Audience Focus: Intermediate
Application Type: Application
Venue: 2015 AACE International Annual Meeting, Las Vegas, NV, USA
Abstract: There are many different methods of calculating contingency as part of estimate at completion for projects from general rules of thumb to sophisticated Monte Carlo simulations. However, the fundamental theory of what happens to that number after it is calculated seems to be a source of confusion for projects. Project controls must be able to calculate, understand, and articulate contingency drawdown for projects. Analysis of contingency must begin with the fundamental understanding that there are differences between forecasting contingency requirements, tracking contingency drawdowns, and forecasting when the contingency could actually be spent. Proper forecasting and control of contingency can be a leading indicator of project success in terms of cost, risk, and schedule.
Audience Focus: Intermediate
Application Type: Application
Venue: 2015 AACE International Annual Meeting, Las Vegas, NV, USA
Abstract: There are many different methods of calculating contingency as part of estimate at completion for projects from general rules of thumb to sophisticated Monte Carlo simulations. However, the fundamental theory of what happens to that number after it is calculated seems to be a source of confusion for projects. Project controls must be able to calculate, understand, and articulate contingency drawdown for projects. Analysis of contingency must begin with the fundamental understanding that there are differences between forecasting contingency requirements, tracking contingency drawdowns, and forecasting when the contingency could actually be spent. Proper forecasting and control of contingency can be a leading indicator of project success in terms of cost, risk, and schedule.